Understanding Dutch e-Auction
It is absolutely important to select a right auction variant when going for an e-Auction to achieve business objectives. Understanding which auction type works best and where, is not an easy game. Lets today look at Dutch e-Auction and how
businesses can benefit from it.
What is Dutch e-Auction?
Dutch e-Auction is a descending price e-Auction where the auctioneer initiates the auction by asking for a high price. The auctioneer keeps lowering the price till a participant accepts the price. In this type of e-Auction, the auctioneer unlike
in English e-Auctions controls the price.
Where does it work?
This variant of the e-Auction typically works best in perishable goods industry and pharma industry. The most interesting aspect of Dutch e-Auction is its ability to help auctioneer discover the right price and demand of the product in the market since the auction price is lowered in decrements until a bidder accepts the prevailing price. It also helps curb irrational bidding.
Dutch e-Auctions are particularly helpful in selling multiples of same items. Consider, a company selling 400 items. First bidder may have purchased the first 100 items at $100,000 but that will not cease the e-Auction. The auctioneer will keep decreasing the price till the time next bidder accepts the price. Let’s say the price is decreased to $85,000 and the second bidder accepts the price to buy another 100 items. So it keeps working that way till the all the items are sold.
Things to keep in mind!
Quoting or asking for a very high price initially may disinterest many bidders for your products. Hence, getting too ambitious at times may not work and the auctioneer needs to be cautious.
Also, while it may appear that auctioneer may be loosing money since Dutch e-Auction involves decreasing the price, however, in reality it is other way round. Auctioneers generally make more money in Dutch e-Auctions than they could in
english e-Auctions. The reason is rather simple to understand. Here, in Dutch e-Auction, the auctioneer controls the price. Whereas in ascending-price e-Auctions, the participants control the price and though they increase the price, they hardly go beyond a limit, item’s actual value. And since the bidders know that the auction is going to end in some pre-decided time, they feel more secure unlike in Dutch e-Auction.