B2B reverse auctions – a critical evaluation

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GRIN Publishing, Jan 5, 2003 - Business & Economics - 23 pages
Seminar paper from the year 2002 in the subject Business economics - Marketing, Corporate Communication, CRM, Market Research, Social Media, grade: 1,3 (A), European Business School - International University Schloß Reichartshausen Oestrich-Winkel (Marketing Cluster), course: Seminar: E-Commerce Marketing, 29 entries in the bibliography, language: English, abstract: B2B online, reverse auctions are said to revolutionize the traditional way suppliers and buyers do business. In 2001, General Electric expected to generate up to $600 million in savings by organizing their procurement through the means of online, reverse auctions. In 2000 Forrester Research estimated that B2B online, reverse auctions would reach $52 billion in revenue by the end of 2002. A benchmark study by CAPS Research stated that 1,5% of today′s purchases are made through electronic auctions. Even studies considered "conservative" believe that 10% of all procurement budgets, which total $4,1 trillion in the U.S., could be spent through reverse auctions. That would mean over $400 billion spent through reverse auctions would create savings of up $50 billion, taking into account a conservative savings rate of 12%. These savings make up 0,5% of the US-GIP. These are impressive numbers for a simple procurement tool, and they have persisted through the end of the online hype and the decline of the new markets in 2001 and 2002. Do these numbers represent true savings, finally holding the promise of B2B e-commerce? Or do they just delude other consequences? Because the practice of online, reverse auctions came into being only recently, it is too early to ascertain long term consequences. Thus, this paper will draw a first overview of the short-term positive and negative consequences on behalf of the buyer and the supplier.

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