What is a Reverse Auction? How does it Work?
In order to properly define the unique characteristics of the reverse auction and why it has become one of the most lucrative auction platforms in the world, I think it’s important to touch upon one of the more familiar auction sites you’d typically see on the internet with the likes of eBay, eBid, uBid, Yahoo and others. These types of auctions are categorically referred to as “traditional auctions.”
A traditional auction involves a “Seller” who is offering an item for sale while potential buyers compete with each other for the purchase of the item, which in turn causes the price of the item to continually increase in price until no buyer is willing to bid more…thus the auction concludes with the item being awarded to the “Highest Bidder.”
The characteristics of a reverse auction are in fact very similar to that of a traditional auction by the fact that it also involves a “Seller” which for the purpose of this illustration will be DubLI.
DubLI offers an item(s) for sale on their online auction website attracting potential buyers who compete with each other for the purchase of a particular item, just like you’d see in a traditional auction…however any similarities end abruptly because in a reverse auction, because the price of an item is actually driven down with each bid placed by potential buyers until a single buyer is identified, then the auction concludes and the item is awarded to the “Lowest Bidder.”
To quickly summarize the key differences between the two, in a traditional auction, the price for an item is continually driven up from the bids placed by potential buyers, where as in a reverse auction; the price for an item is continually driven down from the bids placed by potential buyers.
The origins of the reverse auction date back to the mid 1990’s when the concept was initially conceived as a way for companies to bid on available government contracts and those in the private sector as well. The auction would take place on the internet and potential buyers were invited to openly compete and bid amongst other companies vying for the available contracts, which would of course benefit the recipient by driving down the costs of the project. When bidders reached a threshold and could go no lower for a particular contract, the auction would conclude and the available contracts would be awarded to the companies with the lowest bids.
When you first enter DubLi’s online auction website there are several categories for the buyer to pick and choose from, whether they’re in the market for something from our “electronics section” like a new flat screen TV, or digital camera to “household items” like espresso machines and juicers to gift certificates from some of the top retailers like Wal-Mart and Target and everything in between. There’s a “start price” displayed for each item in the auction and just below the start price is displayed a “current price” which is concealed by design. If a potential buyer wants to “view” the current price of an item, they would have to spend 1 DubLI credit which costs a mere 80¢ in order to do so, and out of that 80¢ DubLi takes a percentage and applies it towards the cost of the item, thus lowering its price.
If the current price revealed to the buyer is “right price” for them after spending a DubLI credit, then they have the option of purchasing the item on the spot for its current price. Or the buyer might decide to hold off purchasing the item by waiting to see if the “current price” will be driven down even further by other buyers using their DubLi credits on the same item.
Actual Pic from DubLi.com
The only risk to the potential buyer by choosing to wait is the chance of the item being purchased by another buyer, but hey that’s also part of the fun part about knowing how to drive home a great bargain at DubLi. The atmosphere on the website is electric with activity, as buyers feverishly bid against each other vying to secure the best possible deal on items they desire most. Many buyers end up paying a fraction of the cost for the item they purchase, which is wonderful…but for most, a savings in the neighborhood of 40%-60% is fairly common.
The customer whose final bid concluded the auction would be prompted for their method of payment and then DubLI would ship out the merchandise directly to their home or place of business, and a new item would immediately replace the item that sold, causing the process to repeat itself over and over again with 100’s of products being bid on simultaneously in the auction website every single day.
Actual Completed Auction on DubLi.com 
We know from past history a satisfied customer often returns back to our auction website several times a month checking out what hot new items might be listed in the auction and many have made multiple purchases, so we know we’re on to something very big. More importantly our software enables us to analyze what individual customers are bidding on, so we can target those specific items when they become available in the auction, and distribute that information via email in order to maintain an ongoing rapport with our customers, so they will continue coming back. In addition we do a number of seasonal promotions centered on the major holidays which drives a tremendous amount of traffic to the auction.
At DubLi, we want to openly extend a warm invitation for you to become part of our global community…together we can create abundance and prosperity for all.