Reverse Auctions in Retail
Whilst reverse auctions for indirects are common across many industries, retail also has a considerable number of unique categories that have been successfully price negotiated through reverse auction. Examples include house brand products (the most common category), carrier bags, trades rates, security services, shelving, roll cages, supermarket trolleys, shopfitting, lighting and so on.
The bid charts below are a few examples of successful reverse auctions that have been run for retailers by Trade Interchange.
Loyalty Cards
Loyalty programs are a permanent and growing feature of the retail industry. According to The Australian Centre for Retail Studies at Monash University, 63% of retailers now run a structured loyalty program, most of which incorporate an associated loyalty card.
The reverse auction shown above was for the supply of loyalty cards for a supermarket chain. There are two notable characteristics of this negotiation: First, the price drop of approximately 38% from opening to closing bids suggests an industry that is used to achieving high margins. Secondly, the aggressive bidding by all suppliers resulted in a considerable number of extensions and, combined with the significant price drop, points to a very competitive market place.
House Brand
The most common category chosen for reverse auction by retailers is house brand products - both food and non-food. The example shown above is for tinned sweetcorn. Notice the 'true market price cluster' of 3 suppliers that have all finished within 1.5% of each other. This allows the buying organisation to make their final decision almost exclusively on the qualitative ratings of those three suppliers as pricing is no longer a differentiating factor. This 'clustering' is a common characteristic of reverse auctions.
Carrier Bags
Bags, whether they be plastic, paper or cloth are an essential and costly component of retail. The bid chart above shows a competitive market with a cluster of 4 of the 6 suppliers finishing within 2% of each other.
