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Competitive Pricing

Reverse online auctions will have suppliers racing to beat each others' bids.

This story appears in the August 2002 issue of Entrepreneur. Subscribe »

If you've ever bid on an item on eBay, you've seen the way your business will probably someday purchase everything from office supplies to critical production materials--in reverse. Online reverse auctions, or downward price auctions, stand the traditional rising price or English auction on its head. Buyers put out specifications for what they want to buy, and sellers submit bids electronically until someone wins the business.

Online reverse auctions came into being about the time the Internet became popular. So-called dynamic pricing commerce, most of which is online reverse auctions, will top $45 billion or 15 percent of all e-commerce in 2002, rising to $500 billion in 2006, says Rob Rosenthal, e-commerce analyst at research firm IDC.

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