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Backward Thinking

Reverse auctions could help you get more contracts.

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This story appears in the November 2004 issue of Entrepreneur. Subscribe »

When most people think of auctions, they picture the price going up. But there's a different game in the B2B world. It's called the "reverse auction," where suppliers and distributors underbid each other online in real time until the contract price drops as low as it will go.

Home Depot, Sun Microsystems and 3M are just a few companies that use reverse auctions. Almost half of large buyers used reverse auctions by mid-2003 and saw an average of 15 percent in cost savings, according to a recent National Association of Wholesaler-Distributors study. "Buyers have been adopting this quickly," says Adam Fein, author of the study and president of Pembroke Consulting, a Philadelphia management consulting firm that helps wholesale distributors, manufacturers and B2B tech companies build market share.

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