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E-MARKETING Introduction A reverse auction is an on-line bidding process which allows vendors to bid as often as they wish during the auctioning period. Three or more vendors should be available to participate in a reverse auction.

In a regular online auction, a seller puts a product online and solicits bids from buyers. In an Online reverse auction, an individual or company posts its need online and solicits bids from suppliers. The process requires a detailed explanation of the product or service requested, as well as a set date and time. Often the site hosting the auction will notify registered suppliers.

These auctions allow any company, no matter what size, to compete for business. For suppliers, it opens the opportunity to go after business with companies that otherwise wouldn't have considered them because they were unknown or too small. Low-volume buyers, on the other hand, can use online auctions to widen their search for competitively priced or hard-to-find items. Its a win-win situation, says Sheldon Malchicoff, founder of BidVantage, an Online reverse auction site based in Camarillo, California.

How buyer and seller participants and price behavior differ by type of online auction

How reverse auction works: •

In a reverse auction, a buyer contracts with a market maker to help make the necessary preparations to conduct the reverse auction. This includes: o Finding new suppliers, o Training new and incumbent suppliers,

o Organizing the auction, o Managing the auction event, and o Providing auction data to buyers to facilitate decision making.

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The market maker, on behalf of the buyer, issues a request for quotation (RFQ) to purchase a particular item or group of items (called a "lot").

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At the designated day and time, several suppliers, typically 5-20, log on to the auction site and will input several quotes over a 30-90 minute period. These quotes reflect the prices at which they are willing to supply the requested good or service.

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Quoting performed in real-time via the Internet results in dynamic bidding. This helps achieve rapid downward price pressure that is not normally attainable using traditional static 3-quote paper-based bidding processes.

The prices that buyers obtain in the reverse auction reflect the narrow market which it created at the moment in time when the auction is held. Thus, it is possible that better value - i.e. lower prices, as well as better quality, delivery performance, technical capabilities, etc. could be obtained from suppliers not engaged in the bidding or by other means such as collaborative cost management and joint process improvement.

The buyer may award contracts to the supplier who bid the lowest price. Or, a buyer could award contracts to suppliers who bid higher prices depending upon the buyer's specific needs with regards to quality, lead-time, capacity, or other value-adding capabilities. However, buyers frequently award contracts to incumbent (i.e. current) suppliers, even if prices are higher than the lowest bids, because the switching costs to move work to a new supplier are higher than the potential savings that can be realized.

When Do Reverse Auctions Work Best?

Reverse auctions work best when:

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Buying products where there is a clear industry specification for the item and recognised quality standards.

The supplier and manufacturer are well known and have a proven track record.

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The industry does not suffer periods of shortages.

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After purchase service is minimal or very unlikely.

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Distance is not an inhibitor to the supply or the service of the product.

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The required item is difficult to find.

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Whilst the above implies more suitability for products, reverse auctions are also addressing services.

Benefits of Online Reverse Auction Benefits of Online Auctions Vendors * An excellent avenue for test pricing of new products. * Useful in clearing excess inventory & used machinery in a cost effective manner. * Enables savings on distributor margins.

Benefits of Online Auctions to Buyers * Save Money: Competitive bidding drives down purchasing costs for capital equipment, materials and services. * Save Time: Stop waiting weeks or months for suppliers to submit bids. * Expand Supplier Pool: Reverse auctions can help the company expand their access to high-quality local, national and global suppliers. * Get Started Quickly: With Web-based auctions there's no special hardware or software to install, so setup is fast and easy. And because the auction software is easy to use, minimal training is required for the organization to start realizing immediate cost- and time-saving benefits. * Eliminate Security Risks: The latest security measures are used by the auctioneers to protect customers’ confidential information. * An avenue to locate critical requirements that are otherwise not easily available.

Benefits of Online Reverse Auctions to Vendors * Ensures Savings in marketing costs / distributor margins. * Facilitates flexibility in pricing decision. *Suppliers can equally address new geographical markets. *Where prices are open, suppliers can understand the various price points and make an informed decision whether to enter a market.

Benefits of Online Reverse Auction to Buyers * Helps achieve significant reductions in procurement costs on account of Dynamic Bidding. * Access to a large number of vendors. * Dynamic bidding process. * A tool for efficient price discovery complementing the direct negotiation process.

Reverse Auction from Buyers Point of View In this reverse auction, in the field of C2C or B2C, the common questions that come in the mind first are:

THE ADVANTAGES THAT ARE ENJOYED BY C2C AND B2C CUSTOMERS-

In addition to the cost cutting, there are other advantages of C2C consumers which are seen in the reverse auction. Few of these are:

However reverse auction also has certain weakness or disadvantages. These need to be studied completely before going for reverse auction. •

Reverse auction can not work where there is cartel ling of suppliers

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Reverse auction can not work where there is single source as such there is no competition.

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In the reverse auction process we may loose a good relation that is earned with the suppliers over the years of working with them.

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Reverse auction is not suitable for tailor made special items. This means reverse auction is not fit for all the items.

However, we can effectively select the type of items for reverse auction wherein there is a potential for cost reduction, time reduction in the process and take necessary precautions in making the correct & complete RFQ. In the whole process .correct documentation is must to achieve the advantages of the reverse auction.

In India there are many leading companies like Reliance Industries, Marico, Maruti Udyog Ltd, and Telco who have conducted many reverse auctions and obtained lot of success in terms of various factors like cost, time, additional source etc.

LET’S HAVE A TRAVEL FROM REVERSE AUCTION WORLD-

How safe for C2C customers is it to buy through Auto eBid? Auto eBid makes buying a new vehicle completely safe.

How are consumers benefited from Auto eBid ?

The unique way to get the best price for new car. It’s GuaranteedWhat if there was a way to get all car dealers together and have them compete against each other to give one the lowest possible price on a new car? Well one can with Auto eBid. Driving away from the showroom with the feeling that we could have got a better price always took away some of the pleasure of buying a new car.

Taking the hassle out of haggling One can get the best deal on new car, without the hassle of trawling through websites or spending hours in dealerships. Car showrooms can be intimidating, and haggling on the forecourt is uncomfortable, but with Auto eBid one can remain anonymous while the negotiating is done for one. Since 2003, thousands of customers have saved millions of pounds buying their new car this way.

Everyone's a winner with Auto eBid. Auto eBid receives NO sales commission from any of registered dealers.

What happens after order goes live?

Nothing to do without just sit back and watching the bids coming in.

For the Auto eBid C2Ccustomer, the service benefits include: 1.

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Better availability as all Auto eBid cars are sourced nationally Access to dealers from across the whole country Best possible pricing as dealers underbid each other Access to manufacturers' nationwide stock New cars all built to oner personal specification Quicker factory orders Once the best price is agreed we put one in direct contact with the winning dealer Only when one are 100% satisfied do we collect our pre-authorised fee.

C2C Customer Feedback

Feedback Date

Vehicle Purchased

Actual Auto eBid reviews & comments from customers

HONDA ACCORDService rating : Great service, very pleased with the 8-NovemberDIESEL TOURER 2.2 i-outcome.

2010 DTEC EX 5d Car :Excellent car, very happy with this Service rating : Amazingly simple and straight forward process. No need to haggle with the dealer to BMW 3 SERIESsave a bundle of money buying a new car. Definitely 5-NovemberTOURING 318i SE 5dwill be recommending to other friends.

2010 Step Auto Car : Superb build quality, and attention to details.

But then it is what is expected of a BMW. This is my 7th BMW 3 series.

MERCEDES-BENZE Service rating : Great, fast process though could be a 5-November- E250 CDIlittle clearer. All went well in the end.

2010 BlueEFFICIENCY SE 5d Tip Auto Car : Fantastic car!

4-November- NISSAN QASHQAI 2010 HATCHBACK 1.6 [117]I recently used oner service and would like to say Tekna 5d thankone , like many people i felt a little hesitant but now can say what a excellent service this is. The time spent going round showrooms or phone calls trying to get the best deal would be too time consuming and

even then don’t think i would have got a better deal, am more than pleased with your service, So many thanks from a happy customer Keith Service rating : An excellent, hassle free service.

VOLKSWAGEN GOLFOner courteous and friendly team also took the time 3-November- DIESEL HATCHBACKto explain the process to me personally, which gave 2010 2.0 TDi 140 BlueMotionme real confidence.

Tech GT 5d Car : Super car - really glad with my choice.

3-November- HONDA CR-V ESTATE Good prompt service 2010 2.0 i-VTEC SE-T 5d VOLKSWAGEN GOLFService rating : Good and easy to use.

3-NovemberDIESEL HATCHBACK 2010 2.0 TDi 170 GTD 5d Car : Excellent car.

AUDI A3 SPORTBACK 3-November1.4 TFSI S Line 5d [StartOk 2010 Stop]

PRICELINE.COM Travel Most Successful The travel category has been the most successful reverse auction items, as it is for normal internet sites like LastMinute.com. The product is a commodity, uses well known brands (airlines or major holiday companies), is of high value with the potential for significant savings, it is easy to deliver the goods (the tickets), the item is perishable and there is over supply.

PriceLine Model In the PriceLine model, the company selects generic categories such as a weekend in Paris. It then negotiates with a number of suppliers who would be interested in selling to PriceLine's customers, i.e. the buyers. To give supplier flexibility, Priceline usually has restrictions on buyers or the product. For example, with travel tickets it does not allow users to use frequent flyer programs, select a preferred airline, or receive refunds.

E-Wanted on the other hand, is reported to let users negotiate for features such as more convenient flight schedules and the opportunity to use frequent flyer miles.

We have yet to investigate PriceLine's charges but another competitor, Respond.com, was

Priceline.com allows customers to name their price

reported to charge sellers between $5 and $50 a month to be listed in a category. Sellers are also charged a nominal fee when they answer a prospective customer's e-mail.

 Customer can choose the city where they want to go, the category of hotel and the area

 The partners hotel on this website are very varied since they cover all ranges of hotels from 1-star to 4-star hotels.  Customers can also choose between big chains hotels such as Best Western, Marriott and Renaissance and small hotels like Gabriel..

The Downside of Reverse Auctions in C2C OR B2C Field Many companies have embraced reverse auction without considering the possible downside: •

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Relationship building takes a back seat. In times of plentiful supply this may be fine, but when products become scarce then suppliers are more likely to satisfy their establish customers first.

Further, there is a tendency not to involve suppliers during the design stage when significant saving or quality improvements could be made for the production stage.

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Reverse auctions are being used for numerous small ticket items but when the quantities are high then much is at stake. Without clear specifications of requirements (for both the product and the service element) then buyers can be dissolutioned when expectations are not met.

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Where many players in an industry use reverse auction then prices can tumble quickly without commensurate productivity improvements in manufacturing or the supply chain. Margins suffer and suppliers go bankrupt which reduces industry competition and choice.

The Business to Business World A reverse auction (also called procurement auction, e-auction, sourcing) is tool used in industrial business-to-business procurement. Reverse auction is a tool used by many purchasing and supply management organizations for spend management, as part of strategic sourcing and overall supply management activities.

Many of the B2B electronic trading exchanges offer reverse auctions including Ariba, CommerceNet and FreeMarkets.com How B2B online auction works?

During a reverse auction, a customer allows suppliers only a short window of time to bid down the price on their products or services. The practice was pioneered by automotive and aerospace buyers, which used reverse auctions to procure commodity parts.

Today, many large companies use them to buy everything from paper clips to their employee health care plans. Reverse auctions are loved by corporate purchasing managers, loathed by suppliers, and rarely discussed publicly by anyone involved.

Among procurement professionals, reverse auctions are considered a best practice, a tool that can reduce costs by as much as 20 percent. Target, Dell, and General Electric are said to use them liberally.

Sandy Jap, a professor at Emory University who studies reverse auctions, says it's possible that half of all corporate spending could someday be decided by reverse auction.

GE ExamplE: Price is only one element of the buyers’ value equation. Stec and Emiliani that in customer the case ofinGE, the company Problems for observe the corporate reverse auction: actually netted only half of the savings initially generated through bidding.

Two of the most outspoken critics of reverse auctions are David Stec and M.L. (Bob) Emiliani from the Center for Lean Business Management at Rensselaer Polytechnic TheirInconclusion: Institute. a paper, they argue that •

Online deliver that are auctions as great as advertised by auction • 50reverse percentauction of the rarely savings fromsavings using reverse disappear because of factors service providers. such as errors in supplier data, post auction negotiation, and changes in specifications or quantities.

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GE does not account for extra expenses resulting from problems such as poor quality, late deliveries and supplier nonperformance.

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When these losses are added up, net savings from Online reverse auction look far less appealing than buyers expect.

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They contend that savings from reverse auctions are difficult to measure and that they do not teach buyers and sellers how to solve problems jointly.

They conclude that reverse auctions are toxic for buyer-supplier relationships.

Even more dangerous is the deterioration of buyer and supplier relationships when reverse auctions are used to beat up suppliers on price. Fundamentally, reverse auctions are zero-sum games the buyer's savings is the sellers loss of revenue. In a separate study of the aerospace industry, Stec and Emiliani found that suppliers that are forced to bid in reverse auctions look for opportunities to retaliate. More than 70 percent of suppliers in the study said they would charge higher prices to their customers as a direct result of their participation in reverse auctions if they had a chance to do so in the future. Considering that 43 percent of the suppliers reported recapturing 20 percent of the orders they lost to new suppliers in reverse auctions because the new suppliers did not deliver, these suppliers have ample opportunity to retaliate.

Reverse Auction from Sellers Point of View Regular auction websites involve a seller to place an item for sale and encourage buyers to bid on it, thus increasing the item’s price. The item is indeed sold to the highest bidder.

Reverse auction websites on the other hand cause the sellers to compete for the selling of their item to the buyer, not the other way round, causing the price to decrease.

So, the seller’s role in reverse auction can be categorized into three groups, as-

In C2C Market………………………………..

The sellers’ name does not appear until the buyer purchases the product in this market. It is a good way for sellers, who are well-established companies, to get rid of their distressed inventory.

Example

The largest Web-based C2C auction site is eBay.com. Founded in September 1995, eBay is the premiere online marketplace for the sale of goods and services by a diverse community of individuals and businesses.

In C2C auctions, individual sellers or small businesses offer items for auction directly to consumers. The process flow is-

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The advantage here is that consumers and businesses can sell products for a minimal cost.

• An added advantage to the business over the consumer seller is that they do not have to maintain a physical storefront further reducing their cost and increasing profit margins.

Within the realm of C2C auctions, there are many different ways in which the items may be auctioned off: • Direct or English: This is the most common form of Internet auction. Buyers bid prices up and the item is sold to the highest bidder. Examples: eBAY.com, Amazon.com and Ubid.com.

• Reverse: Buyers specify the item they want and the highest price they are willing to pay. Sellers bid to supply the items; as a result the price is bid down. The winning bidder is the seller with the lowest price. Examples: Priceline.co, imandi.com, and lendingtree.com • Dutch: This is a descending price auction that starts high and keeps declining as buyers post the quantity desired at a given price. This is good for perishable items but is also used by companies such as Sam’s Club in order to clear the entire stock of an item. The highest bidder wins the quantity available that s/he requests then moves to the next highest bidder down.

Examples: within eBAY.com and within samsclub.com • Haggle: Buyers and sellers can make offers and counteroffers; the sale takes place if price convergence is achieved. This is a rare form of Internet auction. Example: bargainandhaggle.com, which states that it is different than an auction in that it connects buyers and sellers to work one-on-one.

• Barter: As the name implies, individuals agree on an exchange of good or services.

No money is exchanged between parties. Example: youcanbarter.com11

In Bangladesh, Arong, Bata and Apex can apply such process flow.

In B2B Market…………………………………..

In Bangladesh, Rahimafroz can be an online auction seller to serve business buyers at lowest price.

In B2C Market……………………………….

Online B2C auctions have introduced elements of fun and excitement to the buying process.

The big brand sites generate huge volumes of traffic. In February 2000 eBay received 14 million visitors.

Example

Lufthansa hosts traditional auctions on its site.

priceline.com: a B2C auction Role of Priceline.com in a B2C seller……………………………………………...

The priceline.com business model is very simple•

It collects broad demand through its patented Demand Collection System and then allows sellers of a product to look at that demand and decide whether or not they want to accept it. The company argues that its model has created a win-win scenario for buyers and sellers.

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It provides sellers with an optional channel for distributing distressed inventory, while on the other it puts the buyer in the driving seat by letting him name his price.

The simplicity of the model has reaped its rewards. According to Media Metrix, in February 2000 priceline.com was the 69th-most-visited site on the Web and the 11th-most-popular shopping site, generating approximately 3.9 million unique visitors.

According to priceline.com data, the average customer saves 65% off the best applicable retail fit.

priceline.com argue that in several aspects the reverse auction business model is a positive development for sellers, offering them the following advantages-

 Two-thirds of its offers are for weekend stays  About half of the hotel requests are for properties within driving distance of the bidder  More than half of hotel bids come within 14 days of the stay  The average length of stay is just over two days  Weekend requests tend to come farther in advance  While three-quarters of offers within 30 days of the stay are for weekends, 90% of offers made 60 or more days in advance of the stay are for weekends There is no doubt that Priceline.com has used the Internet to create a business model with real added value. However there are a number of areas for discussion.

Example

If Otobi Furniture adopts this reverse auction model in Bangladesh, it will have to follow such procedures as explained before.

Sellers benefit: • •

On reverse travel auction websites, the buyer names the price he is willing to pay for a certain product, then the website’s suppliers/partners compete to offer the best match to the buyer’s request Usually, the sellers’ name does not appear until the buyer purchases the product

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It is a good way for sellers, who are well-established companies, to get rid of their distressed inventory.

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Increased revenues from broadening customer base.

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Improved customer relationship and loyalty.

Problems faced by the seller: • •

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For small suppliers, however, reverse auctions are incredibly stressful--win or lose."The prices can fall quickly Squaring off against a low-cost competitor is only part of the problem. Despite the fact that bids are generally ranked by price, reverse auctions is not binding for the buyer. Companies will sometimes go with the second- or third-lowest bid based on qualitative factors such as reliability, customer service, and the cost of switching away from an incumbent supplier.

Sometimes bidders don't always understand what they need to do to win a piece of business, and they're prohibited from asking the buyer all but basic technical questions during the actual auction, companies can find themselves making a lot of snap decisions about contract terms, pricing, and packaging.

How to set up a Online Reverse Auction Setting Up an Online Auction Setting up an online reverse auction requires a small business to make a number of choices in order to establish the rules and conditions under which the bidding will take place. Hosted auction sites usually offer buyers some options, while auction software packages vary greatly in the number of options they provide. Either way, small businesses should have input into the basic parameters of the auction process. For example, a typical online reverse auction requires the registration of both buyers and sellers and the collection of sale items, along with digital images and descriptions. The buyer may be able to establish the start date and end date of the auction, as well as determine which auction method to use. It is also important to select preferred payment methods and establish a process for delivering items to customers.

A small business involved in an online reverse auction may also have input into various settings that control the way the auction works. According to Korper and Ellis, auction settings are incorporated into most software packages and can be adjusted through most host sites. Buyers can thus specify the minimum bid, or the lowest acceptable starting price for a particular item; the bid increment, or the minimum amount by which a new bid must be lower

than the previous bid; the minimum current bid, or the lowest acceptable bid at any point in time, given the minimum bid and bid increment settings; the reserve price, or lowest price the buyer will accept for the item; and the start and end date, which define the period when bids are accepted. It is also often possible to set the type of auction (open call or sealed bid, for example), and the process for resolving ties. The buyer should always establish the settings prior to the beginning of the auction and never change them once the bidding process has begun.

Terms and condition: Terms and conditions are established by the buyer and are not usually subject to negotiation because that would complicate the online reverse auction process. One of the purposes of online reverse auction is to level the playing field. Since many suppliers participate in online bidding, adjusting terms and condition for individual sellers would favor certain sellers over other sellers.

Table 1 shows the type of terms and conditions that can accompany purchasing agreements that result from online reverse auction. They are typical of that type used by companies in the specific durable goods companies.

Terms and condition

Requirements

Re-negotiation frequency

Upon termination of agreement

Offer

No buyer agreement to purchase, price agreement only

Base unit

Volume drives price

Termination

For convenience

Acceptance of terms

Without exception

Pricing

Firm fixed pricing

Continuous improvements

Buyers encourages seller to implement lean production to meet performance goals.

Charge backs

Supplier assessed financial penalties for quality non conformances

Payment terms

Extended>30 days

Inventory

Consigned at suppliers expense

Lead time

Meet lead time goals by stocking finished goods inventory.

The terms and conditions for DUBLI.COM include the following issues.

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General Business Terms and Conditions for Using DUBLICOM Ltd. Online Services

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Validity and Compliancy

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Contract, Eligibility, Registration

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Participants – Expulsion

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Credit Purchase, Credit Account, Expiration of Credits

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“Unique Bid” Auction Procedure

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”Xpress” Auction Procedure

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Purchase Completion

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Entertainment

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Cancellation Terms

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System Failure

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Legal Succession

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Liability Exclusion/Limitation

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Interference in Data Processing Activities

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Written Form, Applicable law and Legal Jurisdiction

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Severability Clause

Technology required setting up a new web site: Sites that require reverse auction software where each bid decreases, like a job or service auction where the bidders compete who can do a job for the least amount.

A modern real time auction software package is fully functional and 100% self-contained.

By purchasing the software one will receive the open source reverse auction site software needed to start very own professional online auction software with no monthly fees.

Latest Auction Software Features •

4 Different main page layouts built in to chose from.

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Setup the categories, page colors, posting fees, site name/logos, or turn off unwonted features all in just one setup file.

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Currency Customizable can use most world currencies

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Set up your own categories and sub categories

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Post an auction item using a uploaded or linked images to be view with an posted auction item, image will auto delete when auction has expired! (This feature can be turned on or off in the setup file)

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Home Page Featured Auction listings

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Home Page Featured Image Gallery Auctions

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Category Featured Auctions

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Bold and Highlighted Background Listings

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Listing Attention Grabber Icons

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Auction Bidding Confirmation Display

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Special displayed info: Service Needed / Service Needs Completed By /Service Will Be Payed Using

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Ask the Seller a Question Forum

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Seller and Buyer Feedback

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Ban users from bidding on your items

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Editable Auction Item Description

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View sellers other auction items

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Auto Relist Option

Auction Site Administration • •

View, edit or delete auction items.

View, edit or delete registered user’s accounts.

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Suspend or reinstate a registered user.

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Move a auction item to a different category.

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Ban a user’s email address from registering.

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Ban a users IP address from registering.

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Ban free email accounts from registering.

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Email all registered Users.

Accounting System

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The posting fees and all extra fees are setup in the config.pl setup file, all these can be a positive charge or set to 0.00 for free.

If turned in the config.pl file and the percentages fees setup the accounting can bill the seller a percentage of the high winning bid at auction closing.

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New user registration credit (0.00 for no credit)

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Registration referral credit to the referring registered user (0.00 for no credit).

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A user can login to their account and view all of their charges/posting fees.

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A user can make a real-time payment to their account using PayPal.com, PayByCheck.com, Nochex.com, 2CheckOut.com, PayStone.com, using one of these the users account will be auto credited in real-time reflecting the payment made to their accounting file. (Must have one or more of the merchant accounts listed to be able to use this feature, these can be turned on or off in the setup file)

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Sellers Posting Fee Payments option1: When a user is posting a new auction item the system will check the sellers account for a min cash balance they must maintain (that you setup) before they can post a new auction item, if below the min balance they will be taken to a payment screen to credit there account (This feature can be turned on or off in the setup file)

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Sellers Posting Fee Payments option2: When a seller is posting a new auction item they will be taken to a payment screen to pay for any posting fees before that new item is posted (This feature can be turned on or off in the setup file)

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Auto monthly invoice to all users with a negative account balance. (This feature can be turned on or off in the setup file this is used with Posting Fee Payments oiption1 only)

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The webmaster/Admin can login to the accounting administration and select the users account to view, there the admin can credit a users account, delete a users account, send an invoice to user and much more.

Site Setups •

Any site changes like the categories, page colors, posting fees, site name or graphic logo, html header and footer used for all pages, are all setup in the config.pl setup file.

You open the config.pl setup file using a normal text editor. All setup fields have description-help above each of the settings.

Web Site Hosting Requirements: 1. UNIX, LINUX, FREEBSD, Apache, Mac, Microsoft Windows NT/2000/2003/XP/Vista 2. Web site hosting account with cgi access. "Most hosting accounts come with cgi access".

Additional supports 1. The auction software needed to start your very own professional online auction site.

2. 1 year 24/7 E-Mail tech support

3. Free access to the online user support forums.

4. Free access to the software upgrades area.

Installed Package: if one select a third party to install the reverse auction software for himself he'll be provided product installation form after making payment, this form is for the buyer to fill out giving the auction site developer all the information they need to do a complete install to the web site. The auction site will be up and running within 48 hrs from the time order is processed.

Self Installed Package: If one select to install himself as soon as the software seller receive confirmation of payment he or she will be emailed the software package he or she ordered.

Pricing policy As in Online Reverse Auction price is determined by the buyer not the seller naturally the price level is lower than the traditional purchase situation. But different Online Reverse Auction sites use different ways to bid for the buyer determined price by the seller. That’s why a significant difference can be seen in the cost charges and revenue management of the online reverse auction sites.

Priceline.com: PCLN's business model is based on a reverse auction or conditional offer framework To initiate the reverse auction process, potential customers specify product parameters (e.g., dates and destination for airline tickets) and a price (bid) at which they are willing to transact.

To confirm a bid, customers are required to provide credit card authorization, thereby guaranteeing acceptance of the transaction if their price is met. Once submitted, PCLN compares the customer's bid to its discounted inventory.4 If PCLN can identify a product that meets the customer's parameters for a price below the bid, the deal is consummated. In essence, PCLN purchases the product from the GSP and resells it to the bidder.

Consequently, PCLN's margin is the difference between the discounted price it can negotiate from the GSPs and the customer's bid.

Oltiby.com 1. Buyers - Posting an Order is Free.

2. Sellers - Displaying items for sale is Free 3.

Sellers - Bidding on items at online reverse auctions is Free.

Buyers pay Oltiby a service fee a percentage of the lowest bid. Oltiby will then provide buyer with the sellers contact information (name, address, telephone and email) to complete the sale.

Marketing Strategy Marketing activities conducted by online reverse auction sites are different among themselves. It can be simple STP or network strategy. Network strategy can be categorized among partnership management program with the sellers & customer network management program with the customers. As a result this auction sites launch different affiliation

programs for both the customer and the seller. This activity can be precisely described with the example of DubLi reverse auction site.

Dubli.com The DubLi business model uses a multi-level marketing structure to expand it’s network of customers, merchants, partners and business associates. In many cases, multi-level marketing is also abbreviated as MLM or also known as network marketing. Essentially, DubLi’s business marketing strategy is based on networking and multi-level marketing, which is a very clever approach to any online business in today’s globalized world. Coupled with social media, multi-level marketing and network marketing can achieve outstanding numbers in a short period of time, as seen in the launches of the DubLi Network over the course of the past 7 years.

Although transparent to the customer user interface, but available as a quick read on the DubLi Network web site, the advertising and promotion strategy for this growing company is based on a simple multi-level marketing strategy or MLM. The entire shopping experience requires DubLi Credits that cost a customer money. A customer can only shop or bid in the auction using credits. This is where the DubLi Network marketing strategy comes into play.

For a minimal yearly fee, an individual, entrepreneur or business can sign up as a DubLi Network Business Associate. Then, they purchase DubLi Credits in bulk packages (with discounts) and then they resell these credits to their existing and new customer base that they promote too. The customer purchases these credits at regular costs, thereby giving the DubLi Network Business Associate the difference which represents their commission. As a multilevel marketing strategy, the DubLi Network marketing system goes further. As a Business Associate, you can also promote and refer other individuals or businesses to join as DubLi Business Associates, thereby joining the DubLi Network as a promoter and distributor of credits. The original Business Associate will earn commissions from selling credits to their own customers in addition to the referred Business Associates customers. It keeps going for 5 connections downstream. This is how a simply, legal network marketing strategy works.

The other DubLi network marketing program made available to you at a small yearly fee is the DubLi Partner Program. This is setup for people and businesses who already have a large opt-in email database or customer base. A multi-level marketing DubLi Partner essentially creates their own website to sell credits in addition to products. The commission earned goes directly to the partner themselves. However, this network marketing strategy only includes one connection down stream, so only direct customers that you promote to and refer will be included in your commissions.

Priceline.com Efficiently segmenting customers is the key to PCLN's ability to attract GSPs, since the firm essentially offers a vehicle for yield management systems. The service firms that are drawn to PCLN's Internet platform frequently face distinctive problems, one of the most pressing of which is the perish ability of their inventory. Their time sensitive inventory compounded with fixed capacity, high fixed costs and low variable costs, time variable demand and segment able markets make participating GSPs prime candidates for strategic pricing.

Strategic pricing through yield management systems is the way airlines, hotels, and rental car agencies capitalize on the relative price elasticity of various customer groups. Specifically, yield management is the process of allocating capacity to the appropriate customer at the correct price in order to maximize revenue. Consequently, by segmenting the most price sensitive customers, or more accurately, by encouraging the most price elastic demand segment to bid, PCLN gives its GSPs a platform for selling distressed inventory.

A significant issue facing PCLN is that effective market segmentation is at odds with the predicted price impact of expanding Internet commerce. In fact, a commonly touted benefit of the Internet for consumers is its inherent impact on prices." The source of these expected savings is the significant reduction in search costs, which allow consumers to engage in lowcost price comparisons. As search costs fall, supplier markets are forced to become more competitive causing price dispersion within an industry to decline. While the empirical evidence suggests that the anticipated product market efficiencies emanating from the Internet have been somewhat overstated, the overall effect of the growth of Internet shopping is clearly price reduction.

Products & Services Initially the online reverse auction sites provide options for selling only price sensitive and highly perishable products. But now modern online reverse auction products are now providing options for almost all kind of product to be sold at this site.

Oltiby.com This online reverse auction sites provides a wide range of options of products and services to be offered by the buyer. They are: Books Cars Clothing Computer Digital DVD

& & & &

Vehicles Shoes Software Cameras Movies

Health Industrial Jewelry Kids Musical Office Phone Sports Travel & Tickets

& & & & &

Beauty Equipment Watches Toys Instruments Furniture Mobile Outdoor

How to distribute products sold by Online Reverse Auction Physical distribution (logistics) deals with the efficient movement of a company’s product through the channel of distribution. A firm can manufacture a great product, but if it takes 10 months for the product to get from the manufacturer to the retailer (or consumer) the firm will find itself in serious trouble. Physical distribution makes up about 10% to 15% of the total cost of a product.

Physical distribution consists of the following tasks: • Warehousing • Materials Handling • Packaging • Inventory Management • Order Processing • Transportation Warehousing and Distribution Improved service, reduced costs and enhanced performance are the goals of all warehousing and distribution operations. Using these areas for competitive advantage requires real focus on proper planning and continuous improvement.

Warehousing and Distribution Solutions It provides warehouse from the initial planning stages through the implementation process, using proven warehousing and distribution solutions. It provides on-site management of the entire implementation process to maintain quality, schedule and cost conformance.

Implementation support is provided in the following areas: •

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Warehouse Strategic Planning—selecting the most efficient storage designs, material handling systems and warehouse management systems to ensure peak operations performance.

Distribution Center Design and Implementation—Creating, maintaining and administering budgets and schedules; assisting with obtaining proper permits; overseeing installation; developing product slotting configurations for maximum material handling and storage efficiency; conducting equipment acceptance testing and providing start-up support when operations go live.

Distribution Network Configuration—Determining the number and location of distribution centers and manufacturing plants.

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Site Selection—Evaluating existing structures and Greenfield sites, utilities, fix-up costs, gradability, support services, community desirability and incentive packages.

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Construction Services—providing total project management for facility construction and renovation, including site selection, construction team selection and on-site project management.

Systems Integration—seamlessly integrating computerized and manual warehousing systems through system configuration and set up, acceptance testing start-up and implementation.

How to do Shipping Work?

The company uses Distribution Centers  When a Ground package is picked up; the company immediately forwards it to the nearest distribution center for sorting and processing. The company boasts nearly two dozen distribution centers strategically located around the country, and the millions of packages that arrive at these centers each day are removed from incoming trucks and introduced into the facility on automated conveyor belts. As a package works its way through the distribution center, advanced bar code scanning technology automatically routes the package based on the label applied when the package was shipped. The package is grouped with other packages destined for the same geographic area then loaded onto a truck for delivery or transport to another distribution center.

Some Packages Visit Multiple Distribution Centers  If a package is travelling a long way-from the west to the east, for example-it may have to pass through several distribution points before being delivered to the final destination. At each distribution center, the same scanning technology groups packages together based on the destination and the packages are loaded on a truck for additional transport. In most locations it uses a proprietary staging process to ensure the packages are properly routed and grouped with other packages with similar destinations. If the package is to be sent to another distribution center, it is staged for and loaded on a truck headed for the next center route to the destination. If the package is ready for delivery, it is loaded on a truck designed for local delivery along with other packages destined for that truck's delivery route.

Packaging Solutions Packaging Supplies •

Packaging products including, but not limited to: Corrugated Cardboard, Stretchfilm, Bulk Bags, Paper Bags, Plastic Bags, Tapes, Corner Board, Strapping, Foam-in-Place, and Styrofoam.

Packaging Services • •

Customized packaging services offered.

Just-in-Time (JIT) warehouse and release packaging services available using our warehouse and transportation systems.

Custom Displays •

Point of Purchase displays made of corrugated cardboard, slat wall, wire and other materials customized to meet your needs.

Problem associating with distribution The Last Mile Problem • Problem for online retailers/logistics managers: added expense of delivering small quantities to individual homes and businesses.

Less expensive to send cases of product to wholesalers and retailers + let them break the quantities into smaller units for sale.

• Other problems: 25% of deliveries require multiple delivery attempts (increase costs) + 30% of packages are left on doorsteps when no one is home (theft issue) Possible solutions of The Last Mile Problem problems • Three (3) solutions: 1. Smart box: 2.5 foot tall steel box with a numeric keypad connected to the Internet. Delivery people receive a special code for each delivery and use it to open the box and leave the shipment, efficient and secure solution if consumers are willing to pay the hefty box fee.

2. Retail aggregator model: Packages are shipped to participating retailers (local convenience stores/service stations) then consumers pick up the package.

3. Special e-stops: store fronts that exist solely for customer drive - through and package pick up. E-Stops safely halt equipment motion as rapidly as possible.

Emergency-stop switches, generally referred to as E-Stops, help ensure the safety of people and machinery by delivering a consistent and predictable failsafe response.

Example: Leave it in the Box

Can a new digital appliance solve home delivery dilemmas?

It was the kind of logistical nightmare that busy professionals dread. One night last spring, tech-support staffers were still fiddling with Jeff Stonerock's laptop computer when the Washington, D.C., lawyer had to rush to a dinner meeting. Stonerock needed his laptop for a business trip the next day, so his office hired a courier to take it to his Vienna (Va.) home after the work was finished. Trouble was neither Stonerock nor his wife would be there to receive it. And leaving a $2,000 laptop containing sensitive client files on his doorstep was unthinkable.

Luckily for Stonerock, he had a Brivo Systems Inc. Internet-linked lockbox next to his garage. With the proper entry code, the courier could leave the laptop in the secure box. Sure

enough, in the middle of dinner, Stonerock's pager buzzed with a message from Brivo saying his laptop had made it. ''It was a real relief,'' he says.

Stonerock is one of 100 consumers testing Brivo's Smartbox, a steel-and-plastic container about the size of a travel trunk with a wireless link to the Web. By building a box that notifies users when packages are dropped off or picked up, Brivo aims to take the hassle out of delivery for harried professionals, online shoppers, and small businesses.

Reverse Logistics The key to a successful supply chain is not only planning how to distribute product, but how to bring it back - both customer returns and obsolete products. Managing returns effectively allows recapturing value or reducing write-offs, while keeping customers happy.

Reverse Logistics is often associated with 'returned goods' or even recycling of products, but the gamut of reverse logistics activities include much more than just returns management or recycling.

The Reverse Logistics Executive Council defines Reverse Logistics as 'The process of planning, implementing, and controlling the efficient, cost effective flow of raw materials, inprocess inventory, finished goods and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal.'

In order to better understand the process of reverse logistics, let us break down the definition into succinct parts.

Planning, implementing and controlling the process: this implies that the process is an important business function that requires planning and control. It also indicates that a reverse logistics plan has to be implemented by the business.

Planning and controlling becomes important when there are resources to be spent and some gains to be expected in return for the investment. Thus, reverse logistics is definitely not an overhead for any business nor a cost center but a business process, a part of the supply chain that requires careful planning and control of activities.

Many businesses are now realizing the strategic importance of their reverse logistics function as a key differentiator in competitive markets. A perfect example is that of Canon, which has a well developed toner cartridge return program that not only earns Canon considerable revenue through remanufacturing of cartridges but also earns it substantial goodwill as an ambassador of 'recycling programs'.

Moving on to the second part of the definition which states that it is an efficient, cost effective flow of raw materials, in-process inventory, finished goods and related information from the point of consumption to the point of origin. This part explains the direction of the process, drawing parallels with the definition of a supply chain which is often defined as the flow of goods, information and money from the supplier to the end consumer. As a matter of fact, the definition of supply chain merely talks about the forward flow of goods and information whereas, for the definition to be complete it should include the backward flow, i.e. the reverse logistics as well.

Conclusion

Setting up an online reverse auction requires a small business to make a number of choices in order to establish the rules and conditions under which the bidding will take place. Hosted auction sites usually offer buyers some options, while auction software packages vary greatly in the number of options they provide. Either way, small businesses should have input into the basic parameters of the auction process. For example, a typical online reverse auction requires the registration of both buyers and sellers and the collection of sale items, along with digital images and descriptions. The buyer may be able to establish the start date and end date of the auction, as well as determine which auction method to use. It is also important to select preferred payment methods and establish a process for delivering items to customers.

BIBLIOGRAPHY 1. Anon, Reverse Auctions Are Creating False Savings For Manufacturers, Manufacturing News, May 31, 2001 Volume 8, No. 10 - refers to a study by M.L Emiliani and D.J. Stec of Rensselaer Polytechnic Institute's Center for Lean Business Management in Hartford, Conn.

2. Korper, Steffano, and Juanita Ellis. The E-Commerce Book: Building the E-Empire.

San Diego, CA: Academic Press, 2000.

3. Emiliani ML(2000a) “Business to Business online auction: key issues for purchasing process improvement” supply chain management Vol.5 No.4 PP 176-86 •

Strauss, J, Ansary, A.E, & Frost, R. 2003, E- Marketing, 3rd Edition, Pearson Education.

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www.autoebid.com last accessed: 8 November, 2010

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www.priceline.com last accessed: 8 November, 2010

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www.reverseauction.com last accessed: 8 November, 2010