Commentary: Reconsider the Role of Reverse Auctions
March 25, 2006
How do you get a distributor agitated? Bring up the subject of reverse auctions. There are few topics in distribution that generate such a negative response. Nearly everyone who has participated or been displaced by one has a horror story of the resulting breakdown in contract performance. Some were ironed out and distributors lost business to the price battle; some displaced distributors came to the rescue months later and had the opportunity to say, "I told you so."
Satisfying as that may be on occasion, reverse auctions quickly became a lightning rod in the late 1990s for short-circuiting channel relationships. Distributors got squeezed in the middle of a price negotiation where their added-value capabilities were stripped out of the equation. For some it was a ...