<P> For consumer auctions, the term is often used to refer to a sales processes that shares some characteristics with auctions, but are not necessarily auctions in the traditional sense . </P> <P> The most common application of reverse auctions is for e-procurement, a strategy used by purchasing as part of strategic sourcing and other supply management activities . It enables suppliers to compete on - line in real time and is changing the way firms and their consortia select and behave with their suppliers worldwide . It improves effectiveness of the sourcing process and facilitate access to new suppliers . This may in the future lead to a standardization of sourcing procedures, reduced order cycle, which can enable businesses to reduce prices and generally provide a higher level of service . </P> <P> In a typical auction, the seller offers an item which she wishes to sell . Potential buyers are then free to bid on the item until the time period expires . The buyer with the highest offer wins the right to purchase the item for the price determined at the end of the auction . </P> <P> A reverse auction is different in that a single buyer offers a contract out for bidding (by either using specialized software or through an on - line marketplace). Multiple sellers are then able to offer bids on the contract . As the auction progresses, the price decreases as sellers compete to offer lower bids than their competitors whilst still meeting all of the specifications of the original contract . </P>

Reverse auctions result in a downward pressure on bid prices