Online reverse auctions: Issues, themes, and prospects for the future

Online reverse auctions are increasingly being used in industrial sourcing activities. This phenomenon represents a novel emerging area of inquiry with significant implications for sourcing strategies. However, there is little systematic thinking or empirical evidence on the topic. This article reviews the use of these auctions in sourcing activities and highlights four key aspects: (1) the differences from physical auctions and those of the theoretical literature, (2) the conditions for using online reverse auctions, (3) the methods for structuring the auctions, and (4) the evaluations of auction performance. Some empirical evidence on these issues is also provided. Sandy D. Jap (Ph.D., University of Florida) is an associate professor of marketing at the Goizueta Business School, Emory University. Her research focuses on the development and management of interorganizational relationships such as how to create and manage strategic alliances over time, how to balance their risks and rewards, and how to share the payoffs of close collaborations. The results of this work have been published in a variety of journals and books, including theJournal of Marketing Research, Sloan Management Review, and an array of special issue journals related to channel management, sales force management, competition, and e-commerce. She has done extensive work in e-sourcing and business-to-business e-comerce, particularly in the use of online reverse auctions in industrial procurement activities.