What is a Reverse Auction? How does it Work?

In order to properly define the unique characteristics of the 'reverse auction' and why it has become one of the most lucrative auction models in the world, it is important to touch upon one of the more familiar auction sites you'd typically see on the interne like of eBay, eBid, uBid, Yahoo and others. These types of auctions are categorically referred to as "traditional auctions."

A traditional auction involves a "Seller" who is offering an item for sale while potential buyers compete with each other for the purchase of the item, which in turn causes the price of the item to continually increase in price until no buyer is willing to bid more...thus the auction concludes with the item being awarded to the "Highest Bidder."

The characteristics of a reverse auction are in fact very similar to that of a traditional auction by the fact that it also involves a "Seller" which for the purpose of this illustration will be DubLi.com.

DubLi.com offers an item(s) for sale on their online auction website attracting potential buyers who compete with each other for the purchase of a particular item, just like you'd see in a traditional auction. However, all similarities end here because in a reverse auction the price of an item is actually driven down with each bid placed by potential buyers until a single lowest buyer is identified. At this time the auction concludes and the item is awarded to the "Lowest Bidder."

To quickly summarize the key differences between the two; in a traditional auction, the price for an item is continually driven up from the bids placed by potential buyers, where as in a reverse auction; the price for an item is continually driven down from the bids placed by potential buyers.

The origins of the 'reverse auction' date back to the mid 1990's. The concept was initially conceived as a way for companies to bid on available government and private sector contracts. The auction would take place on the internet and potential buyers were invited to openly compete and bid amongst other companies vying for the available contracts; which would of course benefit the recipient by driving down the costs of the project. When bidders reached a threshold and could go no lower for a particular contract, the auction would conclude and the available contracts would be awarded to the companies with the lowest bids.

Sound familiar? It should, because bidding on contracts is certainly not something new by any stretch of the imagination, but it certainly was on the Internet! Prior to the creation of the reverse auction, competing for contracts was more localized and bids were oftentimes delivered through the mail as potential buyers had to patiently wait for the outcome of their bid. However, with the advent of the Internet, suddenly a paradigm shift transformed in the way companies and governments could post important projects and accept bidding from potential buyers and contractors from around the world. By the same token it certainly opened the door for contractors and buyers alike who could now bid on far more projects outside their immediate marketing area and be informed of the status of those bids in real time!

It is not known who officially coined the phrase 'reverse auction' but it's matured into a multi-billion dollar global industry and one you don't hear about very often. Perhaps it is because it's been used primarily by big companies and governments up to now.

DubLi.com's founder, Michael Hansen, carefully studied and examined the 'reverse auction' model starting in 2003 and concluded there was an even bigger opportunity for growth in the multi-billion dollar consumer market. He envisioned showcasing the best selling in-demand products and services from the most well known and reputable companies in the world; only those with a household name would qualify. The key to success would be in the ability to drive customers to DubLi.com's auction website. He felt that buyers would be eager to check out the auction and proceed to bid...only if the products and services had instant appeal and credibility to the consumer.

Michael Hansen, convinced that DubLi.com could become a huge success, began assembling the collective talents of computer programmers, software engineers, web designers and graphic artists. They set out to create the first ever 'reverse auction' site on the Internet; geared specifically to the retail consumer market. There were plenty of trials and tribulations along the way because everything had to be designed from the ground up. The concept of building a 'reverse auction' portal for the consumer market had no predecessors as a guide, but after several years of perseverance and millions of dollars invested, DubLi.com made its public debut in the US in the spring of 2008, and the rest as they say...is history.

To say DubLi.com was a success is an understatement; the concept was simple yet very business savvy. By providing the consumer with the ability to purchase name brand merchandise at a fraction of the cost, it became an instant hit with shoppers. The formula has succeeded and attracted a multitude of potential buyers through word of mouth advertising. The auction website is open for business 7 days a week, 24 hours a day, and offers only the top selling genuine name brand items from the most respected manufacturers in the world. Some of the companies featured on the site are: iPod, iPhone, Hewlett Packard, SONY, Panasonic, LG, Samsung, Toshiba, X-Box, Nintendo, Mini-Cooper, Disney, Rolex, Louis Vuitton, Gucci, Coach and Burberry. Buyers can openly bid against each other causing the price to drop incrementally with each bid until one buyer is awarded the item and the auction is concluded. Auctions begin and conclude 100's of times on any given day; which means 100's of buyers are driving home fantastic bargains on a daily basis.

The success behind DubLi.com's 'reverse auction' lies in the formula of being able to drive down prices incrementally with single bids placed by consumers until the price reaches a point where it becomes irresistible to the buyer and then it's sold. How they are able to do this on a consistent basis 100's of times per day is a trade secret, but DubLi.com's founder was able to implement this revolutionary strategy for extreme discounting through the creation of "Credits".

When you first enter DubLi.com's auction website there are several categories that the buyer can pick and choose from. Perhaps they are in the market for something in the "electronics section" like a new flat screen TV or digital camera; in the "household items" like an espresso machine or a juicer or in general a gift certificate from some of the top retailers like Wal-Mart and Target and everything in between.

There's a "start price" displayed for each item in the auction and just below the start price is displayed a "current price" which is concealed by design. If a potential buyer wants to "view" the current price of an item, they spend 1 "Credit", worth $0.80 /€0.50 , and DubLi.com lowers the price of the item $0.25/€0.20. Every time a person looks at the price, the cost of the item goes down $0.25/€0.20. Can you imagine if you spent $0.80/€0.50 and found a product worth 500 showing the bid at 200 how happy you would be with your purchase. It would be well worth the cost of the "Credit".

If the current price revealed to the buyer is "right price" for them after spending a "Credit", then they have the option of purchasing the item on the spot for its current price. On the other hand, the buyer might decide to hold off purchasing the item by waiting to see if the "current price" will be driven down even further by other buyers using their "Credits" to reveal the current price on the same item.

The only risk to the potential buyer by choosing to wait is the chance of the item getting snapped up and purchased by another buyer, but that’s also part of the fun part about knowing how to drive home a great bargain at DubLi.com. The atmosphere on the website is electric with activity, as buyers feverishly bid against each other vying to secure the best possible deal on items they desire most. Many buyers end up paying a fraction of the cost for the item they purchase, which is wonderful...for most a savings in the neighborhood of 40%-60% is fairly common.

The customer whose final bid concludes the auction would be prompted for their method of payment. After the payment has been successfully processed, DubLi.com ships out the merchandise directly to their home or place of business. A new item immediately replaces the item that sold, causing the process to repeat itself over and over again. 100's of products are being bid on simultaneously in the auction website every single day.

We (DubLi.com) know from past history that satisfied customers often return back to our auction website several times a month to check out what hot new items might be available. This is validated as we see many customers making multiple purchases. This also helps indicates what top selling products must always be on hand for our customers so they will continue shopping at DubLi.com. The software we developed enables us to determine what individual customers are bidding on. We can target these specific items of interest for future reference when they are featured again and immediately notify the customer via email with the specific item they're looking for. In addition we do a number of seasonal promotions centered on the major holidays which helps drive a tremendous amount of traffic to the auction.

Our primary objective as a company is to provide superior quality products and excellent service and to maintain an ongoing rapport with our customers so they will enjoy the experience of saving money and continue coming back to shop with us.

How does DubLi.com earn a profit when the buyers are getting such discounts?

When a buyer purchases a "Credit" for $0.80/€0.50 and then spends it in the auction by revealing the "current price" of an item, we take $0.25/€0.20 off the top and immediately subtract it from the current price. The remaining $0.55/€0.30 is allocated to: referral commissions which are paid out monthly to our business associates as marketing costs, subsidize promotional items referred to as lost leaders, and operational expenses. The remaining dollars are company profits.

We realize a person may be wondering at this point. "How could a potential buyer expect to see any significant savings on an item they want to purchase when DubLi.com is only reducing the price of the item by a mere $0.25/€0.20 per bid?"

That is a great question. Let's face it, if only 10 people placed a bid on a particular item, it would only reduce the price by $2.50/€2.00 which isn't much, but multiply the number of potential buyers for the same item by 100, and now the discount jumps up to $25/€20 which is certainly better, but when you multiply the potential number of buyers for the same item by 1000 or more...now you're talking about substantial discounts in the neighborhood of $250/€200 plus. This is a very significant savings!

But how does DubLi.com attract its customers?

The reason we are able to attract large numbers of potential buyers to our website is centered primarily on two key elements. The first is that we stock and showcase only the best quality and hottest selling genuine merchandise you can find anywhere in the world. The second reason is our business model was built to funnel multitudes of traffic to our auction portal by utilizing one the best known forms of advertising that exists on the planet...that of course being word-of-mouth advertising. Early on, we realized that by rewarding people for their recommendation through referral based commissions, we could potentially attract untold numbers of customers from around the world to our auction portal, and that's precisely what has happened.

Since the debut of DubLi.com we have been fortunate; attracting literally 1000's of business associates from around the world to our business model and nearly 1.5 million customers. DubLi.com's auction portal is quickly becoming one of the most popular destinations to visit on the internet, and we expect those numbers to increase exponentially in the months ahead.

Perhaps you can begin to see the benefits of DubLi.com's reverse auction a little more clearly and with better insight...knowing that our company is still able to generate a profit while providing buyers the ability to purchase the hottest consumer in-demand products and services sold anywhere in the world; oftentimes at a fraction of their regular selling price.

Actual Completed Zero-Auction Photo on DubLi.com

It's pretty simple and straight forward actually...on the surface that is - but it took an investment of millions of dollars and 1000's of man hours in order to materialize the DubLi.com vision into its present day reality.

It's one of the most fun and entertaining ways of saving money on brand new quality merchandise that's ever been conceived; especially when you're openly competing with other buyers to see who can get the lowest possible price for an item before it sells. That's what it's all about...bringing real value to the consumer and pioneering an opportunity that is unmatched anywhere in the world for our business associates.

We receive countless emails on a daily basis from satisfied customers all over the world telling us how much fun they have shopping at DubLi.com and how much money they are saving. Saving money is important in today's economic climate where every dollar saved can make a real difference in a family's budget and their quality of life.

At DubLi.com, we want to openly extend a warm invitation for you to become part of our global community...together we can create abundance and prosperity for all.

By DrangonHorse

Two days ago, DubLi informed the SEC its financial filing due this week will be delayed. This, according to Investopedia and others in the know, is a normal occurrence:

“The form 10-Q is required to be filed within 45 days following the end of each of a company’s first three fiscal quarters. If the 10-Q cannot be filed in a timely manner, the company must file a Form 10-QT with the commission. A very common reason for an NT 10-Q is a merger or acquisition, which prevents results from being incorporated in time for the filing. The SEC provides for “unreasonable effort and expense”, with explanation, as part of the application for relief.”

The SEC rule says:

“The subject annual report, semi-annual report, transition report on Form 10-K, Form 20-F, Form 11-K, Form N-SAR or Form N-CSR, or portion thereof, will be filed on or before the fifteenth calendar day following the prescribed due date; or the subject quarterly report or transition report on Form 10-Q or subject distribution report on Form 10-D, or portion thereof, will be filed on or before the fifth calendar day following the prescribed due date …”

And the official statement from DubLi says:

“The registrant is unable to file its Form 10-Q Report for the period ended December 31, 2009 as a result of the recent effective change of control on October 19, 2009 pursuant to the completion of a merger agreement dated August 10, 2009. Due to the complexity the registrant has not yet completed the information required to be included in the Form 10-Q Report. Such information is being assimilated and the Report will be filed within the required period.”

The guess is that DubLi has another 10 days to file, so we’re looking at next week.

DragonHorse Blog

Team Dragon Horse

Friday, February 19, 2010