Education

Mechanism and Benefits of Japanese Auctions

Japanese Auctions

Japanese Auctions

Sourcing and purchase can be complicated endeavours. This is why you have alternative negotiation methods. You may be well aware of the terms like Dutch auction, reverse auction but do you know about Japanese auctions? Well, in this cut-throat competitive business world, buyers should be familiar with some negotiation options if they want to get the best deal. Here is a detailed description of Japanese auctions.

In simple words, a Japanese auction is just an auction where the opening bidding price is increased in the interim with the progress of the auction. Japanese auctions can be used in a number of situations. Such as:

  • When you are looking for the best quote.
  • If the market is highly competitive
  • If a buyer is looking for the best price for the product.
  • If a buyer has a potential bias to a specific seller.
  • If the buying procedure is complicated because of different demands.
  • The services or products offered by the seller are incomparable.

Mechanism of Japanese Auctions

The major spec of a Japanese auction is that it is processed by a buyer as a kind of elimination game. It is more like a game where the last bidder stands to win the contract.

The buyer marks the starting price after which the other participants participate in the auction. The price is usually set by the details offered from the RFQ price sent to the buyer by the seller.

As soon as the auction commences, the price is increased in increments or at a specific percentage. Suppliers can be a part of the auction or opt-out if the price isn’t favorable for them to continue the business.

Once the bidding starts, no new bidders are allowed. When the price of the product rises, the bidder should bid in response or leave the auction. The winner will be the highest bidder who will pay the final bid amount. The auction only comes to an end when:

  • You have one supplier remaining
  • A limited number of suppliers (in case the buyer wants to work with more than one of them)

The goal of the complete auction is to get a bid for which the deal will be contracted for.

Advantages of Japanese Auctions:

Some of the benefits that buyers can avail themselves from Japanese auctions are:

Cost-saving: It happens because there isn’t full transparency between suppliers at different stages of bidding.

Visibility: The buyer can get a full idea of what every supplier is capable of providing them with regards to the pricing of the product and service.

A plethora of choices: Using the details garnered during the auction, the purchaser can make a directory of which suppliers are preferable to do business in the coming future.

Risk-free: Dissimilar to the Dutch auction or reverse auction, the Japanese auction is risk-free for all the purchasers.

Easy Auction Japan is an online portal to shop for Japanese products and services via bids. You can start bidding on any product and if you win the auction, you will be shipped the product anywhere around the world. 

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