Reverse Internet auctions put clothing manufacturers in
competition with one another to offer buyers low prices. By teaming
up with textile mills and trim suppliers, manufacturers can bid
prices that won't wipe out their profit margins.
In a move to cut buying costs, some big clothing retailers now
require their suppliers to participate in reverse Internet
auctions. They use these auctions mainly for sourcing large volumes
of supplies and for standard products with easily defined
specifications, where there are a minimum number of suppliers for
the products, who can bid against one another.
For buyers, reverse auctions can spur dramatic cost savings and
long-term efficiency improvements in the purchase of goods and
services. For example, procurement charges account for about 60% of
the cost of woven shirts; saving even 5% in costs is, therefore,
important. As well as lower prices, buyers can also reduce
negotiating times with manufacturers. Since buying represents a
substantial portion of retailers' business activity, automating and
streamlining the process can allow buyers to focus on other aspects
of their job.