Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy
The 6 Types of E-Auction — Definition + How to Use Them
As taught in the E-Auction Course for Procurement Professionals / ★★★★★ 4.9 rating
- An e-auction is an online process where suppliers compete in real-time by submitting bids to win a contract.
- An e‑auction enables fast, transparent price discovery by controlling visibility, pacing, and rounds.
- An e‑auction can also use pre‑defined scoring to include measurable non‑price factors like delivery or warranty.
The 6 Types of E-Auction
Below is a brief overview of the most common electronic auction formats, along with guidance on when to use them.
1. British Reverse E-Auctions
A classic live reverse auction where qualified suppliers progressively lower prices and typically see only their rank (1st, 2nd, etc.) rather than competitors’ exact bids. It works best for standard, well-specified categories with interchangeable suppliers and low switching costs.
Defined rules (start price, minimum decrement, duration, soft-close extensions, reserve) create structure and fairness. Its strength is fast, transparent price discovery once non-price factors are aligned in pre-qualification. It underperforms when specifications are unclear or when competition is weak.
2. Vickrey Reverse E-Auctions
A sealed reverse format where the lowest compliant bidder wins, but the contract price is set at (or derived from) the second-lowest bid, encouraging truthful cost revelation. It reduces incentives for extreme underbidding since the winner is not paid its own bid level.
Best used when you want confidentiality and to mitigate tactical shading without running a live event. It requires a sufficient bidder count and strong trust in the integrity of bid handling. Risks include potential collusion in thin markets and stakeholder misunderstanding of the pricing mechanism.
3. Dutch Reverse E-Auctions
A pace-controlled reverse variant aimed at very rapid award: the system adjusts the price level in predefined steps, and the first supplier to accept wins immediately. It suits urgent or time-sensitive procurement where a decisive, fast result protects value (e.g., perishable inputs, emergency services).
Clarity of step size, timing, acceptance rules, and readiness to perform is critical before launch. Pressure and the “first click wins” dynamic can disadvantage less experienced participants. Use only when the supplier pool is deep, logistics are pre-confirmed, and speed outweighs incremental price refinement.
4. Japanese Reverse E-Auctions
A structured, round-based reverse auction where price steps downward and suppliers must actively “stay in” each round or drop out permanently. This format maintains sustained competitive focus and eliminates last-second sniping by requiring continuous affirmative participation.
It is well-suited to significant or capital categories with several serious, disciplined suppliers. Clear timing, confirmation mechanics, and fallback rules for technical issues must be defined. Downsides include higher attention demands and potential inadvertent elimination due to missed confirmations.
5. Sealed Bid E-Auctions
A single-round, confidential submission of best offers by a fixed deadline with no live rebidding phase. It is appropriate when confidentiality, reduced psychological pressure, regulatory formality, or stakeholder preference preclude live competition.
Strengths include simplicity, audit trail, and lower operational stress on suppliers. Weaknesses are weaker price discovery and a tendency for conservative (higher) bids absent real-time competitive tension. It relies heavily on thorough pre-qualification and clear, published evaluation criteria.
6. Weighted / Multi-Attribute E-Auctions
A format combining price with predefined, quantifiable non-price factors (e.g., delivery time, warranty, service level) into a composite score using published weights. It allows transparent optimization beyond price while keeping the live or sealed mechanism credible.
Success depends on keeping the scoring model simple, objective, and fully communicated before bidding. Overly complex or subjective criteria should be handled in qualification instead of in scoring. Ideal when multiple measurable value drivers matter, and stakeholders need structured trade-off visibility.
Why Auction Format Matters
The auction format directly shapes supplier behavior and the quality of outcomes. The right choice aligns the business objective, such as price or speed, with category characteristics and supplier maturity, thereby encouraging competition and building trust, while the wrong choice leads to participant disengagement and poorer results.
Offer visibility, pacing, and the number of rounds affect participants’ incentives and strategies, so those decisions should be made according to market behavior. Simple rules and a short trial run before the event often determine success. The format is not a theory but a practical tool for achieving measurable objectives.
Design Elements That Influence Behavior
Visibility, rounds, and scoring shape supplier behavior in an auction. Ranked visibility boosts momentum because suppliers see their position, while blind visibility reduces pressure and can help protect relationships. Use single-round sealed bids when confidentiality matters, and choose multi-round live auctions for stronger price discovery when suppliers are prepared and engaged.
When timing control is important, Dutch auctions speed decisions, while Japanese auctions reduce last-minute sniping and keep competition steadier. If non-price factors matter, apply a simple weighted scoring model that combines price and other criteria fairly. Set the weights in advance and define objective criteria before the event to keep the process clear and trusted.
How to Choose: A Three‑Test Decision Framework
Start from the business objective: what do you need most, price discovery, speed, or protection of value and service levels? The three‑test framework helps translate that objective into a practical format by screening the opportunity through market conditions, supplier base, and standardization.
If a category clears these tests, an e‑auction will likely deliver fair, competitive, and actionable results; if it fails one or more, you must adapt the design or choose a different sourcing approach.
Test 1 — Market Conditions
Assess demand depth, product characteristics, and time sensitivity. Deep, competitive markets with commoditized products suit reverse auctions for rapid price discovery, while perishable or time‑critical goods point to Dutch formats that close fast.
Thin markets or assets with complex value drivers may require forward sales, negotiated deals, or pre‑auction qualification rather than a price‑only reverse event.
Test 2 — Supplier Base
Examine the number, maturity, and behaviour of potential bidders. Multiple experienced suppliers support live multi‑round events and ranked visibility to generate momentum; small or nervous supplier pools benefit from blind visibility or sealed bids to reduce pressure.
If suppliers lack readiness, invest in qualification, clear rules, and a short mock session before running a live format.
Test 3 — Standardization and Comparability
Decide whether the requirement can be specified and compared objectively. Highly standardized goods and services map well to price‑centric reverse auctions, while procurements with important non‑price factors need simple weighted scoring or multi‑attribute formats with pre‑set weights. Complex subjective criteria should be resolved in the qualification so that the auction focuses on directly comparable elements.
Practical decision flow and preparation. Use the three tests as a quick checklist: market, suppliers, standardization. If all three are positive, choose a straightforward auction format and keep rules simple; if not, adapt visibility, rounds, or scoring, or use sealed bids or negotiated routes. In every case, communicate rules clearly, limit complexity, and run a brief trial to align expectations and maximise participation.
7 Practical Rules and Common Pitfalls
Real-Life Examples
Example 1 – Ergonomic Chairs
A ranked reverse auction was used with a €250 starting price, €5 minimum decrement, 45‑minute duration, and two‑minute soft‑close extensions. Six prequalified suppliers competed and the event closed at €218 per chair, saving about €32,000 because quality and terms had been aligned in the RFQ.
The soft‑close rule prevented last‑second sniping and gave all participants a fair chance to react to price changes. Because logistics and delivery terms were confirmed before the event, the award was finalized quickly and without objections.
Example 2 – Dutch Auction for 10,000 Tulips
The auction began at €1.00 with €0.05 drops every 10 seconds and cleared at €0.60 when the first buyer accepted. This format delivered speed and decisiveness, protecting value by selling before freshness decayed.
The 10‑second drop interval maintained urgency and prompted rapid decisions without overwhelming participants. Prearranged packing and transport slots enabled same‑day shipment, maximizing preserved quality.
Example 3 – Japanese Auction for a Used CNC Machine
It started at €50,000 with €1,000 increases per round, and bidders had to click “stay in” at each step. It ended cleanly at €55,000 with a clear participation record and no last‑minute sniping.
The mandatory “stay in” confirmation at every step ensured full auditability and minimized the chance of later disputes. The format transparently revealed bidders’ willingness‑to‑pay thresholds, helping the seller gauge market demand for similar equipment.
Example 4 – Office Supplies (~€100,000)
A large buyer ran a ranked reverse event requiring minimum €500 reductions with rank‑only visibility. This nudged late movement without exposing actual prices and kept lower‑tier suppliers engaged.
The €500 minimum step prevented tiny “nibbling” moves and accelerated convergence toward a realistic market price. A short, sharp timeline created urgency, while pre-aligned catalogs and SLAs reduced the risk of post‑auction misunderstandings.
Conclusion
The right e‑auction format directly shapes supplier behavior and outcome quality, so align the format with your objective (price, speed, or protection of service) and the market context.
Key choices about visibility, number of rounds, and scoring determine bidders’ tactics. Keep rules simple, transparent, and published in advance.
Prequalify suppliers, select the appropriate format, and run a short trial before the live event. Good design and clear communication reduce complaints and deliver measurable, actionable results.
Frequentlyasked questions
What are the types of e-auction?
The main types of e‑auctions are British (ranked) reverse, Vickrey (second‑price) reverse, Dutch reverse, Japanese reverse, sealed‑bid, and weighted/multi‑attribute (combining price with measurable non‑price factors).
When should I choose ranked visibility instead of blind?
Use ranked visibility to build momentum and quick price discovery with experienced suppliers; use blind to reduce pressure in sensitive or thin markets.
When should I run a multi‑attribute auction?
When measurable non‑price factors (e.g., delivery, warranty, service) matter and you can set clear weights in advance.
About the author
My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.
