Commodities such as bacon, cheese, chips and vegetables are proving the most successful categories in online auction procurement.
Two-thirds of buyers contacted for The Grocer’s Reader Panel this week said they believed online auctions were here to stay, particularly in commodity areas.
“The most successful area is that of commodities, such as corned beef, canned veg and frozen chips,” said one buyer.
Another retailer has bought its own auction platform and plans to integrate contract management and re-tendering of many commodities.
All who have used auctions
say some suppliers have refused to take part. This compares to 71% when we last asked our buyers about online auctions (The Grocer March 29, 2003). However, the number of suppliers refusing appears to be falling. “Very few have refused to take part and usually this is because they price their goods/services with a premium and do not wish to embarrass themselves,” said one buyer. Another added: “Some have refused but it is very much the exception.”
One supermarket buyer said suppliers were now using online auctions more than retailers.
“The volume of auctions has now switched from retail to manufacturer, so those who were most vehemently against are now the biggest users.”
He points out that suppliers’ fears had not materialised. “Because of the scope and flexibility, the much publicised ‘they will drive prices to a point that cannot be reduced any further’ scenario has not happened,” he said. “Auctions are now being used to add value, increase service levels or quality as well as driving down the base cost.”
Despite this, 80% of buyers who had used online auctions had not increased their use over the past year, although some had plans to increase it this year. And four-fifths have found that online auctions have not made their job easier. “Not easier, but more interesting,” was one reply while another said: “Not easier but certainly more effective.”
All pointed to the time needed for preparatory work. “They speed up some negotiations and give both sides greater clarity but sometimes the supplier training increases the input required pre-auction.”
Siân Harrington