Reduction is an auction on the contrary

In the modern world, many types of trading platforms are used for conducting commodity-money transactions. One of them is reduction. What auction is different from reduction - let's try to understand this article.

What is a reduction?

Reduction - this auction auction, which are conducted on the principle of reducing prices. At the reduction, the main subject of the transaction is not the seller, but the customer who wants to purchase the necessary goods. He calls the maximum amount of money that he is willing to pay for the right thing. Sellers of the goods offer their customers a price, which is gradually reduced. Bidding continues until the buyer agrees to a deal. In such trades compared to conventional auctions, the thing is sold at low prices.

Thus, the main difference of reduction from the auction is a gradual decrease in the price. As you know, in the auction, participants are willing to buy goods, offering a price higher than other buyers.

Pros and Cons of Reduction

Reduction is a competition between sellers not only in the price plan. Very often this type of trade is justified by other important proposals. So, bidders can offer the customer favorable terms of delivery, a long warranty period, gifts and additional services at discounted prices. Using these tools can significantly improve the efficiency of reduction trades.

In addition, reduction is a very profitable exercise for its organizers, but the implementation of the contest requires certain skills and knowledge. First, it is very important to be well acquainted with the relevant legislation and have some experience in the field of trade.

Secondly, any changes in the conditions of the bid will always affect the final profit. So, the sellers before the contest carefully prepare, conduct all sorts of calculations in order to reach the planned value of income, consider possible terms of the transaction. And during the reduction, the customer proposes to reconsider all the calculations again in order to lower the cost of the goods. Such conditions not only affect the seller's profits, but also often affect the quality of the goods, because the participant tries to reimburse his expenses. In addition, changes in the terms of the transaction lead to a change in the cost of the application itself. In this case, the profit of the reduction organizers is reduced.

Given the features described, there are only a few cases when it is justified to carry out a reduction. It:

1. Purchase of a large batch of the same type of products or raw materials.
2. When the winner of the competition is determined by quantitative indicators. For example, the cost of goods.

Rules of bidding

Reduction is carried out in the event that at least two sellers have applied for participation in it. Bidding starts after the opening of the envelopes and bids submitted for the competition or after comparing the rejected bids. The reduction can only participate sellers, whose applications were accepted by the organizers.

The reduction must be attended by persons who have signed an application for participation or an authorized person who has the right, on behalf of the participant, to take decisions at the tender and change the price of the goods. Authorized participants are required to produce a sealed envelope with a minimum price, below which the seller is not entitled to continue trading. This document is certified by the signatures of the head of the participating company and the chief accountant.

If the participant has not handed over such an envelope to the commission, he is not admitted to the competition and is considered not to have participated in the reduction.

Types of reduction

Organizers have the right to conduct a reduction in an open and closed form. With open tenders, all participants present publicly call new prices. Bidding is conducted until one of them has announced its minimum price, below which it will not agree to a deal. If the final cost of the goods is equal to or greater than that indicated in the envelope submitted by the participant, the reduction commission will approve the final price.

In the event that the price formed in the auction is lower than the price specified in the envelope, the commission will reject the value announced in the tender process, and the content contained in the document will be announced as final.

If the participants violated the rules for filling the envelope, their applications in the auction are not accepted, and they are considered not to have participated in the reduction.

After the competition, the commission meets, which conducts the necessary calculations and summarizes the results. On the basis of the results obtained, the contract is awarded to the participant whose application was most responsive to the competitive requirements.

Quite often, they carry out reduction in electronic form. Contests of this kind are held on virtual trading platforms on the Internet in real time. All participants are registered according to the requirements and must comply with the bidding rules.