Opinion Article
On-Line Tuna
Auctions, Lower prices - Better Deals ?
(By Henk Brus, August 13, 2003)
On-line auctions are more becoming a
common thing within the retail canned tuna business. Over the last years many retailers
have started using the internet as a tool to buy their tuna. On-line internet auctions in
which retailers offer their total private label tuna package to the lowest bidder.
Having participated in several auctions I have become highly impressed at the low price
levels that have been reached, by putting the industries main players in a closed bidding
session. But at the same time I am worried where this will lead.
Almost all canned tuna auctions have one characteristic; they are not based on equality or
fairness.
Studying the rules of the on-line auctions shows you that the principle is that sellers
bid against each-other for the lowest price, but often without any guarantee that the
lowest bidder will also get the business. Almost all on-line auctions conditions specify
that the retailer has no obligation to buy from the lowest bidder, and in the end is still
free to choose where he places his business, after the smoke over the battlefield has
cleared.
However, on the other hand, the bidding tuna company is faced with a lot of tough
conditions, which force him to perform towards the retailer according to his on-line
offer.
It looks like the model of on-line auctions are a great tool for retailers to get an
excellent view of the best prices available in the market, but it is doubtful of it will
be any benefit to them on the longer term.
On-line auctions do not stimulate importers or canners to invest in building a
relationship with their customers. Neither does it really value to point of quality or
supply chain management. Although for most auctions retailers invite only a selected group
of canned tuna sellers, I often doubt of all of them could show the same performance as
expected by the retailer. The model just does not stimulate or value any cannery on all
levels of its business process, it just wants them to be dirt cheap.
In some businesses you even see that high volume on-line auctions provide some canneries
or importers an excellent tool of hitting their competitors hard where they are weakest.
Even though some tuna companies cannot get the final business (because in the end the
retailer will still make his choice off-line), they manage to destroy the market price, to
such an extend that they know it will hurt their competitor badly.
On-line auctions also make it less useful for some companies to continue to invest in
sales and marketing, and product development. These are all activities, which basically
only create higher costs, but are not valued in an auction model.
I wonder how long it will take that retailers, who are now moving into auctions, will come
to realize that really the best way to buy canned tuna is to have excellent market
information, combined with top-notch logistic performance, an excellent tuna product
quality, and reliable partners. Look at the winners in the retail market for canned tuna !
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