A reverse auction is a type of auction

Auction

An auction is a process of buying and selling goods or services by offering them up for bid, taking bids, and then selling the item to the highest bidder...

 in which the roles of buyers and sellers are reversed. In an ordinary auction (also known as a forward auction), buyers compete to obtain a good or service, and the price typically increases over time. In a reverse auction, sellers compete to obtain business, and prices typically decrease over time.

In business, the term most commonly refers to a specific type of auction process (also called procurement auction, e-auction, sourcing event, e-sourcing or eRA, eRFP, e-RFO, e-procurement, B2B Auction) used in government or private sector procurement.

In consumer auctions, the term is often used to refer to sales process that share some characteristics with auctions, but are not necessarily auctions.
This article focuses on the "e-procurement" definition of the term, as this is the most commonly found application of reverse auctions and the term "Reverse Auction" has become synonymous for most people with this type of auction.

Reverse auction is a strategy used by many purchasing and supply management organizations for spend management

Spend management

Spend management is the way in which companies control and optimize the money they spend. It involves cutting operating and other costs associated with doing business...

, as part of strategic sourcing

Strategic sourcing

Strategic sourcing is an institutional procurement process that continuously improves and re-evaluates the purchasing activities of a company. In a production environment, it is often considered one component of supply chain management...

 and overall supply management activities.

In a typical auction, the seller puts an item up for sale.