A non-open market is one where there's no open bidding. In a non-open market, the seller and buyers come together to negotiate in private. It can work out well for both parties: sellers get a fair price for their goods, often higher than what they would have gotten in an open market, and the buyer gets something previously unavailable to them at any price.
How Non-Open Market Works
When two parties come together for negotiations, it's important to maintain an atmosphere of mutual trust and respect. The reason is simple: if either party loses trust in the other, the negotiations will fail. This is why it's always important to do business with someone you know you can trust.
A non-open market negotiation has two phases. In the first phase, both parties agree upon a price and then sign an agreement.
That agreement may be for a single item or multiple items in a larger deal, depending on what both parties want to sell and buy. After the deal is done, both parties keep their word: the seller delivers the item(s), and the buyer pays at the agreed price – but only after receiving and inspecting the goods.
Example Of Non-Open Market
There's a lot of value to be had from using a non-open market, but it can also be dangerous if you aren't careful. Remember that there are risks in any business deal, and non-open market deals are no different.
To minimize those risks, one of the most important things to do is make sure everything is in writing before you ever meet with the seller. That way there's no opportunity for misunderstandings to arise after the initial meeting.
Despite the dangers, non-open market deals have proven themselves to be a powerful motivator. Many of the world's most successful companies got their start using non-open market deals.
For example, Apple was founded the same way when Steve Jobs and Steve Wozniak sold their first computers in a private deal to a buyer named Paul Terrell.
Steve Jobs and Steve Wozniak started out selling computers via the Non-Open Market. There's no guarantee that these kinds of deals will generate anything like the success that Apple experienced, but there's no denying that they can be useful in the right circumstances.
So, it's important to understand all of your options when it comes to doing business deals – from open market to non-open market. The right deal for one person might be a disaster for someone else and vice versa. With the help of this guide, you should now be able to make an informed decision.
Non-open markets can be distinguished from other types of markets in many ways:
1. They are social rather than commercial. At most times people participating in these marketplaces are not primarily attempting to make money but passing on goods/services for use or trade that are produced locally and for mutual benefit.
2. They are non-profit. They operate for the benefit of their members, and the individual members do not seek to maximise profit or gain from them.
3. They are closed. There is a limited number of members and so entry is by way of an application process, admission or invitation. Newcomers cannot simply walk in off the street and join (a point from which they can freely "cherry pick" goods or services).
Some co-operatives have a system of waiting lists, but this should not be seen as some kind of "cherry picking right". The system is there to ensure equal access to the benefits of membership and does not give any member an undue advantage over those on waiting lists.
4. They limit market turnover. There is a limit on the number of goods or services that can be sold at any given time.
For example, it might be one week's worth of food, one month's worth of childcare, or a fixed amount of time set by a contract between the member and another party. The non-open market, like any other form of market, has its ups and downs but it generally tends to move in an upward trend rather than following an erratic rollercoaster path.
5. They use a different method for input prices. Their price may be set by the market participants themselves or by a facilitator. For example, a nursery care institution might charge based on an hourly rate per child.
Or it might charge based on its costs, that is, the cost of running the centre multiplied by the number of children served. In a non-open market prices are generally compared with those charged for similar goods/services in other places or at other times and set at what is perceived as a fair price, rather than being based solely on supply and demand.
6. They use direct democracy to decide how to run the market. This is partly to ensure fairness and consensus in decision-making, but it also prevents the market from being dominated by the strongest players.
The rules of the non-open market are set by an elected committee which ensures that all members have equal rights and that newcomers cannot "pick and choose" whatever they like. The purpose of this is to ensure that the goods/services being exchanged are provided fairly and equally for all participants in a non-open market.
7. They generally list their goods or services in a directory so that no member can demand goods or services without first offering something of similar perceived value in return.
This is the reason why a non-open market can easily help people buy things they might not otherwise be able to afford.
At times when goods or services are not readily available non-open markets can be the only way in which goods/services that would otherwise be unaffordable can be purchased. Not all non-open markets list their goods/services in a directory but many do, particularly those which operate on a reciprocal basis.
8. They are open at certain times and closed at others. The times when non-open markets are open to new members and the times when they are not can be stipulated in advance.
For example, a market might only be open on Saturday mornings. This means that people can't enter and begin trading the following week. The market is said to be "closed" at this time.
Conclusion
A non-open market is a great opportunity for businesses who are looking to enter into a new industry or geographical area. By understanding the dynamics of a non-open market, businesses can formulate a strategy that will give them an edge over their competitors.
