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Maintenance management: The brave new world of online equipment auctions

June 12, 2007 |

Contractors in the past could hardly be faulted for their reluctance to buy used equipment through Internet auctions. Given the cost of the equipment and its mechanical complexity, few contractors early on jumped into the game with both boots.

But in the past two years the weaker players in the online marketplace folded. The companies with stronger business models survived and contractors are warming to this new method of acquiring used equipment. According to Ritchie Bros. Auctioneers, which started taking Internet bids simultaneously with its live auctions in March 2002, Internet buyers are now purchasing between 10 to 15 percent of the equipment sold at its auctions.

The key has been overcoming the buyers’ fears of getting stuck with an expensive iron lemon. What’s more, the online auction business has helped push the proliferation of equipment pricing and buying information, turning the used equipment marketplace from a guessing game into more of a science.

The benefits of online auctions
Convenience is the biggest benefit for buyers at online equipment auctions. “People are finding this is a very effective use of their time,” says Bob Armstrong, vice president of Internet services at Ritchie Bros.

Matt Dahm, cofounder and director of marketing at IronPlanet, an Internet-only auction site started in 1999, agrees. “Everybody is starved for time,” Dahm says. “But now they can hop on our website and see the inspection reports for 20 excavators in a matter of 10 minutes.” Internet auctions also eliminate the cost of travel to and from an auction.

Internet auctions are particularly efficient when the contractor is only looking for a limited number of pieces. If a contractor is only interested in two pieces out of an entire auction and one is going up for auction at 8 a.m. and the other at 8 p.m., the buyer can simply log onto the auction website at those specific times, spend ten minutes bidding and spend the rest of the day working, Armstrong says. At Ritchie Bros., the smaller auctions in particular are getting a boost from the online component, he adds, since contractors have a harder time justifying travel to an auction with fewer pieces – a barrier the Internet erases.

The ability to gather information and strategize purchases before an auction also offers benefits. “You’ve got more information at your fingertips and you can slice and dice it to your criteria in less time,” says Bill Angrick, chairman, CEO and one of the founders of Liquidation.com, which helps commercial and government clients to dispose surplus property and equipment in online auctions. “If you’re not taking advantage of that and you are a buyer I think you’re going to pay more in terms of cost and time to procure. And if you are a seller and you’re not taking advantage of these online auctions, you are not going to be getting the best returns on your assets,” he says.

The buyer’s number one concern – lemon protection
Most people won’t worry about getting ripped off bidding online for a $6 Beanie Baby. But what about a $100,000 dozer?