Online Auction Firm Lures More Buying EyesBy Kim Phelan
Article Date: 03-01-2008
Copyright(C) 2008 Associated Equipment Distributors. All Rights Reserved.
IronPlanet's Internet auctions have built an international marketplace of 320,000 bidders, and the company is just beginning its global outreach.
It's auction day and the buyers are gathering. They're reviewing, contemplating, making decisions. Their languages range from English and Spanish to Polish, Russian, Arabic, and more. But it's not an international art or antiques auction for which they come - in fact, they don't literally come at all. It's a biweekly virtual auction of used construction equipment held by IronPlanet, physically located in Pleasanton, Calif., and the global marketplace they regularly stage holds all the tangible fun - and profit - of a live auction, minus excessive heat or cold, rain or bugs.
"We have a saying here that it's always 72 degrees and sunny at our auctions," said Greg Owens, president, CEO and chairman of the board of IronPlanet since 2006.
But providing an auction venue that's comfortable and mud-free is just the beginning of the features offered by the Internet-based auctions the company introduced in 2000. Today IronPlanet hosts four types of auctions: (1.) Featured auctions open to the public, held every other Thursday; (2.) Wholesale private auctions that are invitation-only and accessible only to authorized parties; (3.) Hosted auctions for one IronPlanet customer held in the same format as a featured auction; and (4.) Owner auctions held 24/7 in which the seller sets a hidden reserve.
The inventory of featured auctions is available for buyer review two weeks prior to auction day and interested parties can even place bids in advance - in fact some 70 percent of auction items receive advance bids. Owens says that a machine offered at a recent auction had 53 bids on it before the auction even opened. And, he says, because the company's Web site is designed for easy navigation, even for first-time visitors, a buyer can purchase a machine in 30 minutes and move on with the rest of his day.
Getting equipment to market quickly for the highest price are two major dimensions of the company's value proposition for the construction equipment industry. Frequency of the auctions, plus the breadth of the buying audience is how they accomplish the first part of that equation. IronPlanet auctions average 10,000 unique bidders and end with average totals of more than $10 million in equipment sold - two and sometimes three times per month.
The expansive universe of buyers who are drawn to the online auctions drives maximum price on the auctioned equipment - to date the company has established a marketplace comprised of more than 320,000 bidders, and more than 3,000 new bidders register on the Web site per month. So, unlike a physical auction that may draw a regional circle of bidders who determine market value based on local economic and demand factors, the Internet auction has no geographic boundaries and offers the advantage of attracting thousands of bidders from distant markets. What may be worth $30,000 to a buyer in Ohio may, indeed, be worth $40,000 or more to a bidder in Brazil or the Middle East.
"The market is very strong from an international perspective - we ended the year with about 34 percent of the equipment we sold going overseas," said Owens. "Eastern Europe is big and the Middle East is very large for us - it's very much an import market into the Middle East right now."
The broad bidder base within the U.S. and beyond doesn't happen by accident. On auction day, inside sales reps (called ringmen) at the California headquarters sit in four corners of "the bullpen," the company's nickname for the cubicle area where they work the phones with auction activity blinking on twin computer monitors. They're calling bidders to let them know they've been outbid on a machine they're pursuing, placing bids, in some cases, for auction participants and assisting them in acquiring the pieces they're after.
IronPlanet also heavily markets its featured auctions through end-user publication advertisements, regular e-mail reminders to all who are registered at www.ironplanet.com, and again, plenty of phone contact with past buyers - sales reps make about 2,600 phone calls during the two-week auction preview, and more than 300 calls on every auction day.
On auction day any visitor to the IronPlanet Web site is taken directly to the auction in progress; new bidders also have the option to test the online process with a practice auction tool to raise their comfort level before bidding in an actual auction.
Owens says there are many reasons equipment dealers choose to dispose of used inventory through IronPlanet auctions.
"Dealers are very busy and they have a lot of responsibilities - when they need to move nonperforming equipment they want it to happen fast, but they don't necessarily have two days out of their schedule to travel to a physical auction site," Owens said. "We give them the assurance that their equipment has been inspected correctly and they know we've done a very good job of accurately depicting the equipment and exactly what its condition is. They also know that they're going to get the huge visibility that only the Internet can bring."
IronPlanet inspects every machine that is posted on one of its auctions and also offers an optional IronClad Assurance inspection, which, the company says, costs the seller a little more but provides greater peace of mind and buyer satisfaction in the end.
And, says Owens, not only does the dealer reap a higher sale price (coupled with a 6 to 11 percent lower cost to sell) but he also sees the cash fast - typically sellers have their money 11 days after the date of sale. IronPlanet handles machine transport arrangements for buyers, too, if needed. And because the equipment has never physically left the owner's possession for display at an auction site, there's no hidden expense to the seller such as fuel or onsite service charges at the auction yard. Sellers are not even encouraged to doll-up their equipment with a fresh coat of paint as they would for a physical auction - IronPlanet prefers that buyers see machines in their work clothes, so to speak, taking a transparent, WYSIWYG-type (what you see is what you get) approach to equipment resale.
The dealer's product support business can profit from IronPlanet, too. The company - whose investor and board of directors base is comprised of Caterpillar, Komatsu and Volvo Equipment - currently has an arrangement through Cat to notify buyers of Caterpillar auction equipment about the local Cat dealer in their area for parts and service.
Keeping the Momentum Going
Apparently the commitment to buyer and seller contentment is paying off. IronPlanet finished 2007 better than it had expected at $240 million, which represented 55 percent growth over 2006. It's a pattern Owens is aiming to continue.
"We've got a very expansive view of where we want to go," he said. "I would like to see us grow in a 50-percent bracket per year; we're going to continue to expand greatly within North American, adding to our sales force in order to call on more customers - dealers and contractors.
IronPlanet is growing outside U.S. borders, as well. On Feb. 14 the company hosted its first overseas auction from Australia. Plans are in place to launch European-based auctions this summer, and in 2009 the company expects to be conducting auctions from Asia.
"Our global view is that our auctions will all be linked together," said Owens. "In the future, you will be able to go on the IronPlanet Web site and pull up the international auctions that are going on and bid on overseas equipment." By 2009, he adds, the company could be featuring auctions every week.
"Our international buyers will be able to buy in their back yards or they can continue to buy from us in the U.S.," Owen said.
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