Question and Answer Session with the National Auctioneers Association and Kirk Dove, Managing Partner, Heritage Global Partners:

By December 29, 2009White Papers

1. National Auctioneers Association (NAA): As far as industrial machinery auctions go, what are you doing to survive and thrive?

Kirk Dove (KD): There seems to be no shortage of asset sale opportunities—lots of plant closings, downsizings, etc. Plus the successful companies that re-tool still need a disposition process for the equipment they are replacing. You just need to remain diligent and work the industries of interest to you.

2. NAA: What role does the auctioneer play today?

KD: The auctioneer’s role should be that of a service provider; I find many companies are very good at buying new; they have Ariba and other spend management tools; they negotiate terms and discounts and have the front end process down very nicely. However, they are relatively poor and inexperienced on the backend disposition process, often relying on a very small pool of trusted, local resellers. The auctioneer can expand that playing field exponentially.

3. NAA: What role will the auctioneer play in the future?

KD: I think the roles remain the same—service provider, but they expand a bit. For example, my company has built software to help companies internally redeploy an item within the firm, before it is deemed surplus. I believe for large companies with poor internal visibility, this is a great tool. I believe periodic valuation of tools in industries of high obsolescence makes a great deal of sense. Some companies in the technology sectors that warehouse items for later use are making mistakes; they could buy newer models down the road, with greater capacity, at lower costs. They should be selling idle assets much more frequently. A good service provider is doing more than just auctions for his clients.

4. NAA: What role does the Internet play today?

KD: The Internet has done wonders for our profession: the ability as a seller to provide content, media, streaming data, and information is the essential factor. The technology available to a buyer to search globally for an item has been a huge leap in their ability to find exactly what they are looking for. Prior to the Internet, buyers had to rely on published catalogs and comb trade journals for product. Those days are over. Searches are swift and comprehensive nowadays and that could not have happened 10 years ago.

5. NAA: What role will the Internet play in the future?

KD: Sales will truly be global; as events switch from live to online formats, time differences disappear along with language barriers. As much as an improvement as the “webcasting “ of live auctions were (and we did thousands of them), they could never overcome three deficiencies: First, the sale was still auctioned in a single language at a breath neck pace; Second, the items came up whenever they came up in a sequence at a local time; Third, they were available only for about one minute in duration. So, a global buyer that perhaps does not speak fluent English, would be forced to sit up in the middle of the night, waiting for lot #475 to come up, and this non-English speaking bidder would have 30 seconds to bid on the item at three am in the morning! My belief is that the way of the bid caller is in massive decline on any sale where you need international exposure and bidding . I believe that Internet driven software, not a bid caller, will conduct 90% of all auctions within this coming decade.

6. NAA: What areas or segments of Auction Marketing have a promising future?

KD: Anything that helps load content in an easy to read format will be in demand. Buyers will increasingly not inspect internationally but instead rely on the content surrounding an asset. We are introducing a service for select buyers, where we will inspect the asset for them for a service fee, so they do not have to travel. We will rate it on condition, remaining useful life, available manuals, service records, etc. Also, any services built around searching for items will become increasingly in demand. Buyers want instant gratification; they want their search engines to find their items right away. We are introducing a procurement tool for buyers, who want to purchase select items but are having difficulties finding and negotiating a fair price.

7. NAA: Do you have any thoughts on how auction marketing will be used in the future that may not be used today?

KD: I believe there are two sellers and two buyers in the marketplace. On the sell side, you have Seller A, those that have to sell (bankruptcy, plant closure, replacement machines coming, etc.), and Seller B, those that would sell if convinced (the purchasing manager who has his own reseller program, the facility manager who is storing items in overcrowded warehouses, etc). On the buy side, Buyer A, professional resellers in all industry sectors (machine tool dealers, computer brokers, repair houses, etc.), and Buyer B, end users looking to buy used and save some money. The Auctioneer stands squarely in the middle and needs to wear four hats. On the sell side, he has to service Seller A by providing an efficient channel outlet for their equipment, and the auctioneer must prove to seller B that his channel is more effective than other channels that Seller B may be considering. 
On the buy side, the auctioneer must provide continual information to the Buyer A community for the product he has now and will have for upcoming sales (advance notice to this segment is essential). This is critical, because many dealers and resellers will bid considerably higher if they receive detailed advance notice of a sale. Often, they can come to that sale and have items pre-sold, which allows them to bid in a much stronger capacity. To meet the needs of Buyer B, the auctioneer of tomorrow will need to dominate in the search engine optimization arena; if the one time end user typing in used CNC lathes gets directed to your website, you will benefit substantially over all others.