In the News

"Business Auction Sites Bypass Liquidators"

By Keith Alexander
USA Today, Nov. 15, 1999

For more than 20 years, when Blyth Industries wanted to sell off its excess inventory of candles, potpourri and other home decorating items, chief executive Bob Goergen would turn to liquidators to facilitate the sales.

But in September, Goergen contacted TradeOut.com, an Internet company that specializes in auctioning corporations' excess inventory to other businesses. His items sold within days after they were posted on TradeOut's Web site. Goergen says he sold $50,000 worth of inventory in less than a month, vs. two to three months with liquidators.

"It's one more way of moving out excess or obsolete inventory fast and at the best realizable price," he says.

Internet companies such as TradeOut.com, iMark and DoveBid are finding a lucrative niche in the business-to-business market. Companies post excess or used items from their inventory on these companies' Web sites and potential buyers bid for them. By using the Net, they are able to bypass liquidators, brokers and brick-and-mortar business auctions to buy and sell items often more quickly and cheaply.

Using the Net also enables buyers and sellers to get the best price for the inventory while reaching a broader and worldwide audience.

The business-to-business online auction industry is expected to grow to about $52.6 billion by 2002, says Forrester Research senior analyst Varda Lief. Lief says companies in quick need of cash or who desperately need a certain piece of equipment are the target customers.

"In the old world, a company would call up several brokers to sell off equipment for about 30 cents on $1. Now, they can sell it themselves by bidding up the price and get about 70 cents on a $1," Lief says.

In August, Foley, Ala.-based Gulf Telephone purchased about $1 million of fiber-optic cable in three days. Harold Killian, Gulf's senior vice president said if he had purchased the cables the traditional way, via a broker, they would have cost 40% more and would have taken up to three weeks to find.

"We got a very good deal. We check these sites more often now when we need something," Killian said.

TradeOut's co-founder and CEO Brin McCagg says individual consumers are often becoming end buyers of the merchandise sold, as companies sell used equipment such as computers, cellular phones and other items to discount retailers for resale.

"We recently sold $1.1 million of cellular phones from a company in Mexico. The phones are being shipped into the U.S. They're probably going to a discount retail chain that will eventually sell those phones," he says.

McCagg says TradeOut, which is based in Ardsley, N.Y., has about 7,000 registered users and has sold more than $20 million in products. TradeOut charges sellers a $10 listing fee per unit and a 5% commission fee on each item sold.

McCagg says businesses auction surplus items that many might not expect. For example, he says IBM has auctioned furniture, while Abbott Laboratories auctioned computers.

A changing world
But TradeOut isn't the only Internet-auction company selling surplus merchandise.

Foster City, Calif.-based DoveBid, is also trying to turn its experience in traditional on-site auctioning into Net riches.

DoveBid.com is the Internet predecessor of Dove Bros., a capital asset sale advisor founded in 1937. DoveBid started its online auctioning earlier this month. It charges the seller 5% on each sale.

"The Web has completely changed the world of auctioning. Instead of using a microphone to sell something in the back of the building, we now use a computer. And the back of the building could be in Bangkok or Bombay," says Ross Dove, chairman and CEO of DoveBid.

To locate customers, DoveBid has created its own site in hopes of attracting high traffic.

IMark.com, another Internet auctioneer, launched in September. So far, iMark has had only 15 auctions. But chief executive and co-founder Brian Magierski says iMark expects to do more than 2,000 transactions a month. The average price of items sold is $20,000. It currently has about 2,000 used pieces of equipment on its site for sale. Some customers include Dow Chemical, Union Carbide, and Campbell.

While most business-to-business Net auction companies sell a variety of items, iMark's Magierski believes they'll eventually be forced to specialize in specific industries and consolidate. "It's going to be hard for any one marketplace to get transactions over multiple markets," he says. "The ones that survive will figure out how to do this."