CW looks at the benefits of buying and selling construction equipment at an auction and how industry players are encouraging regional developers and suppliers to get involved.

Selling construction equipment and machinery to a dealer has its benefits- a quick sale at an arranged time and place. Buying plant and vehicles straight from a supplier also has its advantages - you can purchase from a trader you trust and locally source your equipment.

There has been an increasing demand, however, for selling and buying building supplies through auctions, but why? What are the benefits of going to auction, how can consigners ensure their products are sold at a fair price and how can construction companies be confident that the products they are buying match their expectations?

The seller

One thing that construction suppliers want from a sale is a reasonable fee, but it is almost guaranteed that a broker or trader will offer them a low price for their equipment so they can sell it on and make a profit for themselves. So, according to experts, if suppliers want a good price, auctioning is the way forward.

"We value the equipment before the seller sells it through our auction. The value we give you is the value we expect at sale," says Iron Planet managing director for Europe Tom Cornell, adding that end-users are encouraged to buy from auctions for the benefit of the supplier.

"They pay more than a dealer or a broker because they buy to use and not to resell. By having a very large buyer base and very a high percentage of end-users globally, we give the seller the opportunity to get the best possible price."

Ritchie Bros auctioneers regional manager for the Middle East, Red Sea, Turkey and Southern Africa Steve Barritt also explains that auctioning equipment will lead to a guaranteed sale.

"There are no minimum bids or reserve prices on the items being sold at our auctions, so everything sells on auction day."

Auctioning also gives the seller a unique opportunity to reach to a global market, which can be beneficial for those selling in a region where there is a low demand for construction equipment.

World Wide Auctions (WWA) sells everything from bulldozers and cranes to hydraulic excavators and concrete associated machinery to buyers, well, all over the world. Its unreserved auctions have been held in Dubai, Amsterdam, Qatar, Australia, the Philippines and the USA.

The firm sold over 58,500 items of construction equipment at its 70 auctions in Dubai from March 2001 to February this year for US $862 million.

"The crowd at the auction is important to hone ones trade contacts," says WWA regional sales vice president and director Keith Lupton.

"Human contact is important and spin off business can be conducted with fellow dealers, this is the same effect that arises in trade exhibitions."

Canada-based Ritchie Bros, which sells used and unused equipment to the industry, also has a world wide buyer base, which suppliers can benefit from. In 2009, bidders from 70 countries registered at the firm's Dubai auctions.

"When the equipment is put in front of buyers from the Middle East, Europe Asia, Africa, Northern America and even Australia, our consignors know their items will sell to the highest bidder on auction day," reports Barritt.

But, when it comes to purchasing equipment from abroad, how can a construction company really know they a buying a quality product?

The buyer

Online auction firm Iron Planet is targeting Middle East buyers and sellers via its European base, in addition to its American auctions. Around 95% of the equipment, which is sold through the firm, is from Europe, of which about 65% is bought from buyers based in Europe.

According to Cornell, Middle East buyers are a bit wary of buying construction equipment from overseas, but Iron Planet is trying to assure companies in the region that they will get what they pay for.

"We have 52 inspectors all over Europe who are trained to look at the equipment and operate it so companies know exactly what they are buying," he insists.

"We guarantee the buyers an inspection report. This includes a detailed commentary about every single component from the paint-work to the fabrications. Inspectors also take 80 to 120 photographs [of the machinery] depending on the type of equipment. We plan to do more and more marketing in Africa and the Middle East to give buyers confidence to buy European equipment."

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Ritchie Bros also carries out a thorough examination of equipment before it goes to auction so buyers know what they are bidding for.

"Before we sell equipment in one of our auctions, we research the equipment for any liens. This ensures that our buyers can be confident that equipment comes with clear titles," explains Barritt.

"In addition to that, we see that equipment buyers are very professional and well capable to determine the value of an item or truck. We enable them to inspect, test and compare equipment items they're interested in themselves."

So there is no mistaking the advantages of buying and selling construction equipment at auction, but are industry players aware of these benefits?

"Demand is definitely increasing," Cornell responds. "One thing that is attracting so many buyers and such interest in our auctions is the range of equipment we have."

Iron Planet allows buyers to bid for equipment such as excavators, paving equipment and industrial forklifts, among others.

And, it seems that the financial crisis hasn't affected Ritchie Bros. "In recent years, we've all seen the prices of used construction equipment around the world go down. At the same time, we saw more interest at last year's auctions than ever before. In recent years, we see that the demand for our auctions has increased, both for buyers and sellers."

On site vs online

There are many different types of auctions; unreserved, where the item for sale will be sold regardless of price; sealed first-price, where all bidders simultaneously submit sealed bids so that no bidder knows the bid of any other participant; and then there's the onsite and online auctions.

According to auction firms, the online sector is growing rapidly. And, Iron Planet has big ambitions in this field.

"Iron Planet's vision is really to become the online market place for any type of used equipment. We want to be the equivalent of Amazon and we want people to understand how easy it is to use Iron Planet," says Cornell.

"We have been unbelievably successful in America - we have a weekly auction there and bring in around 17,000 to 18,000 people from 130 countries around the world to every sale."

Online auctioning is sophisticated, suppliers can reach a much wider audience than they can on site and, of course, it is much more convenient for the buyer to place a bid from the comfort of their own home or office.

But, WWA, which invests heavily in both sectors, still believes on site auctioning has the edge over online.

"Online is taking off, but caution must be applied. Some sites charge the vendors a high price for in depth unit inspection, which does not always translate into a satisfactory return for the seller," explains Lupton.

"The day  of  the traditional  sale  with the  crowd and the live auctioneer  is,  however,  a long  way  from  being  condemned to history. You cannot replace the ‘day out' feel of the live sale."

Ritchie Bros also says that buyers still prefer to participate in its on site auctions. "Here, they can kick the tires, take part in the event and meet with our people and other relations they have in the industry," reports Barritt.

But, there's no denying that online auctioning attracts bidders in their thousands. "Since 2002, buyers are able to place live bids through our website, rbauction.com. This bidding method has certainly grown over the years. Currently, 130,000 unique customers from more than 195 countries have registered and are approved to bid online at Ritchie Bros auctions.

Last year alone, we sold for approximately $830 million of trucks, equipment and other assets to online bidders," he adds.

Whatever path the buyer or supplier choses in future times to come, if the equipment that is on display is safe and the price is right, auctioning has a mix of all the right elements to help it become a platform for successful trading.

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