Interview: Tom Cornell of IronPlanet explains the benefits of online auctions
By Murray Pollok17 July 2009
You might buy your groceries or books over the internet, but would you buy a piece of construction equipment? The answer for thousands of equipment buyers appears to be ‘yes', given the growth of the US-based online auctioneer IronPlanet.
Founded in 2000 and part-owned by Caterpillar, Komatsu and Volvo, the online auctioneer sold US$337 million worth of equipment last year from its US operation, and is targeting closer to $500 million this year, including a contribution from its new European office which opened in Dublin last year and which is now holding one auction a month.
The company has 475000 registered potential buyers in its database and reports an historical average of around 1000 bidders per auction, although the first European auctions have generated an average of 2387 bidders.
These bidders rely heavily on Iron Planet's own IronClad guarantee, an inspection carried out by its own team comprising 50-60 photos plus documentation, all designed to give buyers complete confidence that they know what they are getting.
Tom Cornell, the young ex-JCB executive who was last year appointed as managing director for Europe, says this model has already proven successful in the US; "The inspectors look at the machine as if he was a buyer", he tells IRN, "75% of our buyers are repeat buyers - that tells us that they have sufficient confidence in IronClad to buy equipment without touching it. They also know that if there is a problem, it's IronPlanet's problem, not theirs."
The company takes an 8% commission on equipment sales and also charges a listing fee that covers the inspection report, plus the marketing of the item. This fee ranges from €450 for, say, a 20 t excavator to as low as €100 for smaller items.
Mr Cornell says the big advantage for equipment sellers - and rental companies in particular - is the ease and speed with which surplus machines can be converted into cash. Equipment can be sold wherever it is - avoiding transportation costs to an auction site - and there is a high frequency of auctions. "The faster time to cash is important for the seller, and drives the frequency of auctions", says Mr Cornell. IronPlanet is currently holding one auction a month in Europe but hopes to double that frequency soon.
As an online business IronPlanet also understands very well the value of a good contacts database. Its list of e-mail addresses and buying preferences allows it to be very proactive in matching buyers to equipment - so called ‘knowledge marketing'. For example, IronPlanet knows who has bid unsuccessfully on any given type of machine. When a similar model comes up for sale, it can contact all these previous bidders.
In Europe, meanwhile, the initial target for the auctions has been equipment manufacturers and their dealers, but Mr Cornell says that he is now talking to rental companies and contractors about the service. A-Plant in the UK, Bergerat Monnoyeur in France and McCormick Macnaughton in Ireland (which operates the Mac Rental operation) are among its first European customers.
The auctioneer also offers some flexibility to sellers. They can, for example, place machines for auction without the IronClad guarantee, using a lighter inspection, although Tom Cornell does not recommend it; "Some rental companies are proud of their fleet maintenance and think that their company colours are sufficient to give buyers confidence.
"However, the bid activity is consistently higher on equipment with the IronClad guarantee. You don't need to have it, but you don't get as good a price."
The company offers four types of auction: featured auctions are general auctions with all types of equipment; one-owner auctions are for single companies who want to liquidate their entire fleets; owner auctions are for mainly larger pieces of equipment and carry a reserve price, and private auctions are for companies who want to sell equipment to a select audience (for example, a manufacturer that wants to give its dealers the ‘first option' on used machines.) Tom Cornell says rental companies could even have their own dedicated, company-branded auctions.
Whatever your views on buying online, IronPlanet is definitely offering the market an alternative to traditional site auctions. There will always be occasions when you definitely want to see the machines you are buying - and the networking value of traditional auctions is something that IronPlanet can't replicate - but online auctioneering does have the feel of an idea whose time has come.