Corporate online auction services thrive
June 22, 1998
by Sharon Machlis
(IDG) -- Weirton Steel Corp. used to fax information about odd lots of leftover steel to 50 or so of its customers, hoping someone might buy. Now, the Weirton, West Virginia-based steelmaker posts that excess inventory on its World Wide Web site and auctions it off - turning what used to be nuisance products into US$50 million in annual sales.
"We've doubled the number of customers we have," said Chief Information Officer Patrick Stewart. "We actually signed up customers that were 50 miles away that we didn't know were there." And by increasing the number of buyers, prices have gone up, Stewart said, although he didn't say by how much.
Such is the allure of business-to-business Web auctions, both for expansion-minded sellers and bargain-minded buyers. "The business side is taking off far greater than we expected," said Steven Bell, an analyst at Forrester Research Inc. in Cambridge, Massachusetts. Forrester predicts that such auctions will handle $8.7 billion this year, up from $2.5 billion last year.
Real-world auctioneers are among those going online. Copart Inc., which sells salvaged vehicles for the insurance industry, launched Internet bidding earlier this month.
Norman Levy Associates in Southfield, Michigan, delayed its first Internet auction of industrial equipment from June 8 to June 17 because a flood of goods was submitted right before deadline, which made it tough to get everything posted online in time, said spokeswoman Vicki Lamers.
FairMarket Inc. in Woburn, Massachusetts, will launch a self-listing service on its business-to-business auction site (www.fairmarket.com), so that companies can post their own goods.
"It's a great way to shift to just-in-time sales of excess inventory," Scott Smith, an analyst at Current Analysis Inc. in Sterling, Virginia, said of online auctions.
For buyers, there are two appealing aspects: convenience and savings.
Web auction-goers can find everything online from notebook computers to wrecked cars to excess telecommunications capacity (via London-based Band-X at www.band-x.com). Automated Credit Exchange (www.ace-mkt.com) even plans to sell some government pollution rights.
At Copart, allowing Internet bids means buyers looking for salvaged cars can consider inventory in dozens of locations per week, not just the one they can visit on a particular day, said President A. Jayson Adair. That lets buyers use their time more efficiently and lets the insurance companies selling the vehicles reach more potential customers.
"If you know what you're buying, you can get some great deals," said Joseph Cracchiolo, vice president of engineering at RightFax Inc., a software firm in Tucson, Arizona. He recently picked up five IBM Pentium Pro workstations for $1,029 each - they usually cost at least $2,700 new - at the Onsale auction site (www.onsale.com).
But David Zingsheim, chief financial officer at Steelcraft Corp. in Hartford, Wisconsin., cautioned that buyers have to be disciplined. "People get hung up in the heat of an auction," he said. "It's almost like being in Las Vegas." He said he has seen bidders end up paying new-equipment prices for refurbished goods. But he added that he recently paid less than $300 each for a dozen printers that were each worth at least $550.
Web-based bidding systems don't come cheap. For example, Copart officials estimate that because of an imaging system that was overhauled so bidders could view inventory, customized auction software and the hardware infrastructure to support the system, its investment will hit $1.5 million.
Still, officials at the Benecia, California, company said increased business and happier customers are worth the money.
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