Auctions Grow Up
In the mood for
a bargain? Check out the action on auction sites specializing in government
surplus property. There are things here you'll never see on eBay.
market for a nearly new power boat? How about 20 acres in New Mexico
or a Rolex wristwatch? Or perhaps you're interested in 10 cartons of
Chinese medicinal sliced orchid stems or a slightly used strip club
in Baltimore. All of these items, and thousands more, are available
for purchase at a growing number of Web-based auction sites specializing
in government surplus, seized, abandoned, and forfeited products and
auctions of the "Going, Going, Gone" variety have been around
for years, and many still flourish. But the growing use of the Internet
as an auction medium, combined with general dissatisfaction at the travel,
expense, and effort involved in staging and attending land-based auctions,
has led to the growth of the government Web-auction model.
agencies of all types, from the U.S. Treasury and U.S. Marshals Service
to individual counties, have come to rely on private government auction
sites as an efficient way to dispose of billions of dollars of equipment
and property quickly, with higher returns than they could realize by
selling on their own. Numerous entrepreneurs are happy to oblige while
grabbing a piece of the lucrative business--a business that yields returns
25% to 200% higher than traditional auction methods, according to Bill
Angrick, CEO of Government Liquidation LLC, a subsidiary of Liquidity
Services Inc. And buyers, both individual buyers and small businesses,
see Internet-based government auctions as a great way to get bargain-basement
prices on a variety of new and used items.
is there a steady stream of products to sell via Internet auction, but
entrepreneurs need very little in the way of startup costs and expertise.
"Anyone with common sense and some form of capitalization can get
into this," says Louis Columbus, a senior analyst at AMR Research
when competing against dozens or hundreds of similar sites, however,
expertise in dealing with the government, as well as state-of-the-art
technology and a unique business model, play key roles, some say.
government auction houses run bare-bones operations, similar to eBay,
that simply bring buyers and sellers together. Those that succeed must
have a more robust model of some sort, something that appeals to both
buyer and seller. GovLiquidation.com, for example, handles the entire
asset sale process for its government customers--everything from warehousing
and logistics, customer service, and buyer transportation to funds collection,
documentation handling, and enforcing unique terms and conditions. Because
of its high-touch business model, the site charges a 20%-to-50% commission
using a consignment model, depending on services rendered. Angrick considers
his site to be a success, noting that auctions have seen as many as
46,000 bids from 1,700 individual bidders in a 48-hour period.
Inc., a Silver Spring, Md., government-auction house, uses the eBay
model, never taking ownership of property. Customers visit Bid4Assets.com
to gather information about products and properties. But unlike eBay,
the site works like a live auctioneer. "The hammer doesn't come
down until the bidding stops," says CEO Richard Hayman. Bid4Assets
also provides some value-added services, such as product promotion and
customer service for both buyers and sellers, and works on commission.
a subsidiary of Cyweb Holdings Inc., employs yet another business model.
The site acts as a clearinghouse for local, state, and federal auctions.
Customers pay $39.95 per year to access the listings, which currently
consist of about 1,600 live and online government auctions. Once they
find items they want, they visit the individual auction sites to carry
out the bid process, explains president Ian Aronovich.
differentiating factor for these sites is the technology, which, while
it may seem simple, can be quite sophisticated. GovernmentAuctions.org,
for example, developed a homegrown system based on Active Server Pages,
SSL encryption. The site is managed partly by an outside source and
partly internally. GovLiquidation.com also developed its platform in-house
at a cost of $5 million to ensure complete control. The site consists
of several applications used to receive, manage, sell, track, and audit
its clients' inventory and users while stressing security. The system
mines about 25 million records daily, Angrick says.
Russ Fritz, a small-business man in Jacksonville, Fla., has had good
luck buying from government auction sites. Fritz, president of Omega
Enterprises, a vehicle remarketer, procures many of his vehicles from
sites like these.
can get some great deals if you know what you're doing," he says.
"I bought a lot of 2,000 ammunition cans for 15 cents per can and
sold them for $4 per can. So for a $300 investment, plus time and shipping,
I made $8,000." He was able to salvage another recent purchase,
a truck with a blown motor he bought for $104, by installing another
engine. "It ran fine, and I got a deal," he says.
Fritz is site-agnostic, preferring instead to follow the deals. In addition
to visiting GovernmentAuctions.org, he has purchased equipment from
sites like E.surplus.com, and PoliceAuctions.com, handled by Vortal
government auction sites can yield good deals, it helps to have had
experience in the auction world, says Mike Bagherian, president of Tazz
Construction Inc., a small business in Rockville, Md.
have to be somewhat of a gambler, and you have to be liquid," he
says. "There are times when I sweat it a little."
says nerves of steel can pay off. Not only has he bought tools for his
business at 70% less than he would have paid at a local hardware store,
but he has even ventured out to buy items for himself. He procured his
latest purchase, a late-model Mercedes with about 7,000 miles, for about
40% less than he would have paid at a dealership.
even times, he says, when the unexpected can occur. A recent purchase
of 80 acres in Mexico yielded a call from behemoth Conoco Oil, requesting
permission to drill for oil on the property. The company offered Bagherian
a paltry $5,000, a price he turned down, at least for now.
cases, experience with the auction process can really pay off. Bagherian
recently was tempted to buy a property in Jackson City, Miss., with
a new warehouse for less than $100,000--a great deal, on the surface.
"But I started calling around, and I found unpaid back taxes and
toxic soil in the area. I also found that four other people had looked
at the property and rejected it," he says. In the end, Bagherian
took a pass, but checked back with the site and learned that someone
had purchased it soon afterward.
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