Increasing Cash Flow Though Online Auctions

Many rental companies are facing increased pressure to place a higher priority on cash flow due to a variety of economic factors. In an industry that has so much money tied up in capital equipment, this is no easy task.

According to Felix Rodriguez, national accounts manager, rental industry, with online auction company IronPlanet, the need for some rental companies to realign their fleets is critical. "You need to determine what assets to dispose of. You do this by identifying the slow movers, the high-maintenance pieces. In other words, you figure out what's eating your lunch," he says.

Once these items are identified, equipment owners need to find a valuable sales channel through which to dispose of this equipment. Traditionally, equipment owners have had limited options when it comes to selling used equipment: trading it in to a dealer or listing it in the classifieds.

Like buying a new car, many owners believe they will get the best value by trading used equipment in to a dealer when they purchase new equipment. While this might provide leverage for price negotiation on the new equipment, it doesn't always yield the best price realization on the used item. To remain viable, dealers must create acceptable profit margins on each piece of equipment, making it difficult for owners to get premium prices for their used equipment. Geography can also limit owners' choices as many are unwilling to get competing offers from dealers in other locations.

To increase resale value, many owners are now trying to sell their used equipment through classified advertisements. Sometimes this approach yields a higher resale value for the owner. It can often be a time-consuming process, however, creating headaches for sellers who must be available to answer questions and handle prospective buyers.

Advantages of online auctions
Today, online auctions can provide a hassle-free, profitable sales channel for those looking to sell their used equipment. Because they are not tied to a specific location or region, online auctions can reach a global audience of interested buyers, ensuring more bids per item than traditional auctions. As buyers compete to "win" items, owners realize better prices for their used equipment.

Some online auctions also take on traditional seller responsibilities such as fielding calls and handling questions from prospective buyers. In addition to listing the equipment and necessary information, online auctions can actively market items to better connect buyers and sellers.

"Our velocity of reaching a global market of 10,000 to 12,000 bidders is second to none," says Rodriguez, noting that it is this combination of market breadth and speed that is key in helping rental businesses offload equipment most efficiently.

Strictly online auctions also offer enhanced convenience over other methods of equipment disposal. Sellers are able to list their equipment from their workplace or home. Once the equipment is consigned, the seller can have little to no responsibility to find interested buyers, and often does not even need to transport the equipment until after the sale is final. Specifically, IronPlanet's auction model does not require the seller to be involved in equipment transport at all.

A different model
Ritchie Bros. Auctioneers, the world's largest auctioneer of heavy equipment and trucks, offers online auctions in addition to its traditional physical auctions.

"Every Ritchie Bros. auction is conducted at a physical auction site - either one of our 38 auction sites around the world or at an off-site location (usually the customer's property)," explains Denis Prevost, vice president, national accounts, Ritchie Bros. Auctioneers. "Most of those auctions are also broadcast live on our website. Interested buyers that are unable to make it to the auction site to bid can register to bid on our website using our real-time internet bidding service, rbauctionBid-Live.