Online auctions provide access to bargains from around the country
The next time you attend a farm equipment auction, land auction or livestock auction, you might be bidding against someone thousands of miles away.
Or, if you’re one of the tens of thousands of folks who now participate in auctions via the Internet, you might be sitting at your kitchen table in your stocking feet, sipping coffee as you bid on items at an auction in a different time zone.
The Internet has revolutionized the auction business. Companies such as Proxibid and BidSpotter team with local auction companies to provide nationwide, even worldwide, audiences for neighborhood auctions.
"There are two basic types of online auctions," says Joe Petsick, chief financial officer for Proxibid. "The most common is where a live auction run by a local auction company is simulcast over the Internet. Bidders watching their computer screen can see, hear and participate in the auction almost like they’re sitting or standing in the front row.
"A second option is a timed auction that’s strictly online," Petsick says. "It’s similar to eBay in that people view an online catalog of items to be auctioned, then make bids at a predetermined time. The way we do our timed auctions, the bidding closes on an item after there have been no bids during a five-minute period. We call it a ‘soft landing’—the bidding stops when the bidding is done, not when a time limit has been reached."
Money matters. Matt Maring, with Maring Auction Company, Kenyon, Minn., simulcasts many of his agricultural auctions. "[Simulcast auctions] give sellers access to a much larger audience," he says. "It helps buyers by reducing their need to travel to an auction and stand around for a couple hours, waiting on a single item to sell."
Simulcast auctions often gross more profits than conventional auctions. Maring cites instances where online bidding drove prices as much as 25% higher after local bidders standing at the auction had dropped out.
He can document online activity at his auctions because Proxibid tracks the activity of online bidding and reports the results to local auction companies. The reports document how online bidding influenced the final sale price of each item, the percentage of items purchased by online bidders and the percentage of bids that were driven by online bidding.
"We’ve found that 10% to 15% of items at a [simulcast] auction are sold to online bidders," Maring says. "Another 35% to 50% of the sales are price-driven by online bidding."
That might make it sound like online auctions benefit only sellers, but buyers often find bargains online. Farmers in the market for a moldboard plow have learned that Internet auctions are prime places to locate used moldboard units in good condition selling for near scrap-iron prices in other states. Petsick notes that the market for four-wheel-drive tractors has found a nationwide equilibrium, largely due to buyers who use the Internet to leap across time zones to find bargains.
A buyer in Canada used a simulcast auction to scoop up self-loading bale wagons that were going for bargain-basement prices in the Midwest, Maring adds.
Both large and small auctions can benefit from Internet participation. Maring’s company held a retirement auction this past summer that featured a large line of late-model farm equipment. The auction grossed $2.8 million. One tractor purchased by an Internet buyer two states away sold for $45,000 higher after local bidders at the auction bowed out.
"I’ve also done a lot of $100,000 auctions where a $10,000 tractor in good condition sold for top dollar because Internet bidders recognized the value and were willing to bid up the final price," Maring says.
- Mid-December 2011