Finding a Cost/Services Balance that Pays Off

Most of us who have determined to run our own business have done so for one reason: To be our own boss. Master of our destiny. Captain of our ship. We soon find that our most important skill is the ability to make decisions, because we are faced with dozens of them each day. Marketing decisions alone are legion. It doesn’t take long to learn that in marketing we can do anything we choose to do, but we can’t do everything we’d like to do. We also learn the corollary to this statement: Just because we can do something doesn’t mean that we should do it.

In my last column, I mentioned that I’ve been seeing a lot of ads for some very nice auctions, and I wondered why these auction houses didn’t offer live streaming or an online bidding option. After all, more bidders mean higher prices, which also mean happier sellers and higher auction commissions.

In the interim, I’ve heard from several auctioneer-readers, who insisted that just because they can offer streaming or other online bidding options along with their live auctions doesn’t mean that they should do so. They reminded me that staging a live auction is expensive and time consuming, and that adding live streaming or online bidding adds considerably to the expense and work involved in producing an auction.

I’ve also spoken with executives of several online auction platforms, who offer considerable anecdotal evidence that correctly matching online services with the type of auction being offered can result in significantly higher sales. Proxibid Senior Vice President of Operations Jason Nielsen tells of an auction company that did $500,000 in sales the first six months of the year without Proxibid, and using Proxibid did $4.5 million in sales in the next six months. How? By leveraging Proxibid’s online services to increase the number of auctions they could do per month from four to 12, and increasing the number of lots per auction from 200 to 600. Of course, hitting these numbers required more people and more work, but in the end the company (and the consignors) made more money.

Mr. Nielsen doesn’t argue that adding online options increases costs, but he makes the point that the extra costs are nominal compared to the returns. Plus, he says, having a sizeable online bidder base enables an auction house to win consignments that they wouldn’t ordinarily get. The Federal Government, for example, requires an auction company bidding on a Federal contract to have a user base of more than 500,000 and they don’t allow eBay. Partnering with a large provider like Proxibid opens doors.

Even auctioneers who are not online readily admit that online auctions have changed the auction business. As Wi-Fi and mobile devices proliferate, auction companies will become more reliant on technology because bidders and consignors will demand it. Let’s face it: Few bidders like to sit through hours of bidding while they wait for a live auctioneer to get around to the items they intend to bid on. Mobile bidding allows bidders to bid from anywhere; they aren’t anchored to the auction floor. And why, in the current environment, would a consignor settle for a local, on-site bidder pool when they could have local, national and international bidders in their bidder pool?

In the not-too-distant future (in my opinion) all auctions will be online, live option notwithstanding. There’s no way to avoid it, and auction companies that want to stay in business will have to get with the program or close their doors.

How then can auction companies prepare for the inevitable and learn to take advantage of the online platforms being offered? There are several considerations.

First, know what the online options are. Currently, online platforms include the following features:

Timed auctions with online-only bidding (similar to eBay). Buy-it-Now and Make an Offer features are sometimes included

Virtual auctions, in which lots are offered online one at a time

Live Streaming auctions, which include audio and video feeds of a live auction and include online bidding

Silent auctions with mobile (smartphone or tablet) online bidding capability.

Secondly, consider the type of auction you are having. Mr. Nielsen suggests that high-ticket items like industrial or farm equipment, antiques and collectibles and business assets are good candidates for adding an audio and video feed to a live auction. If you’re auctioning $5 box lots at an estate sale, though, a video feed would be overkill. A lower-cost timed auction would be the proper choice for such a sale. So to keep an auction event profitable, careful consideration must be given to the prices that might be achieved by the lots offered, and what the costs are to produce each variation of the event (live only, online only, live with streaming and online bidding, silent/mobile). Adding the correct online option can sometimes be a great boost to profitability, but an incorrect choice might create some red ink.

Of course, the extra costs involved in any online auction must be factored into the analysis. Online auctions will require more photographs, better catalog descriptions, on-site DSL and/or cable Internet connections (in some areas Wi-Fi is not dependable enough to run an auction) and good computer equipment. Not to be forgotten are extra personnel and the charges that the online platform incurs.

Historically, a primary issue for both buyers and sellers in an online auction is the matter of trust. We all know of eBay sales gone sour due to a non-performing buyer or seller. Will the buyer pay? Will the seller ship? Is the item what it is purported to be? Is the seller reputable? Is the buyer a con-artist? Even eBay’s Fraud Protection Program hasn’t eliminated the mistrust between buyers and sellers – but it has helped. On auction platforms other than eBay, it’s important to know that the platform itself is trustworthy and reliable enough to keep track of all the activity and deliver bids in a timely fashion.

Most of the online auction platforms that I visited required a credit card and/or driver’s license number to register. Most believe that having a credit card on file guarantees payment and acts as a deterrent to buyer fraud. In this age when criminals are stealing identities and hacking into supposedly secure government and corporate websites, how safe is it for buyers and sellers to rely on third-party software to proctor their transactions? Mr. Nielsen makes a good point when he asks: “How can anyone be sure that the credit card being proffered belongs to the person who is bidding?”

Jason Nielsen is well qualified to ask – and answer – this question. As one of the nation’s foremost experts in online safety and risk management, his credentials include a stint with eBay, where he served as Vice President of North American Operations at PayPal before joining Proxibid. The management team at Proxibid tackled the trust issue head-on, and the result was their Market Guard Program.

Proxibid’s Market Guard security system assures both sellers and buyers that their transaction will be completed: The seller will deliver the goods as promised and the buyer will pay for them. Before accepting an auction house into the Proxibid fold, the company is thoroughly vetted by Proxibid, so buyers can be assured that the auctioneer will deliver what is promised. All bids placed at a Proxibid auction are processed through a series of checks before being accepted, so auctioneers can be sure that the bidders are real, the bids are good and that the buyer will complete the transaction.

Of course, Proxibid isn’t the only show in town, but the points made by Mr. Nielsen provide benchmarks to use in analyzing other online platforms. Auction platforms come and go, so my advice is to investigate the top three-to-five companies that have some longevity and a track record and choose the one that suits you best. In researching this column, I delved back past page 30 in the Google results for my various search terms, and quickly learned that many auction programs bit the dust in a year or two after their startup and aren’t around anymore.

Once the options, variables and pricing are understood, common sense (and a calculator) will dictate which option should go with which auction.

Previously published by Antique Trader Magazine

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