Auction fever strikes nerve

Auction fever strikes nerve

As online auction fever starts to kick in, the channel has now realised it's more than a passing fad and a real opportunity to leverage an emerging form of e-commerce.

The launch of eBay's Australian Web site last week highlights the growth of Australian online auctions with some distributors seeing it as an opportunity to shift old stock and resellers planning to use them to reach previously untapped markets.

In a survey conducted by ARN, channel opinion is increasingly upbeat about the technology's potential.

Fabio Grassia, managing director of hardware distributor Natcomp Technology, said online auctions are an obvious channel for disposing of excess stock. Naturally, he tries to avoid being stuck with excess or old stock but finds that in this age of rapid technology turnover it is a fact of life in hardware distribution.

"Having stock that is not moving on your shelves is costing money in one way or another," Grassia said. "We currently sell excess stock through our existing customer base, even at a loss where necessary.

"I can see online auctions as being useful for clearing out the old stock to make way for the new. This business is all about turning stock into cash and buying newer product that is in demand.

"Another channel to dispose of slow-moving stock that is taking up warehouse space is always welcome, so long as the it doesn't become a competitor," he added.

Grassia saw the fact that you could be a little more anonymous through an online auction as being a positive. "Offering products to your customer base at low cost is not a good image for the business," he said.

Retailers also see opportunity in online auction sites. Harvey Norman's GM for computers, John Slack-Smith, said its proprietors would only use business-to-business online auctions such as the one recently launched by software distributor Dataflow.

He said HN Liverpool proprietor Tim Edwards is already using Dataflow's site to purchase run out and damaged stock for special in-store promotions.

Dataflow's site administrator, Kathryn Suddacas, said that since the site opened two weeks ago it had received 200 registrations without having done any promotion. "More than half of those businesses are from non-metro areas," she said. "Once marketing of the site starts we expect that figure to increase."

The site has sold most of the stock offered in the six auctions with more than 1500 units cleared. Although bidding has raised listed prices, the final cost per unit has stayed well below the RRP, which means the winner bought the stock at a good discount, Suddacas explained.

Phil Burnham, director of channel researcher Inform Business Develop-ment, commented that if the sites are auctioning older stock they are not competing with resellers, because resellers want to be selling new stock.

"It's a form of direct marketing and selling off the Internet which is under-exploited in Australia," he said.

Burnham added that all forms of Internet trading represent the perfect model for Australia because of the great geographic distances between suppliers and buyers.

IDC's Graham Penn felt auction houses will play a continuing role in the marketplace. "The market is obviously still developing and we will see a lot of change and a lot of new players coming through," he said. "But there is also an element of fad at the moment and people are rushing in. That will be overcome by experience. The mechanism can work and it will grow because it's new and people are interested. But in the long term people may go elsewhere."

Distributors, you would expect, are the obvious channel players to find a role for online auctions.

Phillip Tran, sales director of distributor Tech Excel, said he is not using auction Web sites at the moment to get rid of excess stock but said he would look at it in the future if trends show buyers are starting use them.

Tech Excel currently gets rid of its old stock either through special offers to its existing clients or through traditional auction clearing houses and second-hand component dealers.

"There are two issues regarding auction Web sites that are of concern to me at the moment," Tran said.

"The biggest problem from a distributor's point of view is keeping track of what has sold and what is still for sale. If these Web sites can perform inventory control functions as well, then they will be well suited to clearing old stock."

The other problem Tran has regarding online Web sites concerns warranties. "When we dump excess or old stock, we don't want to have to worry about warranties," he said. "I am not sure what the warranty obligations would be under such a scenario."

Scott Lidgett, general manager of network products and services distributor Lidcam, felt that in the future business-to-business auctions will become the predominant method used by the channel to clear stock. "It gives businesses the ability to turn inventory over in a hurry," Lidgett said. "Often it is better to get something for unwanted stock than to write it off totally. We are already starting to see [online auctions] take off in the US channel."

Lidgett added that Lidcam is currently looking closely at "all sorts of business-to-business e-commerce options, and that includes online auctions", he said.

"We had originally looked at it as a way for us to move excess inventory at our own level, but it also makes sense to have a facility that allows resellers to move their excess stock through our Web site."

He agreed that the public auction sites are eventually going to start charging big money once they have generated the demand. Therefore, offering a value add such as online auctioning back to the resellers is going to make doing business with them all the more attractive, he said.

Lidgett pointed out that there are already a number of "auction-site-in-a-box" software offerings, so he won't be surprised to see auction buttons appearing on the Web sites of all sorts of channel companies.

Providers of online auction services are also keen to stress the potential complementary market which exists for resellers to tap into.eBay Australia & New Zealand's managing director, Alison Deans, believes the reason eBay grew as fast as it did in the US was because it created markets which didn't exist before. "I think for resellers this is a great channel to use along with other channels," she said.

"It's a great opportunity to access markets and customers they might not otherwise be able to access."

Yahoo Australia/New Zealand's senior producer, Alan Jones, said auction houses provided resellers with an opportunity to sell products.

"I see in the next two years online sales in general letting resellers compete on a vastly different scale," Jones said. "There will still be the elements of position but if you're disadvantaged in the bricks-and-mortar world then selling online gives you another alternative to compete where you may not have a disadvantage."

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