Mega Auction

Come on boys, let’s get into this,” the auctioneer says as he goes into his chant. And more than 800 people—farmers, equipment jockeys and dealers—settle in for a day of buying and selling whole fleets of farm equipment.

Joining them via the Internet are another 1,500 bidders from 48 U.S. states, eight Canadian provinces and 37 countries. Since it’s a cold day in Caseyville, Ill. (just outside St. Louis), the on-site bidders occupy bleacher seats in a large indoor arena. Outside several huge glass doors, lines of late-model tractors, combines and sprayers parade past, pausing at the doors like beauty contestants posing for judges.

“Here’s a lot of three [John Deere] 9530s for you, boys. Buy one; buy them all. Your choice,” the auctioneer sings.

In this case, the bidder with the winning bid decided to buy only one 9530, for which he paid $207,500. The other two went back on auction and sold for $202,500 and $180,000.

By the end of the day, 67 combines, 57 headers, 63 tractors and eight sprayers rolled by the bleachers, along with assorted small items—from parts to monitors. Also sold were construction equipment, buses, even automobiles. They shipped as far away as Egypt, United Arab Emirates and Peru.

Welcome to the world of Ritchie Brothers Auctioneers (RBA), a company based in British Columbia, with branches around the globe. RBA has been selling industrial equipment for more than 50 years but, in recent years, has put more emphasis on North American farm equipment. All told this day, auctioneers pounded the gavel on 270 lots of farm equipment for more than $17.4 million, which is about average for the ag equipment sales RBA holds. Last year, one of its sales in Orlando raised the average with $203 million sold over six days.

“Gone. Gone. Gone to Panama. Headed down the road,” hums the auctioneer.

The ability to buy and sell globally is a relatively new phenomenon for the used equipment market. Sure, generations of equipment jockeys have put together shipments of used equipment to send from state to state or even overseas. But it’s the Internet that took the ag equipment market worldwide.

Online bids. Internet-based channels like IronPlanet and TractorHouse have their own sales models. IronPlanet, for example, relies primarily on live, Internet-based auctions but takes bids well in advance of auction day. One of its selling points is that it sends inspectors to evaluate equipment before the sale and makes those evaluations available to bidders.

TractorHouse uses more of a traditional clearinghouse model for selling farm equipment. Visitors to its web site or print catalog can search through an existing inventory of consignment goods and can also learn about upcoming live auctions. TractorHouse also links to online auctions that, like eBay, set time limits for bids.

Other used equipment sellers entities operate in cyberspace, too, with variations on these two models. But the RBA model is unique. It’s a hybrid of the new online model and the tried-and-true auction where bidders face off across a room, take the others’ measure and guess how to outfox everyone else. It’s a live, on-site model that can get the competitive juices flowing. The Internet adds volume and diversity.

“We are an unreserved auction. That means the consigner cannot buy it back,” says Rick Vacha, a territory manager for RBA’s Ag Division, based in Troy, Mo. “You’re not bidding against the auctioneer, you’re not bidding against the owner of the equipment, you’re not bidding against anyone but someone else who wants to buy that equipment.”

New structure. Taken together, these Internet-based models have changed the way buyers and sellers of used equipment get together. They have helped restructure the way dealers handle their inventories.

“The whole used equipment market dynamic is changing,” says Steve Koep, vice president of sales and marketing for AGCO North America. In part, that’s true because of the Internet; in part, too, it’s because of the consolidation of dealerships.

The most basic way to use the Internet is as an advertising vehicle for dealers. It’s classified advertising for the digital age.

“Smaller- and medium-sized dealers are putting a great effort into getting their inventory on a web site, either their own or someplace like TractorHouse,” says Sam Acker, Case IH, manager, pricing and programs. “It helps them spread their marketing efforts beyond their local trade area.”

Larger dealers, too, use Internet marketing. But much of their digital-equipment trading is done among the dozens of locations they own themselves.

“They operate almost like an internal auction service,” Koep says. “As dealer entities get larger, it is much easier for them to transfer used equipment from location to location” to match a customer with a used tractor, combine or sprayer. “Coast to coast is not unusual. And they never leave a single dealership.”

Keep it local. Large or small, dealers would prefer to keep used equipment sales local, Acker says, “because they almost always will get a higher price than at auction.”

Also, a tractor sold in the neighborhood eventually will need parts and maintenance, which are vital income streams for dealers.

Inevitably, if equipment sits on the lot too long, most dealers will reach beyond their normal trading areas to sell used equipment. “The better dealers have a set strategy for handling used equipment,” Koep says. “We like to say, ‘Look, it’s not wine. It doesn’t get better with age.’ ”

Some dealers establish firm time lines for managing used equipment inventories, says Bill Weber, John Deere division manager of remarketing.

Alternatives. “Maybe at 180 to 240 days, he might market it directly. After that, he might look for alternatives,” he says. “Over the years, auctions have been such an alternative.” Now, online trading channels offer another alternative.

“Both are very good ways to punch out at the end of your time line,” Weber says.

The high quality of today’s farm equipment has added to the Internet sales phenomenon because it gives buyers the confidence to buy equipment long distance, Koep says. “Good used equipment by virtue of technology lasts longer today and is worth more money. I think the used market bears that out.”

Still, some buyers want to kick the tires before they buy, which brings crowds to on-site auctions like the Ritchie Brothers. Also, there is the intangible: “There is an allure to the word, ‘auction,’ ” Koep says. “Everybody thinks they are getting a better deal.”

It’s the thrill of the game.

(BAS)

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