Jeff Johnstonbaugh, COO of BidSpotter, talks about RemoteBidder, BidSpotter, Internet bidding and the future of the industry. You can play the episode or download it for later using the links at the end of the transcript, or you can use iTunes or your favorite podcasting software to subscribe to the Auction Podcast. Enjoy!
You’re listening to the AuctioneerTech Auction Podcast; today is Wednesday 5 August 2009. My name is Aaron Traffas and joining me today for the third in the Vendor Interview Series is Jeff Johnstonbaugh. Jeff is Chief Operations Officer for BidSpotter Incorporated. Good evening, Jeff, and thank you for joining me.
Jeff JohnstonBaugh: Hello Aaron, it’s a pleasure.
AuctioneerTech: Jeff how did you get started in the auction industry?
JJ: Well, trading and buying and selling and going to auctions has always been in my family. I started working I was about thirteen in the restaurant business, by the time I was twenty-one I was fairly burned out on that career, and so I was buying and selling a lot of equipment at auctions for restaurants and building restaurants and the auctioneer whose sales I attended most them asked me to come and work for him. That was about 1982 and at it’s been twenty-seven years ever since. So it’s worked out okay.
AT: And you were working in what capacity for that auctioneer?
Oh, I started out as a set up and ended up as an auctioneer and ended up as a sales manager and I actually ended up buying his business when he passed away after I’d worked for him for about fifteen years, just your ordinary local, regional neighborhood business auction company.
And maybe we should preface that a little bit – where are you from, where was this and where are you at now?
I’m still up in the Seattle area where I was there and so I actually purchased Jesse Jones Auctioneers and ran Jesse’s company for several years until I got distracted by this whole Internet thing.
And tell us a little bit about this distraction, as you call it, and what drove you to BidSpotter.
Well, like a lot of people, I saw the allure of the Internet and decided to pursue that dream and I was actually working at nordstrom.com at the time, I was interviewing for a position internally and the president of the company stepped out of our meeting for a while, which obviously made me nervous, he stepped back in and said something which made me even more nervous, said Jeff I’m doing to do something I’ve never done before, I checked with the Nordstroms and we’re going to refer you out of the company, which obviously panicked me. He actually was an angel investor sitting on the board of a little company called LiveBid which was one block down the street and he referred me down to them so I took a walk down the street and it turned out that that was just about ninety days before they were purchased by amazon.com and the fellow who was the sales manager there was well known to me because I had taught him bid calling a few years before, and so I hired on with LiveBid and the online adventure continued.
When was that that you hired on with LiveBid?
I want to say it was 1998. It’s interesting; we got enough experience Internet now that it’s starting to get lost in the fog of time. But yeah, we were bought by Amazon and Amazon had an interesting strategy. Amazon saw that eBay was coming after retail so they took at a shot, Amazon saw eBay was coming after retail, so they took a shot at auctions for a while to force eBay to refocus on their core business and it was very effective and one of the things they wanted to do was make sure that eBay didn’t get to buy LiveBid company nor Yahoo Auctions and we were at Amazon for about eighteen months. I had the opportunity to work with Sotheby‘s and I had the opportunity to help develop the first beginnings of different platforms and sort out how industrial auctions and different from consumer auctions and all that sort of stuff. So it was very formative years and very exiting times.
Sure. How then did that job description segue into BidSpotter?
Well, Amazon decided that its strategic move had run its course and after about fifteen months or eighteen months they let us all go. Some friends of mine, Bill Foot and Jeff Harris, went off to form BidSpotter.com, I took a year off and then later joined them and BidSpotter has grown very steadily from a very small company to what we have today which is working quite well for us. One of the unique circumstances that sets BidSpotter apart from other competition is that there’s never been any outside investments. We’ve been cash-flow-positive and work form within our own means since they started out with their own severance checks and it’s built slowly but it’s built very solid. So we are very proud of that.
That’s very somewhat unique in these days of tech startups and Internet companies and it seems like everybody is taking venture capital from various places and having something that is completely organic and as you put it a cash flow positive entity from the get-go is something to certainly be proud of. You say that Bill and Jeff started BidSpotter and then you joined them shortly thereafter. How did you know them? They were in LiveBid, is that right?
Correct. All of us that founded and originated BidSpotter were from within the Amazon group. We joined with some fellows from Canada, Inet Softglobe was the name of their company and they provided the bidding engine around which all of the BidSpotter website is wrapped. And so it’s grown on that basis and now the fellows from Inet and the original founders of BidSpotter are all partners in the deal, but again, there’s never been any outside investment and there’s never been any debt taken on and so its worked out pretty well.
So how long would you say that you were a bid calling auctioneer, is that something you still do on the side, is that locked away as a part of your past, how long did you do that?
I probably did that very actively with one or two sales a week for a dozen years, and something I still can do and I’m 6happy to do, but for me primarily now its pitching in to help somebody else or for a good charitable cause, I don’t actively pursue auctions although I do still cooperate and consult with friends on big projects and so forth occasionally.
Sure. Well Jeff, tell us about BidSpotter, how would you describe BidSpotter to somebody in an elevator? What does BidSpotter do and what kinds of Internet bidding does BidSpotter support?
Okay. BidSpotter is a website where folks primarily go to buy industrial machinery, plant machinery; I like to say things that make you money. The ways that BidSpotter works with the traditional auctioneers is to provide technology for a Web simulcast where you can bid against the live crowd in the room with the traditional auction, a strong area of growth in future trend, is the timed auctions, the online auctions that are more of an eBay style auction but we still present them as an event as opposed to random items in this gigantic mishmash of offerings. Each of our auctions, whether it’s a timed online auction or a webcast auction, appears in a calendar fashion, it gets its own standalone credibility. The buyers tend to migrate amongst the items there and consolidate their shipping and figure out how to work with one rigger or machinery mover to get the stuff home. They develop a relationship with one auctioneer to buy multiple items at that event and then they package up the goodies, pay the bill and go home. The timed auctions are far more popular with our European clients and we do have a very strong European representation. We also are active in South Africa and the live webcast auctions are really the bread and butter of the American industry although it is a growing segment. I would say that the main reason that BidSpotter trended toward the industrial machinery sales away from its generalist origins has to do with the demands of the industrial auctioneers, the ways that they like to do aggregates and groups and with a privilege and frequently change their mind about how stuff is going to be offered depending on how the crowd receives their proposals of how to give you choice on the next hundred or you’ve got to take the next five or put them all together or what have you, and the BidSpotter platform has always been very facile and very, very quick to present with clarity, those different means of grouping and choosing items and those seem to be a requirement primary of the industrial auction culture.
You mentioned something in that description that kind of focused my attention and you mentioned how you list the auctions as events especially for your Internet only, your timed auctions. You list them all as an event and it is essentially a group of items in an event as opposed to as you put it, individual items in a sea of staggered ending items. Why do you feel that that is important? And I’ve noticed that that’s the primary difference between the way that we as auctioneers market items as opposed to your traditional eBay sellers or eBay style sellers who will list individual items with varying seemingly random closing times, why do you feel its important to list items, Internet only items, in events as opposed to on their own?
Well, I guess for me it goes back to the way Jesse used to run his auction business. My original auctioneer mentor Jesse Jones was an antiques dealer and that’s the perspective he came from, but he was always collecting something, whether it was schoolhouse bells or parish prints or flow blue or Tiffany glass, whatever it was, and he would gather these little bits and pieces together for a year, two years or five years, and when he had enough of whatever it was then he would create an event auction and he knew that by creating an event, the value of the item was far superior to the little bits and pieces and odds and ends that he picked up along the way. So when you had an auction of Maxfield Parish prints, suddenly you drew the attention of Maxfield Parish print collection community. I think that the way we as auctioneers approach the process, especially the industrial auctioneers, it’s generally about a building clear-out. So you have a focal point to begin with. This plant made this number of seats or they made those General Motors cars or they made these plastic water bottles. And so obviously all the items have a cohesiveness to begin with because they all contribute to making that product. But furthermore, you’ve got a geographic focus and you’ve got a timing focus. And an auctioneer works out an advertising budget that’s amortized across might be a hundred lots, might be a thousand lots. He is working on a labor budget that’s focused on getting out of the building in sixty days. So that event focus makes us very different than the person who is trying to sell one antique teddy bear that they found at the flee market and they want to throw it on eBay and find the other antique teddy bear buyers. Our product comes with a built-in focus and therefore it behooves us to go with that flow and maximize the advantages that we have, being so focused.
Jeff, BidSpotter recently, relatively recently anyway, came out with the RemoteBidder platform and product and you’d mentioned what BidSpotter did and what its strengths were especially in relation to asset type and market. What then is the cause for RemoteBidder and what is its target and focus?
Well, I think that everyone knows by now that in the end of last year, eBay left the live auctions space. And we had actually had a deal with eBay from 2004 to 2006 and we decided of our own accord to pull out of that deal because we didn’t see them supporting auctioneers as auctioneers in the way that auctioneers need to be supported. So with the news that eBay was leaving and knowing that the primary, the vendors, the most successful vendors, the biggest vendors in that consumer goods, fine arts and antiques kind of space were, by and large, resellers of eBay platform, we decided to go ahead and put up a product to approach the consumer market but approach it with the needs that the fine arts and antiques buyers in that culture wanted. What I’m finding as I pursue this business is that there are distinctive and unique cultures, even though we use the word auction across all of them, the guys that are buying livestock at auction have very distinct different needs and demands than the guys that are buying cars, they are different than the folks that are buying arts and antiques and industrials and so on and so forth. So with RemoteBidder, we partnered with Antique Week and Antique Trading Gazette to try to establish as quickly as we could, the broadest email list bases and customer bases that we could, and then we are actually using technology for the live bidding platform from the folks at ATG Media which we think is superior at serving the consumer good demands, it just – its prettier, it provides bigger images, it provides a different style of presenting the information that the fine arts and antiques folks are more receptive to. And its growing slowly like any new brand and new business it takes a long time to get the thing off the ground but we are very pleased with where it’s at and we are very happy with our partners at Antique Week and Antique Trading Gazette and we expect big things in the future.
And so you’ve kind of mentioned that – first of all, when did RemoteBidder have its first auction, when was it launched?
January this year, January 2009.
Are there any major differences outside of demographic focus and asset type – I guess those are some pretty substantial differences. How close is the technology between BidSpotter and RemoteBidder and what makes these platforms different from other competing products and platforms?
Well, the technology for the RemoteBidder platform has been tested with the saleroom.com in the UK for about the last 18 months to two years. So we know its solid technology, but it is a Flash programming based technology instead of Java which BidSpotter uses; Flash is installed in substantially more home user computers already, so it makes it more accessible to folks. Also its informed by a lot more knowledge about how people pursue personal entertainment or the things that they’re going to buy in life as opposed to the machines in the machinery business. So it is a lot more amenable to enjoyable browsing and sorting out and watching just the items that interest you and that sort of thing as opposed to the machines which are by and large dictated by “does it meet the specs and is it a catalogue item and lets cut the chase and get this done with”.
Something that you want because it is desirable to you not because it’s a commodity that fits your specifications of what you need to buy
Exactly, exactly. A lot of it has to do with just being able to cut through the clutter. At some point, these different auction sites reach a saturation point where you can hardly take it all in and so it’s helpful to have a different channel on the TV so to speak.
Sure. What would you say the biggest benefit is to building a bidding platform for a specific market as opposed to one of the larger more generalized other competing platforms?
Like I said, I just think it’s the ability to tailor to a cultural need. I cannot envision the day for me when I am just as happy having heavy equipment auctions with bulldozers and road graders on the same platform as diamonds and vases. Those different users all approach their computer differently, I mean, for one thing, by and large, the consumer good users are a much older demographic, they are much wealthier demographic and they have just a different set of expectations. The guys that are high tech and very, very dialed in their computers that just bid like mad men on the server auctions and lab equipment auctions, they have a lot less need for support and they have a lot less need for a happy touchy-feely kind of experience than your consumer goods folks who are really buying to entertain themselves, they are buying to have the enjoyment of it. So, the whole thing needs to be a very enjoyable experience. Quite frankly, a lot of our industrial users would get frustrated with the enjoyable parts of the experience, they just want to cut to the chase, they want to buy what they want to buy and move on. And that’s the main difference. The technology underlying it, there is a lot of varieties for technology, there is a lot of ways you can approach it and I just think it all needs to be driven by the nature of the event and the nature of the customer you’re trying to appease.
So what are some differences in the product offering for auctioneers between the two services? If I am an industrial auctioneer and I utilize the BidSpotter service, what kind of advantages do I see either in a pricing model or a feature set as opposed to if I am an antiques auctioneer and I’d like to utilize the RemoteBidder platform?
I would say the primary benefit from the perspective of the auctioneer is going to be the marketing assistance. BidSpotter has an amazingly well-dialed and database of industrial buyer as opposed to RemoteBidder which is accessing that great mailing list that Antique Trading Gazette has throughout Europe and Antique Week has in the US. The technology is going to appeal to the different buyers so they are going to get a smoother and happier customer. I would say on the industrial side, they are a lot more demanding and I guess the primary difference of the BidSpotter platform is not so much the software but the skill and the mindset of the people running the business. The folks that are taking the remote sales or the implementation specialists who are out on the ground and can actually wire phone system or Internet connectivity for a couple of hundred thousand square foot plant without breaking a sweat and make sure everything goes off perfectly. Whereas antique auctions are primarily from a well known venue and auction gallery that’s a lot more controlled situation, the folks with BidSpotter, the BidSpotter auctioneers are a lot more inclined to want to hire our staff to take care of things for them, the folks at RemoteBidder are a lot more inclined to handle themselves and they want an easier interface that is more readily accessible. They want the simplest way to achieve the audio instead of the way that most accommodates the challenges of working on the road. Basically we run them as two different businesses and those two different businesses address the needs of the clients and the clients are radically different. The guys that sell ancient Chinese antiques have a completely different approach than the guys that sell bulldozers from a vacant lot in the middle of the Midwest.
You mentioned the implementation specialists and with the approach that each is a separate business, what are the different implementation options for each one. In other words, if I am an auctioneer, how technical do I have to be as far as the way that I interact with the service, do you offer a turnkey solution, do you offer a self service solution, do you offer a mixture of both? What does it take someone to utilize either service?
That’s an excellent question, and again it all goes to what the auctioneer would like to have. We completely consider our business from the perspective of being in service to auctioneers. We can run the whole thing for you and literally be another staff member on the ground at your sales site with you and that is generally the way that the auctioneers who are running multiple millions of dollars of sales with us a year like to have it be. As a matter of fact, its very, very common for our clients to pick favorites amongst implementation specialists and ask to make sure that James or AJ or Mario or whoever it might be, is in attendance at their event in particular because they work so well with them. That’s going to be the case where we send someone out with a big sachell full of gear and they make it happen, whatever needs to be done to make sure that you can hear and you can connect to the Internet – the whole works. The other end of the spectrum, both platforms are completely capable of being turned over to the auctioneer in-house staff and run completely self-sufficient. Again I would say that the remote bidder platform is easier for an operator within the auction house to run, it has less bells and whistle therefore there is less clutter on the user dashboard and its just a little easier to understand. In the middle of that is a very economical compromised that is something that I originally worked out back at Amazon and has become an industry standard which is the remote broadcast. And the remote broadcast simply is putting a cell phone usually, with a headset, on either the auctioneer – which works far better – or as an alternative, to a ring man or just a clerk on the ground, where the headset can pick up the noise from the PA system. We use that feed from the auction floor to run the bidding from one of our office computers and when a bid comes in from an authorized and approved bidder, we relay that bid back to the auctioneer via the cell phone and the bid is process that way. The advantages are that it saves all that expensive travel and trying to run the auction that may or may not be able to support technologically. The disadvantage is you’ve got a couple more links in the communication chain and that’s why I said it works better if the auctioneer wears the headphones themselves because there’s just a couple less links in the chain because you’ve got this message being passed from bidder to the computer to our computer, our computer to our persons, thoughts and brain and then they say it over the phone and that person using the phone has to relay to the auctioneer and even if all this happens in a couple of seconds, those elements of the chain can be a frustration to getting a bid in very quickly. My recommendation for remote sales is they are best done, and this is kind of standard practice for our bigger clients, if they’ve got a huge auction, they tend to have someone there. If they’ve got a modest size auction, say its going to be under a couple of hundred lots and it’s a fairly simple situation, most auctioneers in that case will be selling a little slower, a little less stress, a little less pressure, and then not bearing the burden of traveling and so forth is a perfect situation to use remote broadcasting. All three have their place and all three are very good tools for an auctioneer to use depending on what their circumstance is.
What kind of pricing structures are associated with each of those three options and is there a difference in the pricing structure between BidSpotter and RemoteBidder? And what kind of volume would an auctioneer need to have to justify utilizing either service?
Well you know, it’s interesting because the volume to justify has been a question that goes back a long ways. I remember when we first started this with LiveBid, the event fee was twelve $12,500 per event, I could guarantee you the Internet wouldn’t keep working, I could guarantee you no one would bid, but I could also guarantee you that every single live television news truck in town would be outside your auction talking about your auction that night in the local news. So the value was a little strange then. You fast forward to ten years later now and the event fee is down to $350 on BidSpotter, the event fee for RemoteBidder is $500, and that’s just a consideration of the fact that we sell so many more lower price point items on RemoteBidder that in order to stay in business ourselves we have to charge a little bit more event fee. The percentage that we expect as a buyer premium bump on both is the same, 3% to folks that win online bids, so that’s pretty simple math. $350 bucks is not a big advertising hit or $500 for RemoteBidder is not a big advertising hit for most sales. Its kind of more of a question of where do you want to push your business. I know that we have several clients – I would say Gallivan Auctioneers is probably the best example – who readily acknowledged that they used us with the online broadcasting as a very integral part of building their business to make sure that they were investing in reaching further and further and expanding their geographic boundaries every time and as a result, they may have taken a lot of sales early on that other people might have deemed not worth spending money on. So the value proposition isn’t always about does this auction justify it, but sometimes the value proposition is, can I use this as a tool to help build my business and establish myself as a very forward thinking, ambitious and technologically sophisticated auctioneer who is availing themselves with every marketing resource they can come up with. Sometimes that’s the value proposition that an auctioneer needs to consider. I would never put a specific dollar amount on the deal but I will say that it is much more common for our auctioneers doing lower gross volume sales to run the software themselves and my standard description of the person who can best run that in-house is if you have a niece or nephew who is between he ages of seventeen and twenty-five and grew up in the auction business and they play video games all their life and they have no fear whatsoever about a computer, there is no doubt whatsoever they can run any of the online auction platforms very successfully for you.
That’s a pretty good analogy, I know that my years playing Counter Strike probably suited me very well for being able to click the bid receive button. Jeff, I’m going to switch gears just a little bit, I’m looking at a press release from – the published date is very early June of this year – that talks about the BidSpotter.com announcing a dealership liquidation program. Tell me a little bit about what that program is and who that targets.
Well, you know, its been announced with General Motors and Chrysler in the last sixty days at the most, that they are going to be closing thousands and thousands of auto motor dealerships across the country. We started seeing some of these dealerships and they were generally about a $100,000 auction and looking at different resources I’ve noticed that a lot of them are going to local auctioneers who have never done anything online before because the relationship and the business isn’t coming through Chrysler, is not coming through General Motors, its coming through the owner of the dealership who is a neighborhood businessman and knows the neighborhood auctioneer. So what we did is we put together a package that really simplifies the whole process for, especially for an auctioneer who has never used us before or maybe never done an online auction before, and we took the different flavors of implementation out of it, we know from our experience that the best way to run one of these moderate sized auto dealership auctions is to be on the phone and do a remote broadcast, and we know that we can support this very effectively with a discount nonetheless. So it’s a $350 event fee, flat rate, implementation included for any dealership, and it doesn’t even have to be an auto dealership, it would be a John dealer dealership, it could be a moped dealership, but dealership auctions, they’ve got a special featured category on the BidSpotter homepage and that’s something we think that auctioneers across America are going to be busy with for the rest of this year at least and probably six months after that. So we put out a special offer to support our local auctioneers. I think what really drove it home for me was when I saw a couple of dealerships in Casper, Wyoming, and I just know that we don’t have an industrial user base in Casper, Wyoming, amongst client auctioneers and it brought home to me that these are going to come from all different directions and hopefully it’s a chance for these auctioneers to have an opportunity to try it out and see if they like it and we want to keep it simple, and straightforward.
That’s an exciting new program from you. What are some other features from either platform that we can look forward to, to seeing released in the future, what kind of development is going on, on the backside?
The most exciting features we’ve got coming along are along the lines of client integration. I know that for a lot of years a lot of auctioneers have had a strong debate of whether or not they are building our business or building their business and whether or not they want to drive their clients, their bidders to a portal website like BidSpotter. Coming in the future, the technology has come to support the idea that the sale can appear equally well in both locations and bidders who are loyal users of BidSpotter can find the event on BidSpotter calendar, they can log in, register, get approved, all that good stuff, and they will perceive that they found the auction through BidSpotter. But we have coming out shortly opportunities for auctioneers to embed a tool or a page within their website that allows branding with their logos and their colors to be able to traffic from directly within their site and maintain more of the feel that you’re working right within the auctioneer’s website. So really it’s going to be the best of both worlds. And those tools are in development, we except to roll those out in the fall. In conjunction with that, we are also focusing very heavily on back office systems. We have a channel partner in the UK that should allow us very shortly to be able to offer a very comprehensive package of enterprise management software for auctioneers to use that will do all your basic accounting functions and track your consigners and print your invoices and all that good stuff that you need to do, live at the sale site as well as with the online purchases because obviously when you get in these timed auctions and so forth, you have the dilemma where 100% of the bids and the bidders are coming through the website, but you still need to put them through an enterprise management software back office system that allows you to get the invoices out and check your bank deposits and make sure everything is as it should be so you’re running your business properly.
And so, let me jump in there, you’re talking about a web-based clerking and cashiering system, is that right?
So someone, and let me form this question, for the real time live streaming auctions where I have a crowd in attendance and I’m taking bids from the floor and I’m taking bids from the Internet, will the system support then the recording of the winning bids for both Internet bidders and on-the-ground bidders and let me generate invoices all from this one spot?
That’s exactly what we are shooting for.
On the customer side there’s also a lot of nice stuff coming along. There are new cultural things, new cultural expectations in the realm of the online auctions, some of which are bleeding over from eBay and some of which are kind of driven by the fact that we are event oriented, and people are going to want to be able to manage their favorites and their watched items and their items they are bidding on in a much more focused way. And so we are developing a lot of tools along those lines to allow people to dial in a little more tightly from the bidder perspective what they are interested in. And we think that will lead to more loyalty and better focus and more follow-through when it comes time to finalize the bidding.
One more follow question to what you described as essentially and a combination portal / integrated solution. That will provide auctioneers the ability to have the same inventory set hosted on his website as well as on BidSpotter or is one or the other?
No. The goal is to have the inventory data and the bidding exist in a space between the two and all we are changing is the way it is viewed from one perspective or another. So yes, it should be exactly the best of both worlds and whether it’s a live or timed auction won’t matter. The bidding will be competitive amongst all the bidders but their perception of where they came from and where they are existing on the internet will be colored slightly differently based upon where they began.
One more question on that. Do you anticipate a different pricing structure for an auctioneer utilizing that option and also is there a difference in the pricing structure between a real-time bidding auction and a timed auction?
At this time we don’t. You know, we have never done a whole lot of differentiation pricing-wise because we’ve really just always built whatever tool next seem to be most in demand and it’s a very competitive market and so we haven’t put out a lot of “gee, now we are going to get you to pay more for this and pay more for that.” The a la carte thing is never been anything that’s been a very much interest to us. So instead we are all about trying as best as we can to maintain the pricing structure we have as low as we can and just keep throwing more features out there as they are either brought to our attention by auctioneers, which is where most of good ideas come from, or whether they seem to answer a recurrent problem or a recurrent bidder demand.
What are some of the features that you offer that you are seeing of your most successful auctioneers utilizing? What are some of your most successful auctioneers asking for as far as feature sets, and what are they doing to set their auctions apart from the rest of your client base?
To be honest, I don’t think that the successful auctioneers are dependent upon a technology or something that we are providing. I think that the biggest difference and the most successful auctioneers for online auctions really comes down to their mindset regarding embracing the online bidders as real people, actual bidders who are just as genuinely interested in making good purchases and doing good business as the folks on site, it just so happens that they are at a remove, whether it’s a time management situation because they cant go to the auction because its their daughter’s wedding rehearsal that evening or whether they cant go to the auction because they are twenty-five hundred miles away. The biggest challenge for auctioneers is always about vetting the bidders and making sure they are doing good business. And we certainly appreciate that with my own auctioneering background, I’ve done enough bankruptcy court sales where the building has to be cleared in time and the bills have to be paid in time and I’ve even done sales in cases where I was liable for any deficit if someone didn’t pay their bill. On the other hand, if I am honest with myself, I have to admit that I usually have no more guarantees that someone is going to follow through with their purchase when they have registered live in person. We certainly don’t track whether or not people leave the sales site before they’ve paid and we don’t do a whole lot when they register except maybe scan a driver’s license and so, you can draw direct analogies between doing good business in live auctions on site in person and doing good business with folks online. My experience has always been, through the ten years of doing this, that the percentage of people who are flakes online is just about the same percentage of people who are flakes in real life, we don’t see anywhere near the kind of fraud concerns that eBay has and I think that is because we are event oriented and we are focused on a whole package, and its still a process, you have to participate and actively, you cant swoop in and steal a bunch of laptops and swoop out like they do on some of the different online platforms where you can use fraudulent credit cards and so forth, but my advice to auctioneers has always been and the guys that do best are the ones that make the effort to reach out to every registered bidder, pick up the phone, see if they answer the phone, see if they sound like a good Joe on the other end and make that human connection, and the auctioneers that accept the most number of registrants are doing the most business and selling the most items. The auctioneers that have the most prohibitive, restrictive deposit demands and registration requirements and a lot of documents and so forth are the ones who are not seeing very many transactions with their online bidding.
That’s a great point in that the higher your barrier to entry, the less participation you are going to have. I mean, it’s a pretty direct relationship I think, on that. Talk a little bit more in-depth if you would about the various options that an auctioneer might have as far as bidder qualification and what maybe the most permissive policy and the highest barrier to entry policies may be.
Well, its kind of interesting because at the last Industrial Auctions Association Conference, Bruce Schneider with Schneider Industries came to us and said we had restored his faith in humanity, because he approves everyone and he’s never had a real problem. On the other hand, the other extreme, we have some of the guys who stick to the old school New England auctioneer policies where you’ve got to put a twenty-five percent deposit down, but they are not considering that from the perspective of the bidder. If you’re a guy in California and you see an auction for a bunch of audio video movie gear, and you think you want to bid on this stuff and you only know of the auction from the Internet, you go online and you register and you see that this guy wants you to send him ten thousand dollars cash – wire transfer – before he lets you bid. Well from the perspective of the guy in California, the bidder, that sounds like the definition of Internet fraud. You don’t know who that guy in New England is, I don’t care if he’s been in business for two hundred years, his name isn’t meaningful to you in the California market, you just know he’s asking for ten grand upfront before you can buy fifty thousand worth of equipment, or forty thousand. So there is the disconnect. Now, we are working very closely to try to establish something in the realm of a Paypal type payment process that is focused on the needs of auctioneers where you are moving actual money and you don’t have a whole bunch of recourse to cancel the deal after you’ve taken the goods and so forth. Most auctioneers right now are working in the middle ground and what we do on our platforms is, we have all the forms to request whatever the auctioneer requires. So if they wish they can request a driver’s license, if they wish they can request banking references, if they wish they can request credit cards for either just a deposit or for transacting the deal, we do not provide payment services at this time but its certainly something we’ve been in consideration of and maybe in future years we’ll be offering that service, we would certainly never require it but as an opportunity and as a feature for auctioneers that maybe something they wish. At the end of the day, it seems to me the guys that apply some common sense discretion to the folks registering online and the ones that use some of the resources that are there to vet some of the bidders and so forth, they do fine. There is an occasional problem, but my experience is that the occasional problem since 1999 is very much the same as the occasional problem before 1999. You just get a guy who gets excited, gets over his head or he doesn’t understand auctions and you’ve got to deal with the situation occasionally. It’s a rare situation. But nonetheless, when you look at that form of requesting approval to bid, if they haven’t spelled their name right or if they’ve got a phone number with eight digits or what have you, well then you know you’ve got a problem or you want to follow up and investigate a little further. If they are a name well known to you as most of our industrial auctioneers have well known clients they’ve never met in person, then you automatically approve without hesitation and its very much like the same policies you use to vet your auction bidders in the past, its just on a new venue.
How does registration work? If I’m a bidder and I find an auctioneer’s item or inventory set on BidSpotter.com and I decide to register into that event, I obviously have some steps to go through that are dependent on what that auctioneer requires for that event, but once I’m registered into that event, can I then reduce the number of steps I have to go through to bid in another auctioneer’s event? And the follow up question is that if there is a communal buyer set, for lack of a better descriptor, can one auctioneer make comments about a bidder that can be seen by another auctioneer?
You’ve hit on a couple of features that are inherent to what we do. I spoke earlier about the differences between BidSpotter and remote bidder and the ability to have a set of bidders who are automatically approved because they are known to you is one of those nice features that we have with RemoteBidder. Because again, if you traditionally sell duck decoys at all your auctions and you’ve got a buyer who always comes looking for duck decoys, then he’s going to be there sale after sale and there’s no reason for him not to and you’re going to know who he is so you can automatically approve that bidder as someone on your good list so to speak. And that’s a nice feature to have. We are a little more wide-ranging I will say on the BidSpotter side and it is very common for someone to come in completely unknown, buy a few machines, settle the business and go away and not bid again for five years until he needs more machines. On that side we do have a system of auctioneers being able to leave comments about bidders and I would like to see auctioneers use it more frequently because it is a very good communication tool when someone does fail to pay their bill or so forth. One of the comments we’ve had in the past about bad bidders is why don’t you block them and never let them register again based on email address. Well, the easy answer is, because someone goes out and gets another Gmail or Yahoo account address and they become unknown to you. I’d rather keep an eye on the guy in the way that we know him and be able to communicate amongst the auctioneers, you know what, this guy hasn’t paid in the past you need to make sure you get deposit or find out what the situation was. But again, those are uncommon things, I’m very happy with the feature we have with RemoteBidder where you could your whitelisted bunch of bidders because it does save time and energy. And again, in the consumer good space, you have a lot more repetitive buyers.
We talked a little bit about some of the things that some of the successful auctioneers are doing with regard to even a paradigm as it relates to Internet bidding and customer registration. What are you seeing as far as some of the mistakes that some auctioneers are making that had they done things a little bit differently they could have done a better job with the Internet bidding and the relationship with those Internet bidders at their events?
You know, I think the number one area for improvement and the thing that seems to separate most the successful online auctioneers and not just the folks that sell the most online but also minimizing and mitigating challenges and problems after the sale, are the level of cataloguing. And I have catalogued hundreds if not thousands of auctions. I know how much work it is. I know that auctioneers often put out disclaimers that it doesn’t matter what I say or what this catalogue is, you are buying as is under your own inspection. Well, that kind of stands at odds a little bit with the circumstance that an online buyer finds themselves in where they are completely dependent upon the auctioneer for description. There is a trend amongst industrial auctions for folks to go down and inspect and then bid online later and I imagine for consumer goods there is still a fair amount of people doing that regionally as well, but you seriously have a lot of people who need to depend on you, because they’re never going to see the item until it arrives in their possession after you ship to them. So the difference between cataloging table as the whole description, and one small low resolution snap shot as opposed to getting very detailed and saying this is mahogany, Ethan Allen table with four leaves and so on and so forth, and putting in three or four images. One of the biggest advantages we have in our RemoteBidder site is how easy it is to manage multiple images and I believe that multiple images is a level upon which all of the different live auction broadcast sites are competing, because the more that that person can see for themselves, the better it works out in the long run for everyone. And a very good example I know came from a recent auction we did with OK Automobilia, it was kind of a fun auction because we run it on both the BidSpotter platform where they have done auctions annually for the last seven years under the name Vic’s 66, which they recently sold hence the new name, and we ran it on the brand new RemoteBidder platform. And between the two online platforms, we did about forty or fifty percent of the auction total gross and it was split pretty evenly between their folks that knew to come to BidSpotter and the new folks in RemoteBidder. But there was a situation that came out after the sale, a fellow had bought a sign – this was a sale of Petroliana and automobile signs and gas pumps and that sort of thing – definitely those kind of guy toys that a demographic works very well for. And the fellow came in and he looked at this sign which had been a hanging sign and it was two sided. And one side which probably had been against the building for years was gorgeous and the other side was very rough. And not to put it too lightly, the guy came in and basically blew a gasket. He said, “You know, I bid exclusively online, I couldn’t come look here, I’ve driven hours to pick this thing up and now I see you hide the back side from me.” And the auctioneer very calmly said, actually sir, lets go see what we had online, because he knew there were photographs there of both sides. In this case the client hadn’t availed themselves of it but it had been offered to them had they wished to look it over and do a little more due diligence and at the end of the day the guy paid his bills, said, “Golly, you know what, to be honest, I think maybe I saw that other side, I just I don’t know what I was thinking I got caught up in the bidding and you’re right, it was there and I need to pay my bill because I bought it and that’s fair.” So that extra effort by that auctioneer to snap one more picture really saved a situation where there could have been a dispute that was without a good resolution. And so I think that’s the place for most auctioneers can avail themselves best, and if I had a magic want and there was one thing I could say to the auctioneers as my rule, I would say catalog it the way you’re going to sell it, and sell it the way you catalog it. Because one of the biggest frustration we get with bidders in industrial sales is when we have a bidder who carefully pours over hundreds of lots of tooling and drill bits and so forth and picks out the twenty that he needs for his business and leaves very good absentee bids and events at sale, and then the auctioneer comes in and says, put the next twenty together, put the next twenty together. And so all over a sudden who left a hundred and ninety dollar bid for his one lot is outbid by the guy who is spending two hundred dollars for twenty lots. And it really didn’t serve anyone’s best interest but the set up guy wasn’t really in tune with the auctioneer ones and so on and so forth. Its important to remember that these folks online don’t have a good way to holler out and say hey, could you sell out 147 separate, I really just need that one piece. So that would be my magic wand wish. I think that most of the opportunities for improvement and more success and less challenges after the sale fall in the realm of cataloging.
Is this something that you’re seeing improve over time, the diligence that auctioneers are using as far as cataloging their auctions and what are some other overall trends you are seeing in Internet bidding in the auction industry?
Absolutely. I had to go to the auction in 1999 of one of the most preeminent industrial auctioneers in America at the time, who later rolled up his business with DoveBid and then now has rolled it back out again. And he was of the mind that people didn’t need to hear the auction, and they certainly didn’t need a picture of every item because there’s just no point. So I went a day early on my own nickel and I took a picture of the lot. And that was the first auction where we did more than 25% to the online bidders. And we made a believer of him that day. Since then, I think the auctioneers understand that its very important. We have a few holdouts who refuse to offer every lot, we have a few holdouts who refuse to take pictures of every lot, but by and large, everyone now is a consumer online frequently enough that we are all beginning to have a shared set of expectations. And we’ve all shopped at Amazon enough, we’ve all shopped eBay enough, we’ve all done Harry and David online for Christmas shopping and all these different things, and so providing that and meeting that expectation really, really sets a level playing field amongst all the bidders and you’d be surprised. What I’ve found over the years is that the online bidders are interested most in the twenty percent of your merchandise that represents eighty percent the value. So you don’t need a whole lot of action online to generate a whole lot of money. I know that in a recent sale two weeks ago, because of a partnership between their client and my client, we ended up going head to head with one of our primary competitors broadcasting the same auction at the same time and they sold a lot more lots and they sold about $17,000 out of the $600,000 sale, and we sold a $117,000 out of the $600,000 sale. And the difference primarily was a $70,000 lot and a $30,000 lot. So being dialed in the right demographic and the right mailing list could make a really big difference. But also, on the auctioneer end, providing the tools they need to make an intelligent buying decision and if you’re willing to risk spending thirty grand or seventy grand. Or we’ve actually had a single million dollar bid online and it went just fine. So it’s all about providing the information needed and setting it up so they can feel confident when they place their bid.
Well, that’s it for Episode 19. My guest tonight was Jeff Johnstonbaugh, COO of BidSpotter.com. You can find out more about bidspotter at www.bidspotter.com and about remotebidder at remotebidder.com. Thank you very much Jeff for joining me this evening.
Thank you, Aaron. I appreciate the opportunity.
You’ve been listening to the Auction Podcast from AuctioneerTech. If you have suggestions, questions or comments, or are interested in being a guest, please let me know by going to www.auctioneertech.com/feedback and leaving a message. You can also post public comments about this or any other episode, as well as find show transcripts, on the auction podcast page of auctioneertech.com.
Thank you for listening, now go sell something.
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