Used Equipment Online: Making Progress-Slowly

You can buy, sell, or rent equipment without leaving your office. It’s a very promising proposition. The world of used construction equipment is brought to your computer screen, courtesy of e-commerce trading services plying the Web with billions of dollars worth of equipment. It’s happening, but slowly. In reality, most Web sites serve as equipment advertising services, and the deals are made when the buyer contacts the seller after learning of the equipment on a Web-listing service. The actual deal does not take place through Internet correspondence.There are, however, some bright spots in e-commerce for equipment. IronPlanet www.ironplanet.com is successfully running online equipment auctions; the company holds an auction every other week. And Rentmaker www.rentmaker.com is succeeding with an online service for finding rental equipment for contractors. The company claims to be seeing 35% growth each month, with close to 4,000 contractors using the service.

Crawler tractors come across the ramp at a Ritchie Bros. auction.Still, most contractors want to see and inspect the equipment they’re buying–they don’t deal for iron over the Internet. In a survey done for the Rental 2001 research study sponsored by the Associated Equipment Distributors (AED), only 5% of equipment users said they use the Internet to search or make deals for rental equipment. And of the 5%, some 80% said they just use the Internet to check price and availability. “Only a very small percent are transacting business on-line,” reports Frank Manfredi, an equipment-industry analyst.A number of dot-com equipment services have recently gone out of business. And more than one company has stopped holding online equipment auctions, at least temporarily, in recent months. Says Manfredi, “Our industry is not well known for early adoption of new technology, and this is certainly one of those cases.”Glut of Equipment“The construction equipment market right now has an oversupply of quality used equipment,” observes Simon Newman, president and partial owner of TradeYard Inc., which runs TradeYard.com, an e-commerce service that lists upward of $4 billion in equipment on its Web site. “There’s a massive glut of equipment out there.”Doc Madsen, used-equipment manager for Scott Machinery Company, a John Deere dealer in Salt Lake City, UT, agrees that many dealers across the nation have an oversupply of equipment. “I know there’s a glut of equipment, and we’re starting to see some softening of prices. I think a lot of dealers are in trouble–they have a yard full of overpriced equipment. I look through the trade magazines and stuff advertised over the Internet, and some of these pieces I’ve seen month after month after month. Some of it’s been on the market for a year and a half.”From 1996 to 2000, the national rental chains replaced large volumes of equipment, says TradeYard’s Newman. The equipment replaced consisted of, for example, rough-terrain forklifts, midpowered dozers and excavators, manlifts, scissors lifts, and more. “That bubble of used equipment is now coming up for sale, creating a glut of those pieces of equipment,” notes Newman. “The rental chains are holding on to their equipment. You can think of it as an avalanche waiting to happen.”In fact, says United Rentals’s Fred Bratman, vice president of corporate communications, “We decided to age our fleet somewhat. We’re selling a fraction of the equipment this year than we sold in the year 2000. We sold $347 million of equipment in 2000 and decided this year to sell $130 million worth.”Moreover, says Newman, over the past four or five years, the major equipment manufacturers have experienced record sales, many of them through various leasing deals for new equipment. Now that equipment is coming back off lease and being returned to dealers as used equipment. So, he continues, all that late-model equipment is adding to the pending flood of equipment about to come into the marketplace.Newman reports that the market is adapting to Web-launched sales at about the rate that online services might have predicted two years ago. But the amount of interest by Wall Street and the venture-capital community in funding new online sales initiatives has dropped off substantially. “The buyers aren’t buying on-line in large volumes yet, but we wouldn’t expect them to,” says Newman. “So far, many of them shop around and look at features.“We get several million dollars per week in offers to buy used equipment,” relates Newman. “Some of those are low-balled offers. The point is, it’s not $500 million of offers. But we’ll be successful if we can capture just a small percentage of equipment purchasers to buy machines on-line.”Newman lists some of the equipment for sale on TradeYard.com: 14,000 aerial-work platforms; 5,000 excavators; 1,500 graders and scrapers; about 3,000 cranes, draglines, and pile drivers; 2,700 off-road trucks; and 2,000 skid-steer loaders.“We match a buyer and a seller a few hundred-thousand times a month,” he says. “That means if a buyer is looking for a certain type of equipment, we supply the buyer’s contact information to the seller a few hundred-thousand times a month.”All those visits to the Web site result in “a lot of phone calls from buyers to sellers,” notes Newman.

Online Auctions

IronPlanet offers live auctions on-line two to three times a month.The online auction business is growing rapidly at IronPlanet, say company officials. Just this year, through July 12, IronPlanet had sold more than $10.9 million of equipment–more than double the $4.6 million sold at online auctions in all of 2000. With these online auctions, equipment from widespread geographic locations can be bid on by, and sold to, buyers at equally diverse locations. IronPlanet helps arrange for transportation, financing, and warranties.To help buyers know the equipment they’re bidding on, IronPlanet gets all of the equipment listed on its Web site inspected by DynCorp, a firm that has inspected military off-road equipment for the Department of Defense. Inspection fees are paid by the seller as part of the cost of listing the machines with IronPlanet. Results of the inspection reports are available on-line for prospective buyers to view.At its September 6 online auction, IronPlanet sold 61 pieces of equipment for nearly $2.8 million. On July 12, the auction sold IronPlanet’s two highest-priced pieces ever: two Caterpillar 771D off-road rock trucks. One sold for $267,000 and the other for $264,000. IronPlanet had scheduled to sell 67 pieces of equipment at its November 15 auction.Other firms have many more listings, but everything IronPlant has is fully inspected, and the inspection reports are insured. When a piece is sold from the company’s Web site, the buyer first pays IronPlanet. Once 100% of the funds are in an escrow account, IronPlanet calls the seller, who can then approve the release of the equipment. IronPlanet earns a commission based on the selling price.When the equipment arrives at the buyer’s site, he has 24 hours to compare the actual piece to the inspection report. If the piece matches up to the inspection report, which it most often does, IronPlanet releases the funds to the seller. If there is a dispute over the actual condition of the equipment, IronPlanet has a dispute-resolution process. It will send the inspector back out to inspect the piece. If it’s something the inspector missed, IronPlanet will pay to make it right. But if it’s something the seller changed, the seller will pay for it. The insurance behind the inspection report assures the buyer that he’ll receive the piece of equipment represented in the inspection report.According to IronPlanet, business isn’t sluggish despite the slowing trend found in other online equipment arenas. IronPlanet believes that it has developed a trustworthy marketplace with which buyers feel comfortable. The good prices the company gets for its sellers and the full information furnished in the buyers’ inspection reports are also factors that bring about customer satisfaction.Although Ritchie Bros. Auctioneers, the big British Columbia—based equipment auction firm, had not introduced online-only auctions as of mid-November, the firm offers bidders the ability to place online bids at live auctions in real time. “A large number of our customers expressed great interest in this tool,” reports Bob Armstrong, vice president of Internet services for Ritchie Bros. “It’s an Internet-based tool. A bidder can access our auctions through our Web site, complete with live sound, live video, and live bid and asked numbers. And he can follow the auction and place bids.The test phase was completed in July, and the service is now available to bidders, sellers, and viewers with assistance from rbauction.com Premium Services. However, Armstrong adds, “The majority of our bidders will still attend auctions live. The equipment must be inspected live.” He says the online tool will be useful only to people who have personally inspected the equipment beforehand or who have hired someone to do the inspection.Bidders also can buy equipment on-line at Ritchie Bros. auctions by placing their top bid on-line before the auction starts. If a buyer bids $50,000 on-line for a piece and at the auction the top offered price is $40,000, then the online bidder gets the machine for $41,000–the next bid increment up from $40,000.All used equipment for sale at Ritchie Bros.’ auctions is listed at www.rbauction.com. The Web site “is designed so you can find it by auction location, by equipment type, by manufacturer, by model–you specify what you’re looking for, and we’ll show it to you,” states Armstrong. The database of equipment is updated daily.In 2000, Ritchie Bros. held 121 auctions in eight countries around the world. The company achieved record gross auction sales of a little more than $1.23 billion. The largest auction of the year was a $45 million, three-day sale in Ft. Worth, TX, in September 2000.“Way Fun”

Scott Machinery’s Madsen credits AED’s online Machine Mart with helping him sell seven used machines in the last two years. Six of the seven machines were bought sight unseen, he says. “I’ve sold a dozer, a wheel loader, and five rubber-tired backhoes. This Internet has been way fun. I’ve been really pleased with what those listings generated for me.”In selling one machine, a John Deere 310D backhoe-loader, the New Mexico—based buyer asked Madsen some 15 questions about the machine. The questions concerned the amount of looseness in the pins and bushings on the backhoe, tire wear, overall condition, and so on. “I responded to his questions, we agreed on price, and he said he’d take it,” Madsen recalls. “We arranged for a wire transfer of money.“For all seven machines that we’ve sold, people called us and said, ‘I saw your ad for a certain machine.’ It still comes down to people after they call. They find out it’s a well-established John Deere dealer, and they get the feeling they have some leverage if something isn’t right.”Despite the shake-out in equipment-sales services doing business on the Web, a large number of them have survived and are prospering to one degree or another. The list of such services includes:AED’s Machine Mart www.machinemart.com, which lists used equipment for sale by AED member-dealers. According to Bill Hermanek, an AED staff vice president, more than one-third of AED member-dealers now list equipment with Machine Mart. As of mid-November, the site listed 10,500-plus pieces of used equipment worth more than $585 million. Machine Mart permits a member to log in to his account and add, delete, or edit various listings on the site. Buyers conduct searches for equipment, and when they find something they’re interested in, they can e-mail the seller with reference to the piece of equipment in question.Both Caterpillar and Deere have Web sites that list used equipment stocked by their dealers. Cat’s site is located at www.CatUsed.com, and Deere’s is at www.usedconnection.com. The sites offer used equipment for sale by Cat and Deere dealers, and prospective buyers are referred to the listing dealer.Point2.com lists more than 50,000 pieces of equipment for sale on its home page. In addition, the company designs software systems “that allow industry to take advantage of, and profit from, the power of the Internet,” states Wendell Willick, CEO of Point2 Internet Systems Inc. Recently Point2 announced a licensing agreement that will allow Caterpillar and its dealers to take advantage of the online sales tools developed by Point2. It’s free to use Point2’s heavy-equipment search engines.IronMax.com allows potential buyers to submit a request for quote (RFQ). Interested buyers or renters submit an online form listing the type of machine they’re interested in, how much they’re willing to pay, and the geographic area in which they’re searching. Dealers who have registered with IronMax then receive the RFQ and can respond. Access to IronMax is available to buyers at no charge and to suppliers for a small fee.You can buy used equipment on-line at unitedrentals.com, but the primary channel United Rentals uses to sell equipment is its rental stores. United Rentals publishes regional used-equipment catalogs that are available on-line, from any United Rentals salesperson, or by mail.Rental Service Corporation (RSC) offers its services on the site rentalservice.com. “All of our equipment on rent is available for sale, so you have the ability to view and ‘test drive’ the equipment you are interested in purchasing,” states RSC on its Web site. The company has an online catalog listing of several thousand pieces of used equipment. You can shop for a piece and submit an online inquiry about a machine that interests you. And you get information about which RSC yard owns the equipment and a Web link to that location.Renting On-LineRentmaker, the Internet-based service that helps renters find the equipment they want, says it has seen $150 million worth of quotes pass through its site. To use the site, prospective renters complete a brief online RFQ form on Rentmaker’s Web site. The request goes out to rental stores, and several of them respond with a quote. The renter chooses the quote he likes best and contacts the rental store directly.“The typical contractor using Rentmaker is generally medium to large in size, with multiple regional offices, since these are the same companies that tend to take an organized approach to the Internet at an earlier stage,” relates Jerome Meier, Rentmaker president. He says repeat usage of the Rentmaker site has climbed to about 30-50% on a weekly basis–”which indicates that almost half the contractors who have tried Rentmaker became faithful, repeat users within just a week’s time.”It’s true: The promise of buying, selling, and renting equipment on-line is happening. Certainly the machines are out there–worth in the billions of dollars–but they’re only fetching a single-digit percentage of buyers. How fast online business will grow depends to a great extent on how well trust can be built among the online services, the buyers, and the sellers.