Online or Onsite: Which Auction Format is Better for Utilities Companies?

The utilities sector across North America is currently undergoing a rapid change. Since 2017 in the United States of America over 50 coal-burning power plants have been shut down with an announcement of over 50 more plants to follow over the next couple years. 

Sell Industrial Surplus In Auction

North of the United States, Canada's power generation industry is also undergoing a massive change with the planned phase-out of traditional coal-based power generation by 2030. In addition to the closures of these facilities, projected CapEx spending is expected to continue to increase in the Utility sector beyond 2020. This means the utility sector is continuing to invest heavily in new technology, new machinery, equipment, and inventory on a year over year basis. These newly purchased assets are going to displace older machinery and equipment that will no longer be needed.

Estimated CapEx for Utility Companies

This means now more than ever utility companies need expertise when it comes to liquidating their surplus. While possessing expertise in maintaining and implementing surplus parts & equipment into production many utility companies lack the expertise needed to properly liquidate and manage their surplus inventory. Often many utility corporations end up scrapping this equipment instead of recovering the value through an asset recovery method. By working with an external asset recovery organization these utility companies can gain expertise in various methods of asset recovery allowing them to maximize the return on their surplus equipment. In fact according to research conducted by the Investment recovery association businesses who work with professional asset recovery personal see a benefit to cost ratio of 18:1.

Leveraging Event Based Sales To Liquidate Surplus Industrial Equipment

One of the reasons why an asset recovery firm can recover more value for your utility company's surplus industrial equipment is the expertise in the different ways of selling it. One of the most popular methods for selling surplus equipment in the Utility and Power Generation industry is through an auction. Through either an online or onsite auction, an asset recovery firm can maximize the value your company can recover from your surplus equipment in a limited time period.

Regardless of the type of auction, the auction-style method of selling always provides a few key benefits. The benefits are especially helpful when trying to liquidate slow-moving MRO and surplus equipment.

First, companies that sell at auction receive a fair value as determined by the immediate market. There’s no need to speculate on how much or little a piece of machinery might be worth in the future, for that’s irrelevant in an auction. An auction shows exactly how much the market values an item at a specific point in time, and that value is what the seller receives.

Surplus Industrial Equipment in Storage Room

Second, auctions are one of the fastest ways to sell items. When dealing with surplus equipment, a speedy sale itself has multiple advantages. If your company can quickly unload a piece of equipment, you don’t have to worry about:

  • Storage costs required to simply keep the equipment
  • Maintenance costs necessary to keep the equipment in its current condition
  • Logistic costs from shipping unused equipment from different storage locations

Instead of incurring these expenses, your company receives capital that can be used to strengthen and grow the company’s current operations.

As for whether an online or onsite provides a better way to sell surplus industrial equipment, that depends on several factors. Both types of auctions have their own merits and downsides, making each option appropriate in different situations.

Selling Industrial Equipment in Online Auctions

Online industrial auctions continue to grow in popularity as the world is becoming more and more connected. This industry is growing at a CAGR of over 20% with a predicted growth of over $1.13 billion from 2018 to 2023.

Online auctions combine the reach and accessibility of selling online with the buying power of event-based selling. These auctions make it possible to take full advantage of the reach and speed of the internet, however, there are still obstacles associated with selling industrial equipment that even the internet cannot overcome.

The advantages of online auctions are found in the reach they provide, and the costs associated with them. By hosting an online auction, you get:

  • Global Audience - Reach the broadest possible audience, as prospective buyers from around the world can place bids.
  • Greater Control - Ensure all bidders are qualified, by pre-screening prospective buyers during an initial registration process.
  • Reduced Auction Costs - Keep auction costs affordable, as there’s no need to hire a professional auctioneer to sell the equipment.
  • Greater Flexibility - When selling online you do not need to schedule a date that works with an auctioneer to have the auctioneer come in and inspect all the equipment and build lots for the auction that they believe will sell. When selling online you have the flexibility to sell as many lots that you want in the timeframe you want. 

The disadvantages of online auctions lie in how these auctions operate and post-auction expenses. Depending on what items are listed and where they’re listed, you might have to:

  • Listing Fees - Some auction websites charge you a per lot listing fee regardless of whether an item sells or not. 
  • Marketing Fees - Just because you are hosting an online auction does not mean you will attract visitors to your sale. You will need to heavily invest in marketing your sale to attract the right buyers.
  • Global Competition - When selling online you must be aware of other sellers liquidating similar assets. This could cause your expected return to drop significantly, 
  • Shipping Costs - When selling online you must be aware of shipping fees for any of the equipment that sells. If you do not offer to ship your items, you must also be prepared to work with the seller to ensure the item is picked up successfully.

Considering these advantages and disadvantages, online auctions usually aren’t suitable for installed or large and heavy equipment that costs a lot to move or require dismantling or decommissioning after the sale. Online auctions also don’t necessarily work well for specialized equipment that only a few buyers are interested in.

Instead, these auctions usually make the most sense when selling relatively small equipment that has uses across multiple industries. For example, this is normally the best way to auction off generic electric motors, tools, and pumps that companies across many industrial verticals can use. By selling equipment and parts that can be used in more industries you can maximize your return while also quickly liquidating your surplus.

Using Onsite Auctions to Liquidate Industrial Surplus

In many ways, onsite auctions have the opposite advantages and disadvantages of online auctions. This makes onsite auctions the perfect complement to online auctions and generally preferable for equipment that isn’t easily sold over the internet.

Selling Heavy Machinery in an Auction

The advantages of onsite auctions stem from their traditional, in-person format. When a bunch of people are gathered to bid on lots, your company benefits. With this auction method, you can likely expect:

  • Better Audience Attention Rates - Get a higher per-attendant average value, because everyone who goes through the trouble of showing up has a reason for coming.
  • Bidding Frenzies - For many individuals, the buying process becomes fast-moving and overwhelming. This often leads to bidding frenzies as bidders go back and forth with each other often driving the price of your lot up.
  • Interested Buyers - With onsite auctions mostly taking place during the day during the week, you know those who attend your auction have interest in the lots you are selling. This leads to an increased sell-through rate of your equipment.

The importance of having a buyer’s full attention shouldn’t be underestimated. Even when an online listing gets in front of the right buyer, that buyer can be taken away from the auction as they peruse other tabs, get distracted by notifications, are interrupted by real-life events or otherwise have their eyes drawn away from the listing page.

At an in-person auction, it’s much more difficult to lose a buyer’s full attention. Even if they are momentarily distracted, they’ll be refocused by the auctioneer and overall event activities. The disadvantages of onsite auctions come from their potential costs and the limited reach they have. When putting on this type of auction, your company will experience:

  • Limited Geographic Reach - Onsite auctions usually attract a smaller group of buyers, as most attendees will be locally or regionally based
  • Hiring an Auctioneer - Spend time finding an auctioneer, as the right person who’s trained in how to chant is essential to an in-person auction’s success
  • High Auctioneer Costs - Pay higher fees, as an auctioneer must be compensated for their time and work

All told the strategic advantages of an onsite auction makes them a good choice for liquidating specialized equipment or larger equipment that requires dismantling or costly removal. A group of focused buyers may drive up the selling price of your equipment. Since everyone in attendance is at least regional, they’ll have to pay less to move the equipment and can spend more on the equipment itself.

Regardless of whether an auction is an online auction or onsite auction, this selling method is ideal for helping Utility Companies' liquidate their surplus industrial assets. From large installed machinery such as pulverizers or transformers to smaller MRO items such as pumps and motors, each option can reliably help sell this equipment. One of the larger challenges for Utility companies is selecting an asset recovery company that has the expertise to properly liquidate their assets in an auction.

Auction Services for Utility Companies: a case Study

NRI Industrial Sales recently provided our services to one of the largest public power providers in North America by helping them liquidate surplus MRO equipment, excess parts, and power generation equipment. This client was also seeking an expedited asset recovery solution, based on the perimeters we provided our client with a strategy that heavily featured auctions to liquidate their assets. 

The results

NRI Auction StatsAs a result of our auction strategy, NRI Industrial Sales was able to help our client sell more than 5,000 pieces of equipment, in a 2-month timespan. The value recovered from our efforts was more than $1 million.

To read more about how we helped our client by liquidating their surplus in an auction download our case study by clicking the button below

Click Here to Download The Complete Case Study

Conclusion

For help liquidating industrial equipment and other surplus assets that your company no longer needs, contact the team at NRI Industrial Sales. We are industrial asset recovery specialists who focus on helping energy and utility companies recover value and liquidate your surplus assets in a smooth and transparent process. 

To learn more about how we help Power Generation and Utility companies call us at 1 (855) 709-9813, send us an email at solutions@nri-isd.com. 

Like this article? You may also like some of our other articles on What to Look For When Hiring an Industrial Asset Recovery Firm or you may also like How NRI Industrial Sales helped a Large Energy Provider With Their Surplus Challenge.

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