Compared with the number of industries around, not all that many specialist sites exist, and not all of those have yet built up sizable trading communities. (For a list of specialist sites, see "Industry Nets,") But specialist auctions, because their markets are so focused, frequently are more predictable than general sites when it comes to product availability, closing bids, and buyer demand. And buyers seem willing to pay for that predictability: closing bids for the same items often run 30% to 40% higher on specialist sites than in general auctions. In addition, such sites have a powerful advantage in their ability to provide services tuned to their particular sectors, including inspection and appraisal, member authentication, escrow, insurance, credit research, financing, and transport.
Specialist sites can also tailor their auctions to fit the peculiarities of the industry they serve. For instance, Ben Zaitz, proprietor of several agricultural auction sites, explains that cattle-feed contracts--one of his stocks in trade--are too complex for the normal auction format. Transport expenses vary with the distance between supplier and farmer; farmers contract not for a onetime shipment but for a delivery schedule; and the product can be packaged in several ways. Plus, "farmers don't want to wait for two weeks to see if their cattle are going to get fed," says Zaitz, referring to the length of the average on-line auction.
For those reasons, the action on www.cattleofferings.com doesn't look much like the average eBay session. Auctions (which are over in a few minutes or less) are held at a scheduled hour, in real time, with a human auctioneer moving things along in a Java-based auction program that allows him to "push" pictures and data to the bidders. Buyers are not committed to winning bids. And since it is cheaper for a professional feed dealer to accommodate a farmer's needs than the reverse, buyers state their demands and potential sellers bid down the price.
Recently, for example, a Michigan dairy called Med-O-Bloom posted a request on Zaitz's site for 150 tons of beet pulp, to be delivered as dried pellets, in hopper trucks, at a rate of one truck a month for six months. The proposal sat on the screen for about 30 seconds, during which time an observer could almost hear the spreadsheets being massaged out in cyberspace. Then a supplier tossed $104 a ton on the table. "Whoa," remarked Zaitz, who was watching the auction's progress. "That's a heckuva of a price." And so it must have been, since no other supplier was willing to touch it. Three minutes later the auction was over and Med-O-Bloom had its beet-pulp needs resolved.
Jim Good, owner of Med-O-Bloom, says that Zaitz's auction saved him $10 a ton off his usual price on beet pulp. The deal apparently convinced him that Internet auctions are worth including in his company's procurement strategy. "We're going to be exploring that Web site," he says.
On-line auctions can also play a role in companies' marketing and promotional plans. Sherline Products, for example, sells to a spectrum of buyers: professional model builders, high-end hobbyists, contract machine shops, and manufacturers. With very little competition worldwide, the company should have been selling around the globe, owner Martin says. But until recently, he could find no economical way of reaching customers abroad.
Then one day, while scrolling through eBay, Martin noticed the hit counters attached to some items, indicating how many people had viewed them. "There were some good numbers there," he recalls. The lightbulb clicked on, and over the next few weeks Martin began offering his own products for auction, seeking exposure rather than revenue. Although Sherline's products are general purpose, Martin listed them under some of their common applications, like "microscope-repair lathe" or "camera-repair milling machine," so they would be found by people searching under the terms "microscope" or "camera." Those clicking down to Martin's auction would see a link to www.sherline.com, inviting them to enter the world of precision miniature machine tools. Two months of experimenting with that strategy has made Martin a fan. "This is by far the most economical way I have found to make potential customers aware of my products," he says.
Companies willing to invest more in the auction model have an alternative to both general and specialist sites: rolling their own. Gibson Musical Instruments, Universal Studios, Sotheby's, wholesale auto dealer Manheim Auctions, and Cameraworld.com are just a few of the businesses putting their products up for bid on their own Web sites. While running a homegrown auction takes more work than selling through general or specialist sites, there are many advantages: companies can show their own ads, maintain total control over the data left by visitors, cross-sell accessories to successful bidders, upsell alternatives to failed bidders, and, of course, save on commissions that would normally go to the auction sites.
LeCroy Corp., a $130-million scientific-instrument manufacturer in Chestnut Ridge, N.Y., rolled out its own auction in early June. "We are using it to jump-start sales of slow-moving, discontinued, or about-to-be-discontinued items," says Laurie Macomber, the company's marketing-communications manager. "It also generates leads; people bidding on our site might get a call from one of our salespeople. Finally, we see this as a way of getting our feet wet in electronic commerce." The auction is so popular that Lecroy's own employees are pressuring management to run it over the company intranet so that they can bid during the day.
