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Wed 29 Dec 2010 12:00 AM

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A lot to consider

As a new auction house sets up shop in the UAE, will it change the market?

A lot to consider

Prince may have performed in Abu Dhabi
last month but the real sign of the times came last week when a new auction house
set up shop in Dubai.

But Iron Planet, one of the world’s leading online auctioneers,
won’t be camping out in the desert like the more established names about town, it
will be setting up in the lush surroundings in Dubai.

With two of the biggest
auction houses around and rivals, Ritchie Bros and Worldwide Auctions, running events
within a couple of weeks of each other, it’s bound to be a relatively muted event.
However in the long term it should have a profound effect on how heavy machinery
is bought and sold in the market. This can only be a good thing for those interested
in seeing more competition - and frankly it’s about time somebody offered a real
alternative on the scene.

That’s not to say both Ritchie and WWA don’t serve the market
well: they do, admirably. In fact, knowing the dedicated people that run them, I
would go as far as to say we’re lucky to have them. They are a vital release valve
in the machinery market; freeing assets and capital in a slowly stirring construction
industry. It’s a role they accept gleefully.

However traditional auctions take an incredible amount of effort
to put together, promote and organise; placing a limit on their frequency and flexibility.
Online auctions have the potential for faster turnaround and lower overheads, and
can take risks others can’t. If they’re bold enough.

Someone asked me what should be done with the machinery victims
of the downturn. It makes no financial sense to anyone that they stay idle, out
of warranty and battered by the desert elements. Online auctions that reach a large
and international audience are a viable solution, if not the whole answer.

Unquestionably the way Iron Planet does business, if it’s successful,
will have a massive effect on the market. Just how successful will depend on whether
the region accepts it as an alternative. The auction houses have been trying to
introduce an online element to their sales for some time, but encouraging participation
in them has only been moderately (ie: not very) successful. It would be astonishing
if Iron Planet’s introduction doesn’t have an impact on how all auctions are run.

Most of us can understand the very human need to see and feel
something upfront before parting with our cash. Indeed auctions are where the term
“sold as is, where is” - and the trust that implies - are the most important. It
is going to take a leap of faith and potentially years before the region accepts
business doesn’t have to be done up close and personal. Indeed the most critical
part for Iron Planet will be convincing local buyers to use it.

Although, with buyers already coming from the Indian sub-continent
and Africa to the auctions, it won’t have to convince
everyone. Going online makes a lot of sense to purse string holders who can keep
a tighter rein than when buying via an often ill-prepared and ill-informed proxy.

Having used many web-stores across the world, it strikes me that
using the ones based in the Middle East is often
an exercise in frustration. Amazon has raised the standard in web-stores across
the globe and often even the most niche sites give you an ability to search, compare,
and choose that is way beyond anything you can find here. It wouldn’t surprise me
if there is a natural reluctance to use even a sophisticated service like Iron Planet
– the web-shopping habit just hasn’t sparked the souk and mall-obsessed Middle East. Yet.

There is no reason why it can’t put the software and logistics
in place and deliver packages quicker than you can say mall parking. After all,
off-the-shelf back-office software is readily available, and the tracking technology
and logistics infrastructure is ready to be used.

For an example of what online auctions are up against they should
look at ebay. Search for “car” and you’ll get 3 million results. Search and you’ll be able to buy a picture of one.

Stephen White is the editor of PMV Middle East.

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