Government Surplus Auctions: Why & How

Many states and local governments are turning to auctions as a way to make money. This article is designed to give you information on how government surplus auctions work and how you can benefit from them. Specifics may vary from auction to auction; however, the following information includes helpful and important guidelines from which everyone can benefit.

A recent Associated Press article, "State of Oregon Uses E-Bay for Garage Sale," by Peter Prengaman talks about the success the state of Oregon has experienced in selling its confiscated and surplus property on E-Bay. He explains that the State of Oregon, the first state to use E-Bay, has been selling its surplus on-line since 1998 and grossed $7.3 million in sales in 2002. In fact, Oregon has been so successful that they are beginning to assist other government agencies in selling surplus. Local City and County agencies in Oregon are already using the State's on-line auction operation. Oregon is also selling surplus for the Department of the Interior and the city of Lynchburg, VA. Many states have sent representatives to see how Oregon Surplus Property runs their operations and the State of California is now beginning to sell their surplus on-line. So here is my question.

WHY?

These are government agencies - organizations that have made a religion out of outsourcing every function they can, so why are they so eager to in-source their auctions. Could it be dramatic cost savings? Not if you really examine the process.

The article states that the State of Oregon has 16 employees in their auction department and a warehouse that covers one city block. This kind of infrastructure supporting their on-line auctions costs at least one million dollars and probably closer to two. The State of Oregon charges 16 percent to other government agencies to handle their surplus property.

For some state agencies this percentage seems like it may offer a cost savings but the agency must provide all of their own digital photographs and online descriptions. Additionally, they must prepare the items for shipping. That is a tremendous amount of labor on the part of the contracting state agency. So for their 16 percent to the State of Oregon they receive the services of posting the auction to E-Bay and handling all customer service for the transaction - a very expensive auction solution.

E-Bay is a great venue for some auction items - but certainly not for all. For example, six rolls of used fire hose recently sold on E-Bay for $148.32. At the same time one roll of used fire hose sold on our company's own simulcast auction for $57.50 x 6 = $345. That is a difference of $196.68 - the simulcast auction garnered 322% more than the E-Bay auction. Why such a big difference? Simply stated E-Bay waits for its customers to come to them - but through the use of our industry's marketing expertise - we look for the right customers for the product and drive them to our Internet auction. We still apply all the methods of the auction method of marketing more than just the online listing that E-Bay provides where they hope two or more interested bidders log onto the net to vie for product.

There are very few auction companies that don't have their own website, but as an industry we must move to more closely integrate live and web auctions so that there is a fair representation of the time tested auction method of marketing on the Internet. The online auction process is certainly more complicated and costly - but the benefit of bringing in hundreds or thousands of Internet bidders cannot be ignored.

Online auction companies like E-Bay have aided our industry in countless ways from making "auction" a household word to propagating "auction fever" across the world. The exposure for the auction industry has opened up many opportunities for traditional auctioneers and applying good marketing techniques to online auctions is just one more opportunity where E-Bay will never succeed and auctioneers already excel.