January’s column discussed how companies that hire construction contractors are using reverse auctions to drive prices down. It is electronic bid-shopping with a sophisticated veneer. Can you use reverse auctions to buy material or services?
First, reverse auctions are not a good way to buy. Second, how can you avoid taking part in reverse auctions as a contractor-for-hire, but buy via such auctions?
You might not have to worry. But you can buy at auction online––and, perhaps, save some money.
Reverse auction failure
During the dot-com boom, NetPossibilities, a new company, launched BuildingSuppliesWeb.com to help construction contractors buy via reverse auction. While most dot-coms knew nothing about how the real world worked, this one was savvy. Behind NetPossibilities was Bob Compagna, chief executive of CLS Inc., a well-regarded electrical distributor.
While Compagna’s goal was opening auction sites for every trade, the first and only one was ElectriciansWeb.com. You, the contractor, would post a bill of materials online—a list of items—and provide specifics on date, time, location and more.
Material suppliers would “bid” on your list, each one’s package price lower than the next. At one point, the site had more than two dozen companies willing to bid: distributors, mostly, with a few lighting manufacturers. Local distributors were willing to sell outside of their normal trading areas; the manufacturers were not major “names.”
Despite an investment of around $2 million, the site folded in two years, though CLS remains a thriving distributor. After the final curtain, Compagna told me the key in trying the reverse auction idea was to “make sure I didn’t walk into the casino with more money in my pocket than I could afford to lose.”
Why did this idea fail? Pick a reason:
1. Compagna’s verdict: Reverse auctions will catch on with contractors, but “we were just too early.”
2. While contractors did not enthusiastically embrace the Web between 1998 and 2000, neither did most businesses. It would be wrong to see the industry as “slow” or “backward.” Not enough contractors thought about e-business for Electricians-Web to become an overnight success.
3. My notion was that contractors would love to shave material costs. But to do so via this method (or buying directly from manufacturers), contractors must get into the material-handling business, an unappetizing concept.
How about an e-auction?
As of late 2002, no “reverse auction” site targeting the construction industry had re-emerged. However, you can buy plenty of stuff at auction online––you just won’t be able to do the “reverse” thing (unless you’re big enough for FreeMarkets.com).
Last year, at a surviving auction site, Dovebid.com, an unnamed but “major” telecommunications company was being liquidated. An Excel spreadsheet “catalog” of 1,079 bids items printed out at 27 pages.
Was anything of use to contractors? Here’s a sample list:
- AIW 373-1/C DIESEL CABLE (373 MCM)––2,608 items.
- Belden 26-18/C SOL COAX (11430006214)––10,670.
- B-Line RACK 8’H 23” MTG––270.
- Cobra Wire POWER WIRE 750 KCMIL GRAY––4,834.
- Newton 4’ PARALL. AUX FRAMING CHANNEL––998.
- Thomas & Betts FORK FLANGED TONGUE TERMINAL––4,870.
There were more than four pages of Newton items for sale and almost four pages of Lucent materials. A single Avaya item––I could not determine what from the item number––listed more than 150,000 items in stock and up for auction. Not to leave the wrong impression; there were under a dozen of some items for auction, and just a few dozen of others.
Finding surplus sites
We’re not here to promote Dovebid, but it is noteworthy that the “auction” took place over four months. Other Web surplus-auction sites I wrote about during the boom—TradeOut.com, BizSurplus.com, SurplusChannel.com—once had electrical materials. All three have vanished.
Does that mean Dovebid has the field to itself? No. At eSurplusAuction.com, under “Buildings,” I found fluorescent lighting fixtures to bid on from the Los Angeles Community College District with a picture.
Were there more sites? I searched at Hotbot.com for “surplus auctions.” Of the links returned, many were consumer-oriented.
When I input “construction surplus auctions,” I got back 11 links. But when I used “electrical surplus,” 71 links turned up; not all feature online sales.
Another aspect for your company may be buying nonindustry supplies. I can’t recommend it from personal experience, but www.cowanalexander.com was noted recently as a place to buy material at auction from companies that have gone bust. EC
SALIMANDO is a Vienna, Va.-based freelance writer and frequent contributor to ELECTRICAL CONTRACTOR. He can be reached at email@example.com.