Professional Jeweler Archive: Bidding Wars

October 2000


Bidding Wars

Online auction can help unload old inventory

Excess happens. We wish it wouldn’t and we try to develop systems and solutions to prevent it, but there will always be merchandise that doesn’t move.

Seasonality happens too. Mother’s charms sell great around Mother’s Day, but not so well in the middle of June. So you’re forced to sit on those items until a Mom event rolls around again.

The problem with ridding yourself of this inventory is cost-effectiveness. How do you get rid of it without losing your shirt and, in the process, add value to dead merchandise? The answer, in the e-age, is fairly simple. Auctions.

Growth Spurt

According to NUA Internet Surveys, about 2.8 million small companies now transact business on the Web, with sales totaling about $25 billion. Out of that general number, 670,000 small companies took part in auctions last year. That number is expected to rise to 1.3 million this year as business-to-business e-commerce gains in popularity. Simply put, people are willing to buy over the Web if they feel it’s a level playing field. In the auction format, everyone who bids plays on the same field.

When faced with the prospect of auctioning excess inventory, the biggest issue in the jewelry industry is price. Some sellers are uncomfortable with the uncertainty. In an auction format, you randomly match buyers with sellers. The buyer is there because he’s interested in what a seller has to sell. He wouldn’t bid otherwise. The price is determined only after the buyer makes a bid, which indicates what the market will bear.

Tentative Concept

Auctions may mean price uncertainty on your excess inventory, but price is already a tentative concept in this arena. The product has lost value simply because it hasn’t sold. And it loses more value the longer it sits on the shelf.

Traditionally, the true “value” of excess inventory has been whatever a willing buyer will pay for it. Auctions simply take away one important restriction: the number of people who can “bid.” With private sales, the number of buyers is restricted to the number of people the sales force can contact to advise them of the availability the inventory. With an online auction, it’s limitless.

Though auctions may not actually add value to products, they can at least stop the loss of value. But there are a few considerations in placing items with an auction site:

• Who maintains the items in the auction site and how?

• How are payments accepted?

• What is the maximum quantity of a single product that can be placed at one time?

• What costs/fees are involved?

• Is merchandise subject to returns?

Detail Oriented

As in any business deal, check out the facts, get the details and decide what’s best for you and your company, but don’t ignore this avenue for inventory reduction. When the choice comes down to shelving it or selling to the highest bidder, “going, going, gone” may be music to your ears.

–by Susan A. Hargraves, Executive Administrator/Electronic Commerce
Michael Anthony Jewelers, Mount Vernon, NY

Copyright © 2001 by Bond Communications