3 March 2016, 08:46
Used equipment giants pursue unique government & public sector initiatives with exceptional results.
For IronPlanet, the world’s leading marketplace for buying and selling used heavy and agricultural equipment, 2015 was a year of unprecedented success – success that looks set to grow further still in 2016, partly as a result of its focus on government and public sector equipment. Amongst a number of strategic initiatives, the company’s association with the United States Defense Logistics Agency (DLA) – an arm of the U.S. Department of Defense – is particularly noteworthy.
The agreement, established in late 2014, saw IronPlanet become the DLA’s global partner for the disposal of surplus rolling stock via its online marketplaces – stock that ranges from trucks and trailers through to core construction and agricultural equipment. Since then, IronPlanet has hosted several online auctions of DLA equipment – first in the United States through its GovPlanet platform, but more recently in Europe, whereby it offers users the opportunity to purchase DLA equipment from U.S. military bases on the continent.
We spoke to Jeff Holmes – Senior Vice President, Government Solutions and Auction Management at IronPlanet – to discover more about IronPlanet’s government and public sector initiatives, and how he expects them to develop throughout 2016 and beyond.
Establishing a Government Presence
“The DLA looked at how it was contracting for disposal services and decided to break apart this disposal process into multiple contracts – one being for rolling stock,” explained Holmes on the foundation of the partnership. “IronPlanet won that contract and launched our first DLA auction in November 2014 in the U.S. through GovPlanet – our dedicated public sector platform.”
Upon the launch of that first auction, both IronPlanet and the DLA immediately recognised the future potential of the strategy: “What transpired was very interesting. We had people from 27 states bidding on equipment from 16 DLA sites across the United States. But what really stood out was that we sold 100% of the equipment in half the time of the previous contractor, with an improvement in price performance of approximately 300%. That began what has so far been a very rewarding journey for both IronPlanet and the DLA.”
After spending the first half of 2015 building upon its success in the U.S., IronPlanet and the DLA expanded their activities further afield in a bid to utilise items declared surplus by the U.S. military at 230 locations around the world. “Many of those sites are based in Europe, principally in Germany and the UK, but also in Italy, Spain and elsewhere,” said Holmes. “After ensuring we had a good grounding in the U.S., we began to sort our inventory in Europe and launched our first auction in July 2015 with equipment from a U.S. base in Germersheim, Germany.”
“I would say it was wildly successful, frankly,” he added. “We had 115 countries participate in the auction, 40,000 unique visitors and a 100% sell rate – we attracted buyers for everything, from everywhere.”
Buyer Assurance
Holmes attributes the success of the DLA auctions to IronPlanet’s well-established business model, the core components of which have been retained for its government and public sector activities. “For a long time we have understood what ultimately drives value. Part of this is the guarantee that our customers receive when they use IronPlanet marketplaces,” said Holmes. “They know that all the items we sell have been 100% inspected by our experts in the field worldwide. Those inspection reports are very well received by the buyer community because they are able to calculate how they are going to bid on that piece of equipment, without having to spend money on their own inspectors to assess it privately.”
“Additionally, buyers know that our auctions are held on a weekly basis. They know that every week, high quality items will be coming up for auction with pictures and inspection reports – everything a buyer would need to look at – and they are able to view these items two to three weeks in advance. This allows them to evaluate what their bids are going to be, the cost of transportation, and so forth.”
In regards to the surplus military equipment specifically, Holmes touches on some additional factors that are particularly attractive to its buyer base: “Despite being deemed surplus, the quality of this equipment is very, very good,” he said. “Even if the equipment is 20 years old, it might only have 150 to 200 hours of operation and very low mileage. What is also typical to the military kit is that it is rigorously maintained, with engineers being charged with ensuring it is always at an optimal level of operating condition.”
“This continues to attract a significant number of buyers because they know they can get the highest quality equipment with low hours of operation, and that they can get it for a very reasonable price as opposed to buying new.”
But it is not just IronPlanet’s auction format that is available to buyers and sellers. The company offers an array of marketplace options, each with its own unique benefits depending on the type of equipment being sold. Holmes was quick to highlight the launch of Daily Marketplace for government equipment, which has been active in the U.S. for some time, but will be rolled out in Europe in 2016: “The Daily Marketplace essentially lets buyers purchase equipment 24/7/365, available all the time as opposed to the weekly auction. For sellers, we generally recommend it for some of the more unique, higher value equipment to help maximise the return,” he explained. “For example if we have two large construction cranes – quite unique to the government sector – we put them on the Daily Marketplace and use our inside sales teams to broker the items with prospective buyers, which can achieve a much higher value for the DLA than if we put it out for auction. We are bringing that to the government wing of our business in Europe in 2016, and it will be a nice complement to our more standard auction format.”
Servicing the Public Sector
With the global demand for surplus military equipment evident and IronPlanet’s suitability as a disposal partner proven, Holmes anticipates that its activities will proliferate in the year ahead, but is keen to stress that it goes beyond just a military focus: “While we are pursuing our targets based on experience in the defence marketplace, this is by no means a defence only issue – this is the public sector in general,” explained Holmes. “So that includes police departments, fire departments, health services, higher education – all of these public sector entities have assets that need to be disposed of in a way that allows them to recoup maximum value of the assets based upon the residual value that they bring to the market.”
He continued, “2016 is going to be a significant time period for both IronPlanet and the public sector marketplace. One component of that strategy is to expand our government public sector presence into Europe, initially through places like the UK and its government and public agencies.”
“We know that the success that we have had with the DLA has created a fair amount of attention with public sector agencies in the UK. Although the kit might be different, our concepts are very solid – they know that through IronPlanet, they can expect greater proceeds in a shorter period of time than they are experiencing today. That’s why we will be targeting a number of upcoming tenders in the year ahead.”
Shortfall Strategy
Within the government and public sector arena, the benefits of the impressive price performance IronPlanet is able to achieve through its marketplaces is unique in the context of these sectors: “You could say the ultimate beneficiary of our price performance is the taxpayer,” concluded Holmes. “We believe that is a big differentiator: if we can provide buyers with quality equipment at a competitive price, whilst achieving a 200% to 300% greater value in a more timely fashion for the seller, these entities can reapply that value back into their fiscal budgets in areas where they might have shortfall, allowing for a more optimal distribution of taxpayers’ contributions. It’s not simply shedding kit – it’s doing so in a thoughtful way that generates revenue and benefits all parties involved.”
Building on Success; Looking to the Future
With the company set to build upon its existing relationship with DLA and establish agreements with other government and public sector entities, IronPlanet looks set to continue its upward trajectory and further establish itself as the obvious choice for both buyers and sellers alike – not only in Europe and the U.S.A., but across the world.