Exclusive Contracts – What Are They Good For?
Exclusive Contracts
More and more online bidding service providers are aggressively pursuing multi-year exclusive contracts with auctioneers. If you sign that contract you’ve handicapped your business and this blog post explains why.
Lost Opportunity
ABC online bidding provider comes to you and offers you a great 3-year deal (lower setup costs, lower percentage) and you think, heck, why not? You only use ABC online bidding provider right now anyway. If you sign that contract you have now gambled your future that nothing significant changes in the next 3 years. What if a few months from now you have a golden opportunity to conduct an auction with different types of assets where ABC online bidding provider isn’t a good match? Now you’re regretting that exclusive agreement, you don’t have the ability to utilize the best tool for the auction, and you’re stuck with that decision for 33 more months.
The other variable here is change on the provider’s side. What if you sign that 3-year agreement and you get your prices locked in but then they change something else? What if they stop collecting bidder payment information so you’re left to hope for payment after the auction? What if they start an auctioneer ranking system that penalizes you for not meeting their arbitrary guidelines? What if they enact a new rule that prohibits you from posting links back to your home page? What if they start restricting your ability to make catalog changes after bidding has opened? The list goes on and on, but once you’ve signed that exclusive contract you’re tied to that ship, wherever it decides to go.
Your competitor didn’t sign that exclusive agreement and, by contrast, your competitor is able to use the best tool for each auction. They use a mix of ABC, OPQ, and XYZ bidding providers, whichever works best. Because they use the best tool for the job they achieve higher hammer prices, put more profit in their pockets, and in a matter of 3 years your competitor goes from being smaller than you, to being the big dog.
Just Say No
We have never believed in exclusive contracts and never will. Our job is to give you the tools you need to succeed, one of which is our private-label online bidding platform Bidopia. Bidopia is a modern, low cost (no percentages), private-label, non-exclusive online bidding platform where you drive your own traffic and build your own brand. Bidopia offers Webcast, online-only, and internet absentee solutions. While it may work for many auctioneers and many types of auctions, we fully understand that Bidopia is just a tool in your tool box. We do not ask for exclusivity and Auction Flex has built in tools to allow you to quickly and easily export your catalog to any online bidding platform of your choosing.
The Insanity
We’ve heard more than one auctioneer say, ‘ABC provider brought me 50 bidders’. Yet, after a brief discussion we learn that the auctioneer is sending all their bidders from their website and marketing to the ABC provider’s site. To clarify, the auctioneer is driving their bidders to ABC provider’s site and then giving them credit for it! The auctioneer is then paying ABC provider a percentage of the successful bid for the bidder they delivered. That’s like bringing bread to the bakery and then buying it back! To add insult, ABC provider doesn’t even provide the auctioneer with bidder info on all of the registered bidders; they restrict access to only the winning bidders. As if all that wasn’t enough, ABC provider will then giddily send the auctioneer a report claiming credit for all of the internet bidders regardless of how many were truly driven from the auctioneer’s own marketing. And the auctioneer says, wow, ABC provider brought me 50 bidders! The insanity knows no bounds!!!
Webcast Profit Center
Remember that without exclusivity you can utilize multiple webcast providers. You can use Bidopia and ABC online bidding provider and XYZ online bidding provider. Since you don’t pay a percentage with Bidopia you send your bidders from your website and your marketing to your private-label Bidopia page. Just because you’re not paying a percentage doesn’t mean you stop charging the higher internet buyer’s premium. The difference is that instead of paying out the extra buyer’s premium to ABC provider that extra BP becomes a profit center for your company. By not sending your bidders to ABC provider’s site you’ve made that provider earn the percentage they charge on winning bids. In 2014, the first year Bidopia Webcast was available, the Bidopia Webcast platform saved auctioneers ~$500,000 in fees. That’s an extra $500,000 straight to our customers’ bottom lines.
Internet-Only Auctions
With internet-only auctions it’s important to point out that, unlike webcast, you can only use a single provider. With the low cost of Bidopia (no setup cost & no percentage) there’s a HUGE difference in what can be a profitable online-only auction when you’re only paying the Bidopia $75 maximum bidding fee per auction vs. what ABC provider charges ($500 setup + 5% or even $300 + 3%). In 2014 the Bidopia Internet-Only platform saved our customers millions in fees!
What Are They Good For?
When an online bidding provider tries to entice you into signing an exclusive contract they are looking out for their best interest, not yours. Let’s be honest; if they were truly the “best” marketplace then they wouldn’t need that exclusive agreement now would they? The fact is they make the bulk of their money by taking a percentage of successful online bids. If there is less competition from other platforms’ bidders, they stand to make more money, even as your hammer price and commission fall.
Exclusive contracts. What are they good for? Edwin Starr said it best, “Absolutely nothing.”