Setting up a business is hard work, whatever the task. Until recently, it was also expensive work. The internet of things and its global accessibility, entrepreneurial culture and modern investment techniques have made it easier to manage and reduce the associated overhead costs, whilst still executing your concept and branding.
Whilst blood, sweat and tears go into every new business venture, you no longer need to pump in high levels of capital. New companies are popping up all the time operating from a wholly or predominantly online angle, breaking into every sector with limited setup costs. The list is endless and can lead to successes of the like of Monzo, Deliveroo and Asos.
An excellent use case is Ando. David Chang, A New York-based chef, is embarking on a ‘delivery only’ restaurant, using an app, a website and a kitchen. Based on the success of his previous restaurants, Chang is creating restaurant-quality food, but removing the cost of acquiring and designing a restaurant front, as well as reducing staffing overheads. Teamed with a dedicated delivery start-up to provide service, Ando will avoid the majority of the up-front costs associated with starting a restaurant.
How is this relevant to the Auction market?
Starting an auction house has significant upfront, fixed costs. For an auctioneer to get a new business off the ground, they need to spend time and money on:
- Hiring a team to handle day to day running and business expansion.
- Locating an office space.
- Sourcing instructions.
- Renting a venue to host their auctions.
- Establishing an access point for legal packs and documents for all lots.
- Marketing the room auction and attracting relevant buyers to attend.
- Hiring temporary staff to help organise and run the auction.
- Setting up phone and proxy bidding.
- Catalogue and addendum printing costs.
For this to be anywhere close to a profitable first auction, a new auction house is going to need to list and sell quite a few lots.
A trip to a large London — based residential auction demonstrates the enormous effort and cost of running a live room auction. It is located in a grand hotel in central London, has a huge staff roster responsible for organising and coordinating contracts, document viewing stations, taking bids, managing customers and identification and general customer assistance. Then there’s the cost of glossy, printed catalogues littering the foyer; it’s a huge operation.
A new auction house would struggle to compete with this; without the huge number of properties, the sunk costs far outweigh any revenue made. For this reason, an auction house’s ability to expand or establish itself comes with risk — it involves a large amount of sunk costs to build and sell a catalogue before any return is made.
Innovate and bypass the barriers to entry.
The internet is the best tool at your disposal to streamline and reduce overheads, increase your product’s accessibility, and drive up profitability.
Establishing an online auction removes many of the costs listed above. Marketing need only be conducted online, and the high costs involved in hiring a venue and staff are replaced by a lean team required only to support and run the online auction platform.
As part of our online auction technology, Bamboo Auctions takes care of all ID verification, registration, financial processing and management and hosting. There’s a free document management system built-in and perhaps most importantly, the user experience is uninterrupted — meaning buyers are not directed away from your website to place a bid. All of these things are designed to take the hassle away from the auctioneer, to allow them to concentrate on providing the best property expertise and customer service.
To garner these benefits, innovation is key.