Hammer Time! Are Live Auctions Going, Going, Gone?

Posted by Poppy Behrens on Jan 26, 2021 12:00:00 AM

In 2019, Casey Jones, owner of BC Cole Auctioneers in Phoenix, Ariz., was thinking of adding an online platform to his auction business, but he hadn’t yet pulled the trigger.

“I lost a large client because they wanted to go online, so I was heading in that direction anyway,” says Jones. “When COVID hit, it forced me to do the platform and set up the website.”

Since Jones brought launched his online platform, his auctions have gone from 100 percent live to 90 percent online.

Transition To Online Auctions

Prior to COVID, online auctions for self-storage had been slowly growing for at least the past six years. Online storage auctions are thought to have made an appearance sometime in the early 2010s.

Some self-storage operators, however, have been slow to adopt the newer technology. “There’s a ton of operators who haven’t changed from live to online,” says Peter Allen, president of Charlotte, N.C.-based Lockerfox, an online platform that facilitates 10s of thousands of online auctions per year.

Lonnie Bickford, CEO and president of StorageAuctions.com, a Baton Rouge, La., firm that markets online auctions and sold approximately $6 million in goods in 5,000 auctions last year, notes that smaller operators, especially if they’ve been in the business a long time, are known to evolve their businesses at a slower pace. “Self-storage owners don’t like people telling them what to do,” says Bickford. “They don’t like change, even if it’s something best for them.” 

Online auctions are not only the wave of the future but the wave of the present, given the circumstances with the pandemic. “If ever an owner-operator needed a reason to start doing online auctions, you have one now,” says Allen. “If you still are having a crowd of people showing up to your facility, there’s a better way.”

Since the COVID-19 pandemic hit full throttle last March, online auctions have increased significantly. “The pandemic has almost decimated the live auction,” says Dan Dotson, who, along with his wife, Laura, owns AmericanAuctioneers.com and StorageAuctions.net, based in Yucaipa, Calif.

Dotson, who began his career learning auctioneering from his grandfather at farm auctions when he was a kid, has been in business since 1983. In the storage world, he is best known for being the original auctioneer on the hit reality series “Storage Wars,” which brought attention to the general public of what happens to all those goods when tenants don’t pay their bills.

Dotson created an online platform for storage auctions back in 2015 and has seen significant growth in that area since COVID. At the same time, he is also a proponent of live auctions, if they are conducted safely in this new era of COVID-19.

Taking Over The Auction Market

In the early months of the pandemic, most operators took a hiatus from any type of auctions while new laws governing COVID-19 on evictions were examined by attorneys. “When COVID came along, it was a huge blow to all of the auction industry,” says Cheli Rosa, marketing and communications manager and auctioneer for StorageTreasures in Phoenix, Ariz. “There was a moratorium on evictions. There was the legal side, but there was also the ethical side of selling people’s stuff when they couldn’t pay. Owners started making deals with tenants just to get them out and get a portion of what they owed.”

Allen adds that the national Self Storage Association has done a very good job at keeping track of all of the state laws governing auctions, but he suggests consulting with your counsel if you’re not up to date on all the restrictions and laws regarding pandemic-related payment issues.

By July and August, the legal questions had largely been answered; with the exception of a couple of states hit hard by the pandemic, auctions resumed.

Still, many owners and operators continued to try to work with their tenants due to the huge financial impact the pandemic had on jobs and the overall economy. “Some of our customers tried to work with their tenants in a more proactive and compassionate way because of the reality of the financial impact,” says Allen.

Many owners and operators have been forced to resume business as it was with regards to evictions and auctions. Dotson sold $200,000 in auctions just in the month of December, and all of experts interviewed for this article saw increases in auction sales as the year ended.

However, it really hasn’t been business as usual. “Many have turned to online auctions because they’ve had to put additional restrictions on live auctions, such as social distancing and wearing masks,” adds Allen.

Experts point out that in some jurisdictions, there’s a restriction to only having one person on the property at any given time, which doesn’t lend itself to holding live auctions. As well, even if allowed, people aren’t happy about crowding into narrow hallways to view and bid on units during a pandemic, Bickford notes.

“The need to have contactless transactions has brought a lot of people to our site,” says Y. Leon Benghiat, chief operating officer and partner with SelfStorageAuction.com, a company in Phoenix, Ariz., that holds 3,000 to 6,000 auctions per month. “We’ve seen steady growth, but really have grown over the past year.”

Per Benghiat, in addition to being contactless in that bidders can bid on their item, pay online, and go straight to the locker to pick up the merchandise without even having direct contact with managers, there are many other benefits to online auctions during COVID.

  • Online auctions, on average, bring more money: Benghiat says his online auctions bring double to triple what live auctions do and they cost less to run. “Operators don’t have to wait to have a bunch of auctions to hold one, they can have them monthly,” says Bickford, who adds that getting more money per unit also answers the legal mandate of trying to get fair market value for the goods.
  • A larger audience allows for more bidders: While “Storage Wars” may have brought more people to your site, Bickford says it also brought a lot of “lookers” who were just curious; it also encouraged more of the bidders to work together, which can bring prices down. “I’ve seen one of them bid on a unit and they split up the goods in the parking lot,” says Bickford. “They can’t do that online; they have to bid against each other because they don’t know who is winning the bid.”
  • Excitement of the auction can be translated online: According to Jones, some operators increase the excitement of the auction online by providing live sound feeds. Dotson adds that it can also get exciting when time is extended due to new bids.

Live Auctions May Never Die

Although many more self-storage owners are turning to online auctions and it is a segment that is going to continue to grow, COVID hasn’t been the death nail to the live auction. Dotson, whose voice still gets excited when he talks about live auctions, says they can still be done in most jurisdictions, even in this COVID era.

While it’s true that some items get better bids online, certain items do better when people are actually able to see the item in the unit or smell the unit to get a feel for what may be there. It also depends on who is conducting your auction. “A good auctioneer can bring good money for you,” says Dotson.

If you’re going to hold live auctions during the pandemic, you must adhere to your local, state, and federal laws. Also practice the following:

  • Maintain social distancing by only allowing a certain number of people in to see the unit at any given time and holding the auction outside, making sure everyone is maintaining a safe distance from each other.
  • Require face masks.
  • Provide accommodations for hand washing and hand sanitizing.  
  • Conduct temperature checks, depending on laws, restrictions, and outbreaks in the area
  • Only allow one or two bidders on the property who are coming together; do not permit children.
  • Provide contactless payment options.

Whether you decide to go online or hold your auctions live, the important thing to remember is that you need to hold them. “Some never did return to doing auctions in 2020,” says Allen. “That is just not a sustainable business model. If they haven’t already, they are going to have to get started in getting them going again.”