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Online stock auctions: the pros and cons of going virtual

05-Jun-2020 09:54:41

While the virtual world can never replicate the in-person experience, at a time when social distancing is the new normal, auctions have proven to be an effective method of selling everything from hand sanitiser to homes.

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While online auctions have been around for some time, COVID-19 has greatly accelerated their uptake, a trend that the rural markets have also embraced.

NZ Farmers Livestock (NZFL) has held several virtual auctions in recent months using its hybrid auction platform which was developed to meet the needs of farmers affected by COVID-19 restrictions.

The first event was a hybrid of on-line and on-site bidding which saw over 50 farmers from around New Zealand register to bid, and more than 80 people attended in person. The auction was deemed a success by NZFL, with 100% clearance and prices at expected levels.

Online bids made up 30% of the total bidding activity and 20% of the lots, which were mainly top end, were purchased by on-line buyers.

At NZFL’s second hybrid event only 20 bidders attended in person under strict COVID-19 safety restrictions. No spectators were allowed inside to watch. Vendors could watch the bidding from the comfort and safety of their lounge and see the price going up as the bids came in.

Providers of online auctions tout the following controls and benefits: strict protocols and an accreditation process for listing livestock; real-time trading offers farmers much greater flexibility to buy or sell stock as and when it suits them while opening up a wider audience of buyers and sellers; and improved stock welfare due to reduced animal movements (as a result of less transportation).

However, technology issues at NZFL’s second event meant some online viewers experienced difficulties with the audio. All the cattle were sold to on-site bidders.

In the residential real estate market, online auctions have also come to the fore during COVID-19, and while they have been around longer, they have faced similar challenges.

The obvious benefit is that while many still prefer to attend these events in person, there are others who feel better keeping their distance and participating online. Online bidding ups the competition and is likely to suit a growing number of buyers as it becomes more commonplace.

NZ Farmers Livestock, General Manager Bill Sweeney says, “It’s all transparent, there is no hidden agenda, you can see it in colour in front of you in real time.”

Like all things new, it will take time for online stock auctions to be bedded in, the technical hiccups to be ironed out and for people to get used to the different dynamics of online auctions.

There are many intangible aspects of a live auction, and human nature, that the virtual environment will struggle to replicate.

“Listing livestock for sale on the website and watching the auction from their favourite chair does not seem to give the vendors the same motivation to sell,” says independent Whanganui livestock agent, farmer, and farm commentator David Cotton. “If they don’t like the price, they just leave them in the paddock and put the sale off for another week or three.”

“From what I have observed a number of auctions on the web-based system are overpriced with vendors having a wish price versus a market price in mind.”

Cotton also cites farmers’ relationships with their stock agents as factor that those who use online systems miss out on. “It’s not always about the price of selling livestock on the day, but the advice on when to sell and how to draft them that can make the biggest difference in the sale process.”

Then of course there’s the buzz of being there in person and the information gleaned from those who attend. Not all the action happens on the auction floor, as those of us who worked from home during COVID-19 well know. Often, it’s the conversation by the coffee machine that delivers some important insights or simply the nudge required to act.

It’s no different for those who attend stock auctions, where farmers meet with other farmers, agents, bankers and friends to chat about everything from the market to the weather.

It’s unlikely that online auctions will ever replace the real world experience, but in an uncertain world, there are significant advantages to having an alternative. The biggest challenge may be getting more
farmers to give it a go.

Sources:
Rural News, Online auction goes well, 14 May 2020
Taranaki Daily News, Cattle prices strong at new online sale format, 30 April 2020
Whanganui Chronicle, The buzz of a live stock sale creates its own energy online auctions cannot replicate, 14 May 2020

This article is featured in Harcourts' Lifestyle & Rural Property Focus Newsletter Issue , 2020.

Auction-guide

 

Topics: Rural, Advice, Auction, Rural market, Lifestyle and Rural Property Focus, Online Auction