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Going, going, gone: how to make the most of auctions

15 May 2009
Going, going, gone: how to make the most of auctions

Auctions have profited from the recession, as failing businesses sell off their wares and business owners look to save money on equipment. So how can operators use this resource to their advantage? Rosie Birkett reports

The hospitality industry has not escaped the recent renaissance of all things vintage. Walk into any gastropub or restaurant that has been refurbished in the past few years and you're bound to come across a few wonky lampshades, idiosyncratic paintings and mismatched furniture.

But the trend for buying second-hand fixtures and equipment to kit out your business has taken on a whole new dimension in the light of the economic downturn, as thrift chic becomes not so much a design statement as an economic necessity.

"Certainly this year, since January, there has been a marked rise in people buying second hand equipment," says Neill Saint, an auctioneer for Hilditch, which has been holding specialist catering auctions twice weekly for over 20 years. He puts this increase in the popularity of auctions down to the recession.

SAVING MONEY

"There's a lot of liquidated stock coming from businesses that have unfortunately failed, and with credit not so readily available to spend on new equipment, people are looking to save money and buy second hand," he explains.

Saint points to the plight of the start-up business as a prime example of where auctions can be the best option.

"One of the things we're seeing more often is end-users - people that are setting up businesses, rather than dealers. If you're starting up, [an auction] makes great business sense, because if you can keep your capital outlays low to start with, you've got a better chance of survival," he says.

"The biggest mistake a lot of people make when they're starting up, especially in catering, is to spend huge amounts of money on new equipment before they even get a penny through the till - and of course they're having to pay off debts before they've started trading, which is going to be difficult for any business."

Saint also highlights the fact that a lot of commercial catering equipment is manufactured abroad, and as a result has shot up in price since the credit crunch.

"New commercial catering equipment is very expensive, and equipment that is built in Spain, Italy or China is going to be 25% more expensive now because of weak sterling," he adds.

Chef and restaurateur Anthony Flinn agrees: "If you're only just setting up, you'd be an idiot to spend thousands of pounds buying new before you'd established yourselves and built a reputation," he says.

Flinn knows a thing or two about bargain hunting: "When I first set up my fine-dining restaurant, Anthony's, I did it for £8,000," he recalls.

"I got all my kitchen kitted out with second-hand equipment, with a view to developing the business before I bought new."

But Flinn sourced his equipment from independent brokers rather than auctions.

"We went along to a catering auction and took our catering catalogue with us to check prices. It didn't work out much cheaper," he says.

"The stuff they were selling was bottom-grade equipment and people were outbidding each other, so it got really expensive. I got the feeling people were getting caught up in the moment of the auction and didn't seem to know what a lot of it was worth. Plus, there was a buyer's premium and transport costs on top of the bidding fee."


GO TO A SPECIALIST

Flinn's experience is a warning to people considering auctions of the importance of doing proper research well in advance. Well-established, specialist auctioneers such as Hilditch often sell equipment from high-standard commercial kitchens at a considerably cheaper price.

"We get a lot of major distributors shifting stuff through us and most of our catering equipment comes out of working kitchens," Saint says.

"We do a lot of work for the NHS and schools, where things have been maintained well and looked after, and often they've been serviced to a high standard. You should, though, always be aware of what equipment costs before you come along. Know what you want and what you're prepared to spend."

Andy Cole, general manager of outside catering company Williams Kitchen at Calcot, has bought lots of his equipment this way.

"I've been using auctions for buying and selling equipment for 15 years. I think it's appealing because there is always that option of getting something you want at a very affordable price," he explains.

"Because Hilditch specialises I usually get something of a very high quality cheaply."

Indeed, Hilditch estimates that owners can kit out their commercial kitchens using auction stock for £5,000 rather than the £30,000 it would cost new. That's a staggering saving, but for many operators, anxiety surrounding the quality or time-guarantee of auctioned stock might be offputting, and Saint concedes it's a fair consideration.

"You can't get the warranties you'd get with brand new stuff, but all the equipment we sell, we sell as working," he says.

"We test everything we can and if someone buys something and it doesn't work, we're happy to give a refund as long as they come back to us within a week - so people can feel that they are protected.

"Plus, being a live auction rather than online, people can come and look at the stuff before the bidding. They can view our online catalogue first, then come and do viewing days where they can touch, feel and see the quality for themselves."

As Saint mentions, online auctions such as thebartendersbible.com and eBay are a one-dimensional way of bidding, but for Flinn, sites such as eBay can be a good lead-in to meeting brokers.

"The great thing about eBay is that every Tom, Dick and Harry is on there. You can find these brokers on eBay - they might be selling the odd thing on there and have their contact details so that you can go and meet them and see their warehouses."

For Cole, the savings you can make at auction outweigh the potential of future maintenance costs.

"If you're looking at buying a brand-new fridge you're talking £3,000 to £5,000, whereas if you're buying something at auction you'll only be paying £300 to £500, so you just write it off when it breaks down. It might last only two years, but the write-off for £5,000 is much bigger than £500," he points out.

"So yes, it might have a shorter shelf life, but it's got a much smaller purchase price. One outweighs the other. There is also the option of buying ex-demonstration models, or models with a slight flaw, which the manufacturers have been unable to sell as new. If you keep your eyes open there are some real bargains out there."

The green credentials involved in buying second hand are another reason to go to auction, because the equipment is being reused rather than scrapped.

"I think a lot of people haven't considered [auctions] because they think there are pitfalls," Cole says.

"But if you go there with something in mind, in many cases it's better than buying new because you're actually doing something for the environment and spreading your costs."

TIPS FOR GETTING THE BEST OUT OF AN AUCTION

Andy Cole of Williams Kitchen at Calcot, a seasoned auction-goer, offers the following advice:

  • Try to build up a relationship with a trusted auctioneer - they might be able to source stuff on demand and bear you in mind when they get what you're looking for in stock.
  • Go to the auction with a budget in mind and don't go above it.
  • Make sure you're aware of what the item would cost new, so you know what you're saving, and if it's worth putting the purchase forward.
  • Have a good look at what the item is like, because some people make a good effort to clean something and it can look a lot better than it actually is.
  • Try before you buy - especially with electrical appliances. There should always be a power supply so that you can turn it on and see if it works.
  • Whatever price you're bidding on, remember you're going to have your buyer's fee and VAT on top of it, plus maybe a transport fee.
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Jacobs Media Group is honoured to be the recipient of the 2020 Queen's Award for Enterprise.

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