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  • Published:

D. Geller - May 31, 2000

Event Summary

There are $400 billion worth of used capital equipment to be traded. eSprocket wants to bring the business online without bypassing the processes and brokers that make it work. eSprocket observes that less than 5 percent of this huge market occurs in auctions. The reason, they suggest, is that used capital equipment items are not commodity items, as new ones might be.

Even beyond the differences between models, each item has a unique use and repair history, and each potential buyer and seller will bring a host of logistical issues to the table. Therefore, eSprocket's strategy for an online marketplace is to provide a way to enable (and improve) the kind of complex negotiations that offline buyers and sellers engage in.

The technical heart of their approach is the Negotiation Table, a private environment that a prospective buyer and seller create for the purpose of negotiating. A Negotiation Table is like a souped-up, two-person combination of a chat room and forum, with other enhancements. The buyer and seller can "meet" at the table for a live discussion, or can leave messages for each other. The discussion thread can be bookmarked and, through features of the Negotiation Table, can be used to build a contract. Both buyer and seller can be engaged in multiple negotiations at the same time. Negotiations around the purchases of large, used capital items equipment typically take from days to months.

Traditionally, much of the trade in capital equipment goes through the hands of professional brokers. These brokers add a good deal of value to the flow of merchandise. They may purchase goods for which they have no immediate buyer, a boon for the sellers, and can also testify to product features and equipment quality.

eSprocket not only expects brokers to be participants in its market, it encourages them. It has a partnership with the world's largest used equipment dealers association; this brings eSprocket a starting inventory of more than $1 billion, with potentially as much as $10 billion in the long run. Dealers will be given a 30-day exclusive opportunity to respond to new listings.

eSprocket will also have its own experts in each significant vertical industry it works with, reflecting their supposition that this is a knowledge-driven business. They also plan to offer a range of value-added services, including financing assistance through Fleet Capital Corporation and delivery services through Hub Group, North America's largest shipping broker.

The eSprocket marketplace will be open for business in June.

Market Impact

Used equipment is a business that will get a significant boost from the Web, and eSprocket is not the only company to have an interest in it. From a wider e-commerce point of view, there are two general observations that can be made as a result of this announcement.

First, this creates interesting opportunities both for asset management software makers and for digital marketplaces. It is reasonable to expect the development of an integrated set of processes that carry a product from its offering as a new piece of equipment in a marketplace through its lifetime in a company and finally straight into a used equipment marketplace. This suggests that at least some marketplaces and e-procurement or asset management vendors will attempt to create their own markets for used equipment. We'd also expect that such companies would create markets that were wholly digital, unlike eSprocket's. If eSprocket's market analysis is on target those folk will all be fighting for 5 percent of the pie.

Second, we think that preserving the role of intermediaries in Web-based systems is a concept that will spread. eSprocket is not the only company to do this but the number is very small (unless customer service organizations are counted). Of course many businesses can be conveniently disintermediated, but we suspect that humans aren't extinct yet and that e-commerce will grow faster once there are viable models for intermediated commerce on the Internet..

User Recommendations

Since eSprocket has no plans to demand exclusive listings there's nothing to keep companies that intend to buy or sell used capital equipment from giving eSprocket a try.

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