Auctions: The Next Decade

Johannesburg: The South African auction industry will grow, strengthen and consolidate over the next decade, said Auction Alliance’s Rael Levitt at a presentation given to the South African Institute of Auctioneer’s annual AGM in Muldersdrift, Gauteng. Levitt’s speech, named Auctions, the next decade, was delivered to auctioneers from around the country and focused on the various trends that the country’s leading auctioneer foresaw over the next 10 years.

“In 2020, I will be closer to my 50th birthday,” exclaimed the 38 year old auctioneer who founded his company in 1992 at the age of 21, “whilst we cannot predict the future, we certainly need to look at societal, business and political trends which will impact the auction industry.”

Online versus the live experience

The presentation focused on ten broad trends which will impact the auction industry, starting with the impact of the digital revolution on auctioneers. “A decade ago, I was convinced that online auctions would cannibalise traditional auctions, but today I realise that there is a place for traditional auctions. Similar to gambling online or in a casino, certain people enjoy gambling online in the comfort of their own homes, but others like the thrill of the casino. The same applies to auctions – online auctions in South Africa will grow, but then so will the real live auction experience.”

Levitt, a previous Vice Chairman of SAIA, explained that over the next 10 years, auctioneers will have to create captivating experiences if they are to remain relevant: “Today people have virtually unlimited options when it comes to retail and entertainment experiences. Choice will grow as new experiences capture consumers’ attention, and auctions will need to captivate the imagination of bidders. As a result, I believe that auctioneers will start providing retail entertainment to their consumers to keep the experience exciting.”

Advertising and marketing

Levitt focused heavily on auction advertising and marketing, which for most auctioneers is their biggest expense. He showed an independent survey conducted by AMPs, which shows that auction advertising spend in the print media has grown from R16million in 2004 to over R200million in 2009. “My prediction is that over the next decade, auction advertising will move towards digital channels, social media, magazines, radio and television.” Levitt said that the days of dedicated newspaper auction sections will disappear because consumers are looking for specific assets and therefore auctioneers will require targeted marketing in the asset categories in which they are selling.

Specialisation

Levitt believes that the days of the general auction are over: “People looking for houses will look for property auctions in specific property marketing channels, and the same applies for cars, art, or any other asset type. We are one of the only countries in the world where large generalist auction sections have developed and they are not only costly, but they are not targeted. Like the rest of the world, targeted advertising is set to become the mantra of the serious auctioneer.

“International auction houses don’t sell everything – they choose their discipline and focus on it. I don’t believe that one person or one company can and should be good at everything. The larger auction houses have already started specialising and will find their focus on specific asset classes. There will still be a place for the small generalist, but that these businesses will deal with lower level assets,” he explained.

Transformation and transparency

“The days of smoke and mirror empowerment are over,” said Levitt, “the reality is that black buyers are growing in leaps and bounds and therefore auction companies are going to have to focus on this rapidly growing market. If 90% of auction attendees are going to be black in the next 10 years, the industry needs to ensure that black auctioneers are there to service these markets. This does not mean that there is no space for white auctioneers, it simply means that auctioneers need to embrace transformation or they will be left behind.”

Levitt also said that in a world of transparency auctioneers will have to start an auction index, where they give their actual results to the public: “Many auctioneers do no want to disclose their results, but if results are given to the public, so will the trust in auctions grow.”

Legislation

Levitt pointed out that in South Africa during the ‘80s and ‘90s auctions arose due to judicial process, including sales in execution, liquidation and foreclosure. Over the last decade however, he said that this had changed and today, auctions have become a preferred method of transaction. “There are several pieces of legislation that will have a real impact on the auction industry, such as the Consumer Protection Act, the Business Recovery Act, as well as possible changes to the rules of Court governing sales in execution. My view is that we are living in a consumer-friendly country, and auctioneers will become far more consumer-friendly as well. Furthermore, with business rescue, the judicial ethos is set to become far more debtor- and labour-friendly. I foresee fewer liquidations and believe that when companies are in business recue or liquidation they won’t just be closed and the assets auctioned off,” he concluded.