Iron Planet is Moving the Big Steel Online

By Jay Hipps, Hacienda Network Staff Writer

Company Takes Innovative Approach to Sale of Used Construction Equipment

Iron Planet, a fledgling company that's already making a significant impact on the construction equipment industry, is moving its headquarters to a 25,602 square foot facility on Chabot Drive in Hacienda from its former location in Palo Alto.

The company acts as both inspector and sales agent in creating an online marketplace for used heavy construction equipment, such as might be used in large commercial or residential projects. Through an innovative approach to the process, sellers are getting better deals and buyers have a more accurate picture of what they are receiving.

Buying with Confidence

The issues in buying used construction equipment are similar to those around buying a used car. Was it maintained well? What is the condition of the drive train and other mechanical parts? How much life is left in it? Considering that construction equipment is much more expensive than an automobile, these are questions that need to be answered.

"We've called about 800 sellers in the last half-year or so and about 90 percent of the time, the description of the equipment is 'excellent,'" explains Reza Bundy, Iron Planet's founder and chairman. "It's hard to digest that knowing that 90 percent of the equipment is not 'excellent.'

"We figured out intuitively that it's difficult to convince people to spend $100,000 to $200,000 on a piece of equipment when they have really no idea what the state of it is and that what you really need is impartial inspection of the equipment."

To that end, they've partnered with DynCorp, a worldwide inspection firm that serves the U.S. military as well as many corporate clients, to set up a nationwide network of 250 inspectors around the United States. Once the inspection is complete, the information is added to the Iron Planet web site at ironplanet.com to attract buyers.

"We physically inspect the equipment and take that data - the 27 pictures, the 10-page inspection report and the oil samples - and have a facility where we analyze that information and upload it to our site."

A New Way of Doing Business

Both buyers and sellers see advantages from Iron Planet's services.

"In the old way of doing business, the people who sold the equipment would need to physically transport it to auctions and it sold for the going price," he explains. "That means, if it's worth $50,000 but someone only bid $30,000 for it that day, that's all it will sell for because the auction companies need to move the equipment - they don't want to hold onto inventory."

Instead of facing what is typically a ten to 14 percent commission, Iron Planet charges just $500 for the inspection and five to six percent commission.

Sellers get the piece of mind that comes with the comprehensive inspection but also benefit from a Lloyd's of London policy which covers the entire transaction and transportation cost if the equipment arrives and doesn't match the report.

"There's an old saying in the auction business: 'As is, where is,'" he adds. "We're trying to be the opposite of that. We're trying to create better liquidity, lower cost, and better information."

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