SJF's Material Handling Blog
Removing the risks – buying used pallet rack and other pre-owned equipment
Certainly, you can save money by purchasing used pallet rack instead of new equipment. Are there are some risks involved? Yes! Will it likely to have a shorter remaining service life and is there no manufacturer’s guarantee? Not necessarily! A common misconception is that with used equipment you’re not really sure what you’re getting. You can, however, easily reduce and even outright eliminate many of these risks by simply dealing with the right people when entering the used market. This article is a primer that covers a few of the basics.
There is no board that certifies dealers of used pallet rack. Used dealers are not “authorized” by the manufacturer or anyone else for that matter.
That said, the fact that some dealers of used equipment are also authorized dealers of new equipment, be it one or more manufacturers, is a good indication they know what they’re selling. Unfortunately, there is a wide variety of sellers of used pallet rack – individuals, brokers, middlemen and auctioneers. How do you know you’re dealing with a legitimate operation, and what makes an operation legitimate anyway?
Used Dealers: The good, the bad and the ugly.. and how to tell the difference.
KEY QUESTIONS & COMMON SENSE:
1. Do they stock what they sell?
There are several advantages to dealing with a dealer with an inventory, including assured delivery and easy inspection of items in stock. Even if the specific equipment you are looking for is not in his current inventory, the fact that he has one tells you some positive things about the dealer. We’ll get into them later, but they cause some dealers to give the impression of having more stock or a larger operation than they have if they have one at all. Beware of false impressions. A few years back, a self proclaimed major dealer had a web site with a picture representing his company location. The photo featured a large and impressive building in the middle of the photo. While the photo did include his building, what he didn’t tell people was his office was actually a one room office located in the shopping mall across the street and barely visible in the bottom corner of the photo.
Obviously, the best thing is to go see the dealers facility yourself, but that’s not always convenient, especially in the early stages of your search when you are looking at numerous possible dealers.
TIP: If it’s not convenient to inspect their facilities in person, go on-line with one of the various map sites like Google Earth or Google Maps (https://maps.google.com/) and enter their address. Look at a satellite photo of their location. If they have offices in their basement or a shopping center, chances are they have no inventory. If their inventory is extensive, you should be able to see it in the photo.
TIP: Beware of P.O. Box numbers and suite numbers, which often disguise a one-room office.
2. Is it an established business?
The pallet rack business is extremely competitive and dealers with a bad reputation don’t last long.
Long term survival is not just proof that a dealer has treated their customers well. Experienced pallet rack dealers know the equipment and can tell the jewels from junk. They know industry trends and current standards. In general, their recommendations are good, their prices are fair, and they have the respect of the industry. If they didn’t, they wouldn’t be around this long.
RULE OF THUMB: Look for a company with a track record with at least ten years of business history under the same name. There is at least one such dealer in every major city in the United States.
3. Is it a real business?
We have already talked about people doing business out of their basement or a shopping mall, but it gets worse. Some people do this in their spare time. They have a day job, which may or may not have taught them something about pallet rack. They have neither the experience to guide you in making a good purchase nor the resources to support you after the sale.
TIP: Ask for a business phone number, not just an e-mail address or cell phone number. If nobody answers the phone and you get the same person’s voice mail every time, there may be a problem. If your contact can’t meet with you during normal business hours, there’s definitely a problem.
4. Do they own what they sell?
Some brokers are no more than deal-makers, simply flipping the equipment and doing no more for their money than making a couple of phone calls. (Hollywood is run by deal-makers these days, and you know how long it’s been since they made a decent movie.) What you want is someone who has demonstrated their faith in the quality and sale-ability of their product by investing their own money in it.
TIP: Any legitimate dealer will be happy to let you inspect the equipment. Don’t accept photos. Larger dealers may have multiple storage facilities throughout the country. If the equipment has only recently become available, it may still be on the premises of the former owners. If you are performing an inspection anywhere not owned by the dealer, ask the people there who owns the equipment, or ask for proof of ownership.
TIP: Don’t give the dealer your money to buy the equipment. Pallet rack often comes on the market because of the bankruptcy of the current owner, and if the court seizes the assets of the company you may never see your equipment or your money ever again.
5. Is the company financially sound?
If your purchase is large enough to justify the expense, it may be a good idea to get a D&B report. The cost is $100.00 or less and can easily pay for itself many times over. This will tell you who they buy from, their payment record, lawsuits filed against them, when they were incorporated, the number of employees and the names of owners and officers – all valuable information.
TIP: If the person you’re dealing with claims to be the owner and operator but is not listed as either, this may indicate an attempt to shelter himself or his assets from previous lawsuits or bankruptcies. While privately held companies will often divulge less information that public ones, the fact is that reputable companies have nothing to hide. Use some common sense when evaluating companies. There are plenty of good people who run good companies out their and provide D&B their information. AVOID those that feel the need to conceal or shelter their histories, owners, officers, backgrounds and/or financial information. Ask yourself, what’s so shocking that they need to keep it hidden from public view?
6. Can they provide follow-up services?
Everyone will sell you equipment but only a few service what they sell. Once you own the equipment, someone has to inspect, repair, replace, buy back, deliver, install and maintain it. If it’s not the broker, you will have to start another search for somebody who can. Ask to see their facilities and resources for performing such services.
TIP:The broker may tell you he has somebody else to perform these services. Keep in mind that adding a middleman can mean a loss of control over costs and schedules. It also complicates communication with the various people involved. Can they repair or replace items that get damaged or need repair? If so, at what price? What you discover may be pretty shocking.
7. What is their reputation?
You can always ask for references, but be wary of the lists they voluntarily to give you. Some references are kept on a permanent retainer, and almost all of them are carefully selected.
TIP:Ask about jobs they have performed in your area and whether you can talk to these customers. If they can’t provide names, it may mean
1) they have no track record in your area or
2) they have had service issues resulting in poor relations with customers.
TIP: Call their competitors.
Ask is they have ever heard of the company you’re asking about?
What is their reputation among other dealers?
Have they had any dealing with them?
If so, what was that experience like?
While impressions and opinions are just that, this is one instance where no news is NOT good news. Feedback like “I’d rather not say” or “NO COMMENT”, are not good testimonials.
I have always found people willing to volunteer feedback if they have good things to say while most will be reluctant to say anything bad. Usually a dealer will simply refuse to provide an opinion rather than provide you a negative report. Look for a pattern to the feedback you receive as this will provide you a good indication of what you can expect. Ask prepared, factual questions about the things covered in this report: time in business, number of employees, etc.
So it’s your first auction and the place is full of people and excitement. The auctioneer is barking out bids, numbers and prices. People all around you are bidding on an item like it’s a long-lost childhood toy. You notice that some item you have just seen in the store sold for a fraction of the store price. A second item comes up and it goes for yet another great bargain. You think, “Wow, this seems like a pretty easy way to get things dirt cheap. Maybe I should bid and get in on the action. How hard can it be anyway…right?”
While great buys can be had at auctions, the opposite is also true. Getting stuck with something that isn’t what you thought it was can (and more often than not, does) happen. Below are some pro tips that you can use to avoid costly mistakes. Following the tips will save you a lot of grief and expense and give you the tools you need to bid like the pros.
#1 – Hidden costs
While auctions provide a means for anyone to find a bargain, it’s important to keep in mind many of the hidden costs often associated with auction buying.
Most, if not all auctions have what is called a buyer’s premium. This is an additional fee that is put on all items sold at an auction. This fee can run anywhere from 10% to 20% of the item’s sell price. This cost is an additional fee that you will be charged for items you buy in addition to the price you bid. Beware – buyer’s premiums can add up very quickly. Auctions can often have different buyer’s premiums for those bidding online and those physically bidding at the auction. Every auction is different so take note of what these costs are and which fees apply to you before you bid.
#2 – Do a detailed inventory and inspection
If I can give you two pieces of advice here – it would be these:
- Don’t assume all the parts or there.
- Don’t assume missing parts can be requisitioned or repurchased.
I’ve seen to many rookie bidders thinking they got a great buy only to discover later that the items are no longer in production or the manufacturer is out of business. Do a detailed inspection of items to make sure all necessary items (ie. hardware, parts, controls, manuals etc.) are there. If parts are missing make sure replacements are available and have an idea of what the costs will be to fix, repair or replace what is missing before you bid.
#3 – Taxes & Fees
Depending on the location of the auction, be aware that different states have different rules about what taxes or fees they want you to pay. Some states are nothing some are 6% – 8% or more.
#4 – Remember…there are no “Do-Overs”
What that means is that “What you see is what you get!” and “You buy it, you own it!”
If an item you bid on doesn’t run or isn’t what you thought it was, you have NO RECOURSE later. The auctioneer is not going to give you your money back or allow you to back out of a purchase once you buy it. It is your responsibility to know what it is you are bidding on – NOT the auctioneers. Items purchased thru auctions are inherently sold “as-is, where-is” with no implied guarantee or warrantee.
Caution: Auction bidding is a fast paced game for grown-ups – not victims. At auction, you sign the auction’s terms and agreement paperwork before you are allowed to bid. This agreement is a legally binding contract that says you know what you are doing and what you are bidding on, and you assume all liability to pay for whatever you buy in the condition it is in when you buy it. If you bid on an item thinking it works or runs only to find out later it doesn’t – too bad. In other words – you buy it, you own it.
#5 – Removal Costs
Never forget, unless specifically stated otherwise, everything in an auction is sold “as-is, where-is.” If the equipment you purchased requires dismantling and/or removal, YOU (as its new owner) will be responsible for the disassembly and removal of the item – not the auctioneer or former owner. This can be very expensive.
#6 – Time Costs
Related to removal costs are time costs. There are often very short time frames and/or restraints for removal that you will be responsible to adhere to. Failure to comply with these can result in fines or legal action and even forfeiture of the equipment. The time you have to remove the item can also drastically affect the final sale price you and others may be willing to pay. I have seen time frames for removal that range from the same day as the auction to several weeks or even months. Know when things need to be removed before you bid.
#7 – Transportation
Items to big to move by yourself may require additional people or equipment to move. The auctioneer IS NOT going to do that for you. Don’t bid on items that will require you to hire or requisition additional people unless you know the costs of doing so in advance. With fuel prices on the rise, having to freight items across long distances can be very costly. Again, know and factor in all the costs before you bid.
There you have it – as with any great deal – the devil really is in the details. Please feel free to comment or share other auction tips or tricks in the comments below.
SJF Material Handling is honored to be named to Minnesota Business Magazine’s “100 Best Companies to Work For” in 2018. This is the 4th time SJF has been named to this prestigious list.
Qualifications for the “100 Best” Award From Minnesota Business Magazine
Minnesota is known for being a great place to live and work, with top-notch companies in many industries headquartered here. Each year, these companies submit nominations for the 100 Best Companies to Work For Awards by Minnesota Business magazine. This award recognizes Minnesota’s top companies and, time after time, helps the winners attract key employees who make all the difference.
The “100 Best” were determined by the resulting scores of an anonymous online questionnaire filled out by the employees of each participating company — to determine which companies in Minnesota excel in the areas of work environment, employee benefits, and overall employee happiness, making them the 100 Best Companies to Work For.
SJF will be honored in a celebration awards program and dinner on Thursday, June 28th at JW Marriott in Minneapolis.