AuctionMart's new five-year deal with Broadlane confirms business plan of doing one thing well - Brief Article

Health Industry Today, May, 2001

By not attempting to be all things to all people, little AuctionMart of Bryan, Texas, may slip through the cracks that swallow dot-com failures on its way to becoming the proverbial 800-pound gorilla of used medical equipment sales.

Last month, AuctionMart announced an exclusive five-year marketing agreement with Internet provider Broadlane Inc., and said that with the deal it had cornered close to 50% of the used medical equipment market.

If so, AuctionMart may be on its way to succeeding where others have faltered, instanced most recently by Neoforma's decision to drop its online auction site platform as unprofitable.

AuctionMart offers auctions of pre-owned equipment and online refurbished equipment sales. Under the agreement, Broadlane will extend exclusive access to AuctionMart's services to its 25 hospital systems in the U.S.--comprising approximately 567 acute care hospitals and 2,000 non-acute facilities-- through a co-branded Web site hosted by Broadlane.

"Sometimes, with e-commerce, less is more," says Jack Nally, vice president of Corporate Contracts Inc., Erie, Pa. "AuctionMart is not trying to sell soup to nuts. They're just meeting a specific need that's out there.

"They're moving slowly, and cautiously, and not burning through money like the other ones did."

From the beginning

AuctionMart was founded in November 1999 by David Hickson, Ph.D. In 1984, Hickson co-founded a health care service firm and helped bring it to $65 million in annual revenues before it was sold in early 1999.

In May 2000, Hickson and AuctionMart connected with Allegiance Capital Corp. of Dallas to create the funding structure needed to provide for the future growth requirements of the firm.

Following that initial contact, William B. Glenn, Allegiance Capital vice president, said his company guessed AuctionMart would be "a $13 million company within three years."

But upon further review, that judgment was revised. Now, said Glenn, after looking at the company and the current state of the industry, "We estimate that AuctionMart could be a $300 million company within three years."

When first approached, he says, "We were impressed with the development of his company and the growth it had experienced based on Hickson's efforts alone."

AuctionMart said that every year approximately $100 billion is spent internationally on medical equipment and of that, roughly 20% is spent on used medical equipment.

Industry sources think revenues from used equipment sales will probably rise as foreign providers plug into the global marketplace. And given current cost constraints imposed on health care providers, the used equipment market may expand as providers seek to reduce equipment dollar outlay and court revenue streams based on the sale of equipment underutilized or made surplus by upgrades.

"There is a need in the market for an inventory management company like AuctionMart," said Glenn.

Added emphasis

"People in the industry ask what makes AuctionMart different from other transaction Web sites," said Hickson following the announcement of the Broadlane deal. "The biggest difference is that we are the first site to provide a fully integrated inventory management system for used medical equipment."

That integration system includes a platform for refurbished equipment and the companies that perform the services. There's also an "extra-net" designed to allow hospital facilities to reallocate existing health care equipment throughout their system.

Hickson said customers using Refurb-eSearch[TM] can submit a request for equipment that is sent to refurbishment contractors holding agreements with AuctionMart.

"We have contracts with about 80 refurbishers and we are very strict with whom we hold contracts," said Hickson.

Purchasers of refurbished equipment are guaranteed a six-month warranty from the refurbisher, with an option to extend the warranty.

And, he says, before the site's Equipment Extranet was developed, "There was not an easy way for larger health care systems to keep inventory of non-used and needed equipment."

As a result, Hickson says AuctionMart receives more than 600,000 hits monthly, and since April 2000 has sold "thousands of pieces" of used medical equipment.

Cost containment

AuctionMart conducts business with only 34 employees. It deals with providers ranging from smaller doctors' offices to larger health care systems such as St. Joseph Health System, Orange, Calif. and BJC Health System, St. Louis.

There is expansion in the works.

The company is said to have gone into the world of group purchasing organizations and emerged with either signed deals or ongoing dialogues.

AuctionMart is also rumored to be finalizing "international channels that will be huge for them."

Said one health care consultant, "In a year they will be acquired by somebody huge, or get a huge influx of cash.

"Then there will be no other choice but for purchasers to go there."

* www.auctionmart.com