Auction.com makes sudden withdrawal from German market
Fifteen months ago, when Auction.com set up shop in Germany, the company heralded its arrival at the ExpoReal commercial real estate trade fair in Munich with the biggest splash that had been seen in the industry for many years.
No expense was initially spared to trumpet the success of the company in its home market of the United States, where it is a powerhouse in real estate auctions, and how, given time, Germany would overcome its own traditions and learn to love the auction model for the buying and selling of real estate portfolios as well.
That might yet turn out to be so, in the course of time, despite the chorus of skepticism that greeted the arrival of the Americans with a business model that most Germans have traditionally associated with the final stages of a foreclosure procedure that sees beaten-up, washed out properties being sold for rock-bottom prices.
Whether it does or not, it will happen without Auction.com, who summarily announced their withdrawal from the German market last week, and the immediate closure of their Frankfurt office. The announcement – or, indeed lack of it initially, as apparently staff and business partners had yet to be informed before the news leaked out – came as a surprise nonetheless. The company had only recently moved to bigger offices in Frankfurt's central business district and made a number of significant hires from within the industry.
All told, the company ran four auctions in Germany, with the third and fourth running in December last year. From REFIRE's discussions with Auction.com's top management, the second auction last summer had shown the company making progress in establishing a viable platform, although the results of the third and fourth auctions late last year (for commercial property, and then residential property) have not yet been publicized. Now, it looks like, we'll never know.
The company finally issued the following statement last week about its decision to withdraw from the market:
“The senior management team at Auction.com has been analyzing all of the company’s business operations, and has identified several businesses that were unprofitable and/or deemed non-core to our overall corporate objectives. As part of this initiative, the company has decided to suspend operations related to Germany, effective immediately”, according to Rick Sharga, Executive Vice President of Auction.com.
“This has been a difficult decision, as we’re proud of what we’ve accomplished in Germany over the past year. We broke new ground by successfully auctioning commercial property online in one of Europe's most traditional markets, further proving the power of our online platform. Despite these achievements, however, our German business unit has been operating at a loss, and was not expected to achieve profitability requirements in the foreseeable future. In addition, significant time and attention of senior management has been required for the German effort, and we feel that these resources are better applied to business units where growth and profitability potential are higher”, he comments.