It’s a dark day when Joe Bandwidth, unhappy dotcom executive, finds himself on the phone with Eliot Millman, commission auctioneer. It signals the passing of an era, the end of the party. Those fancy modular cubicles, those elegant pieces of ergonomic seating, the beautiful Italian light fixtures venture capitalists paid for when the world was full of promise–they’re all that’s left of Joe’s ambitions. His staff has been laid off, his friendship with his co-founder went down in flames, and he’s on the phone, alone in his soon-to-be vacated, $25,000-a-month offices, asking Millman to sell off the Aerons for whatever price he can get.
These days Millman, whose liquidation outfit is based in New York (Eliot B. Millman Company), is a busy man. His is what analysts call a “reverse-cycle” business, one whose growth and success depend on the demise and failure of other enterprises. And as Internet-based companies tumble into the gutter of recession, reverse-cyclists thrive. “Oh yeah, we just did a couple [of dotcom office auctions] last-week,” Millman says. “One on 57th, the other on Madison Avenue. Herman Miller, Haworth, Knoll–we had probably 200 lots go out the door.” This economic schadenfreudeis good news for many in Millman’s line of work: today hundreds of liquidators across the country are refining their business models into a very lucrative art–and that’s good news for designers whose clients want Vitra furniture on IKEA budgets.
Typically, a liquidator places an ad in the local paper on a company’s behalf, arrives at their office on an appointed day, finds an impromptu lectern from which to run an auction, and then turns whatever physical assets are left in the room into cold cash. Two dozen or so folks–designers, small business owners, and college kids–sift through light fixtures and coffee makers, jotting down lot numbers and calculating how much they might be willing to spend. During any given week, 30 of these auctions may be scheduled around the country.
Wellness, Inc., a health-services company in Naperville, Illinois, was looking to decorate its new office space, and found itself one morning in an ice rink, bidding on the fancy furniture of a failed ISP. “I bought a Herman Miller Aeron chair for $250, down from $750,” says Jeff Lindblade, the company’s director of technology development. “And they had custom-designed conference tables which would have been $10,000 a piece; I got one for $2,000.”
Nowadays, scavengers don’t even have to leave home: liquidators like Cowan Alexander, Gordon Brothers, and DoveBid joined Bid4Assets in conducting their auctions online, (Web auctions make it impossible to paw and bounce on the furniture, but some would-be buyers may find that bidding with no clothes on transforms them into cutthroat competitors.)
Credit for the dotcom chop-shop concept goes to Bid4Assets CEO Thomas Kohn, who founded his online liquidation venture in 1998, ignoring the heady dotcom optimism he observed all around him. His skepticism paid off. In August 2000, Bid4Assets became the first Internet company to liquidate the assets of another Internet company, CivicZone. The company puts out a steady stream of tragic press releases: “Happily Ever After? Not Quite. Bid4Assets.com To Liquidate Bankrupt Bridal Business.” But thanks to the company, an incredible variety of high-end furniture can be salvaged every day from the brutal economic smackdown.
DoveBid is currently offering Design Formula’s Le Corbusier long chairs, which retail at just under $700, at a starting bid of $1. Cowan Alexander moved dozens of Herman Miller Aeron chairs at its liquidation of Katmango.com in San Francisco in March, and when Furniture.com (which struggled valiantly to stay afloat until this year) turned its inventory over to Cowan Alexander in April, a crowd of Boston bidders made off with hundreds of items.
Those hoping to get 60 to 70 percent off the usual $1,000 price tag for a Herman Miller Red Super Deluxe desk system will find the most favorable conditions in the Bay Area, where the cafes are full of former dotcommies and where liquidation companies have found a treasure trove of bankruptcy. But entrepreneurs sank investment capital into extravagant furniture all over the country, so if you keep your eye on the newspaper classifieds in almost any American city (and, of course, online), that Barcelona chair your client wants for the reception area is probably there for the taking. And if they go out of business, you know who they can call.