Growth of Auction Market In Africa – Just like with many other markets, auction market involves the selling of one or more assets between two parties. The parties involve are bidders and a single seller. The seller in most cases goes home with the highest bid.
Africa is the second most populous continent in the World and is also known to be an economically less developed country. However, despite this, the continent still provides room for the development of auction market.
Around 1995 to 2005, the continent witnessed a 5% average increase in economic growth due to the increase in the number of businesses. Most of these businesses, directly or indirectly, requires auctioning at one point or the other.
Auctioning activity has been in existence since the beginning of the world. However, this article seeks to address the growth pattern of auction market in Africa.
What Is Auction Market?
An auction market is a type of market where bidders pronounce their decisions to purchase a particular asset with the seller selling to the highest bidder through an auctioneer. Therefore, the major people involved in an auction market are the bidders and the Auctioneer.
The auction market can be physical or virtual. When physical, the Auctioneer may announce the selling price and the bidders begin to state their price with the next bidder giving price higher than the previous bidder.
When virtual, each bidder will place his bid and the highest bid will be displaced electronically. Either way, only one of the bidders (usually the highest) goes home with the asset. This form of auction is known as the open ascending price auction.
Another type of auctioning is the sealed-bid auctions in which a number of bidders will send a sealed bid to the Auctioneer. The Auctioneer on the other hand will determine the highest bidder and make the sale to him or her.
The third of type of auctioning is decreasing price auction and it involves the selection of the first bidder. Here, the Auctioneer opens the slots for people to make their bidding decision but goes with the first bidder and this helps in preserving maximum privacy.
Auctioning can be applied to different business segment whether it is real estate, livestock, emission trading, online advertising, selling of cars and many others. It has been proven to be an effective method of selling assets with the greatest profit. However, your profit margin is dependent on type of auctioning you are using.
Actually, auction market has been in existence since 500BC. However, it becomes more evident during the 17th century. It has also witnessed a certain level of growth over the past decades.
In Africa, there has been an increase in the growth of auctioning most especially in the aspect of market share, familiarity with the public domain and asset inventory. In fact, some sectors in the continent already adopted the act of auctioning. Examples of them include the Commercial property industry.
However, in the real estate industry, the Africa auction market is still behind when compared to international standard. For example, The United State of America currently witness the sale of up to 5000 property on the auction floor on a daily basis and Australia currently witness 85% of second hand properties being sold in the auction market.
However, the African market has a very bright future as most of her auction methods are known on a wider scale. The misconception that auction is used exclusively as a channel for foreclosed and liquidated properties is well accepted.
In a study done in South Africa, they noticed an increase in the market share of the industry from R16 Million to R200 Million in 2010. This has however decreased over the past decade in line with global advertising trends.
To meet up with this trend caused by change in the advertising methods, different marketing strategies have been developed in the auction market. With the advent of the internet, selling and bidding on a national scale is now possible as compared to when auctioning was done in the dedicated newspaper auction segment. Most of the auctioning process is now done over online marketing channels which has a wider reach and more profitability.
Conclusion
The auction market in Africa is on the increasing side and promises to be a multi-million-dollar industry in years to come. This is supported with the increase in the number of online opportunities that the online world offers. If you need information on how auctioning works in Africa, contact Lansar Aghaji & Co for consultation today.