One has to assume that as time goes by and technology moves forwards, things like the used machinery market will die off and the new machinery market will dominate.
This sort of thing is already happening in car garages. We are seeing more and more computer programs and car parts that only the manufacturers can use and access, which pushes car garages and secondhand parts sellers out of business.
Yet, even though the technology is moving into the “New and only new” realm, the used machinery market is still pretty robust and still pretty effective at serving its customers. This article explores a few reasons why the used machinery market has stuck around for so long.
The Price of New and Used Machinery
The garage example in the introduction was a little unfair. Car manufacturers are going to continue making parts that only they control, and adding computer software that only their computers can access. The used machinery marketplace is a little different because manufacturers are not also in the business of setting up repair shops.
The cost of new machinery is pretty high, whereas the cost of secondhand machinery is often far lower. This is partially because of the volatile nature of the production and construction industries. Secondhand machinery isn’t low-cost because it degrades quickly. It is often low costs because the original users went out of business and sold things off cheap. The world is not awash with good-quality used machinery, so it is not dominating the new machinery market, but there is certainly enough used machinery around for companies to enjoy some very good prices.
Availability of Items
This was proven to be a very big issue when the 2020 pandemic rolled around. Very quickly we saw a shortage of computer chips, which made it very difficult for manufacturers to build a wide variety of devices and machinery. People were forced to turn to used machinery simply because it was the most readily available solution.
This new business helped secondhand traders to expand their reach and range, which essentially made them better at their job so that they could offer even more.
There is also the fact that if a business is in trouble and needs a part or a piece of machinery, they may not have time to order one and wait for it to be shipped and assembled.
Even when manufacturers have things in stock, the amount of time between ordering and actually having the machinery operational is too much for some companies. When wasted days start to cost thousands, it is often easier to get a buy used machinery that is available right now so that business may resume as normal.
Given that a lot of machinery is made and assembled abroad, it is fair to say that it takes far longer to deliver new machinery than used machinery. Used machinery merchants are often located in the same country as their customers. In some cases, the distance to the used machinery merchant is drivable. Just like with the arguments for availability, there are times when a company has to choose between waiting for the machinery to be delivered and losing money during the wait, or buying secondhand to keep the business running as normal.
New Machinery’s Profit Margins
This is a bit of a mixed bag because, on the one hand, the manufacturer has to pay for all the development and research that has been put into the device. Plus, the manufacturer has shareholders who are eagerly awaiting their payday.
On the other hand, manufacturers tend to be larger companies, and even though they have invested a lot into research, marketing and profits, they often have the sort of buying power that allows them to buy components very cheaply. Their size allows them to produce items more cheaply.
The thing about profit margins that puts secondhand traders ahead is that profits are decided on a trader-by-trader basis, whereas in the new machinery markets, things are a little more normalized.
Take, for example, when company A, B, C and D are selling a device. If company A, B and C are selling at $31K, $30K and $31.5K, then company D is not going to decide to sell at $18K. Company D is going to choose prices closer to its competition. Secondhand traders don’t operate in that way. They tend to pick their own prices and set their own margins, which means you are more likely to find bargains with secondhand traders.