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Auction Fever

Is there really gold in government auctions?

The ads make it seem so easy-great stuff at dirt-cheap prices that you can sell for huge profits. And when the auctioneer is Uncle Sam, you can't lose . . . can you?

It depends. U.S. Department of Treasury Seized and Abandoned Property Auctions offer an amazing array of commodities in a broad range of lot sizes. But auction shopping isn't for everyone-it takes cash, connections and nerves of steel.

Jerry and Cathy Herskowitz started a small retail shop nearly 20 years ago; today, Variety Discounters Inc. in Pawleys Island, South Carolina, is a wholesale liquidation business with major retail chains on its customer list. Jerry, 52, travels the country in search of merchandise at government auctions, as well as from bankrupt companies and warehouse sales. The items are sold, usually in large quantities, to major retailers. Smaller quantities and unique items are sold to single stores, small chains, designers and galleries.

Jerry says most retail buyers don't have time to travel that much in search of merchandise, so they depend on operators like him. But the business isn't as easy as it seems. "Don't think you can go [to an auction], spend a couple hundred dollars and make a fortune," he says. "It takes a lot of work and contacts."

If you want to take advantage of auctions as an inventory source for either a retail or wholesale business, Jerry offers this advice:

  • Don't make auctions your chief source. Although you can find great deals, auctions aren't predictable.
  • Don't get caught up in the frenzy of an auction. It's easy to spend more than you planned. "So study the merchandise, know what it's worth, what you can sell it for and how much you want to spend," Jerry advises. "And when the bidding exceeds your limit, stop."
  • Do your homework. Understand what you're buying and be sure you can either use it or sell it.

Much of government auction merchandise has been seized in connection with criminal cases, and U.S. Customs sells property that's been abandoned. Every year, about 300 such auctions are held around the country, organized by EG&G Services in Fairfax, Virginia. For more information, call EG&G at (703) 273-7373 or visit http://www.treas.gov/auctions/customs.

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This article was originally published in the April 2000 print edition of Entrepreneur with the headline: Auction Fever.

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