TradeMachines | Overview

The Market for Pre-owned Machines Is Changing

Each day, diggers are sold from Europe to Africa. Each day, tractors from the U.S. are shipped to South America, and production machines from Switzerland are shipped to Asia. Consequently, hundreds of thousands of such transactions take place around the globe every day. Machine Trading has only just begun to shift to the Internet.

Finding a Used Machine Is Sheer Coincidence

Today, thousands of sellers around the globe are offering their used machines for sale on hundreds of websites. In Germany alone, there are approx. 100 industrial auctioneers and 8,000 dealers. On Google, however, it is hardly possible to find special offers concerning machines. If, for instance, one searches Google for "Agrarmaschinen" (agricultural machinery), one gets almost 38,000 results.

Having searched many dealer websites or machine auction websites, purchasers may eventually find a suitable machine by chance. Still, in such cases, purchasers will not be aware of all relevant machines offered on the market, especially if they are searching for a suitable machine around the globe. It's time for a change!

TradeMachines Helps People Search the Market

We have solved the problem of searching the market in an elegant way. Indeed, we collect offers from the many trading platforms, dealers, and machine auction websites there are, thus providing purchasers with an overview of the entire offer. This has long been possible for flight search on the Internet, but it is only just beginning in the area of machine trade thanks to TradeMachines.

Agreements with Market Leaders and Unique Strategy Ensure Competitive Edge

Within two years, we have become the global market leader in pre-owned machines. Today, TradeMachines handles almost one third of machine auctions in Europe. Toward the end of this year, we will have 1 million active offers on our platform for the first time. Nonetheless, TradeMachines is already the largest database for pre-owned machines within the market. Thus far, machines worth a total of €2 billion have been listed on TradeMachines.

TradeMachines is a meta search engine for a specific category – just like Trivago for hotels or Ladenzeile for consumer goods. (A meta search engine collects as many offers on the Internet as possible, thus enabling customers to easily get an overview of the offers and prices for certain products.)

Now It's Time to Shape the Future!

We are in the right place at the right time. TradeMachines is a brilliant idea (Börsenzeitung). Next year, we plan to further improve our position as the market leader. Consequently, our internationalization will be our main focus in 2016. It is our goal that in the future, all machine experts will be browsing TradeMachines while having their morning coffee in order to read the latest news; we are providing users with a service that is actually fun to use.

As a Companist, you can support us in making history worldwide, shaping a market, and fostering international innovation from Berlin-Kreuzberg.

When buyers click on an offer, they are redirected to the seller immediately. Thus, TradeMachines puts potential buyers in contact with sellers and is paid for this service by sellers. In this case, sellers pay a fee for each potential buyer redirected. This business model is called "cost per click" (CPC) and is identical to the model used for advertising on Google. Our sales team negotiates individual prices per click with each seller, and the average price is currently €0.30.

Better than Google Advertising

We put sellers in touch with the most promising potential buyers. These potential buyers are three times better than those attracted through Google advertising because

1. They know they are looking at a pre-owned machine.
2. They see whether the offer is an auction or a "buy now" offer.
3. They have already seen pictures and additional information.

Our customers have told us that the potential buyers they get through TradeMachines are three times more likely to buy a machine than those who have noticed the offer through Google ads. For potential buyers they get through TradeMachines, sellers pay five times less than for potential buyers they get through Google.

In addition to redirection of potential buyers, sellers may book another service from TradeMachines: targeted email campaigns. This service enables sellers to email an offer to all potential buyers, thus increasing awareness of the machine they want to sell. Today, this service makes up 20 % of our total revenues.

A Non-transparent International Market

The market for pre-owned machines is a traditional business shaped by sellers, brokers, and large industrial auctions. Just like cars, machines usually have several owners during their lifespan. Many machines are resold around the globe; for instance, woodworking machines are often sold from Western Europe to Asia. 

In addition to a lower price, higher availability of pre-owned machines compared to new machines is an important reason to buy a pre-owned machine. Indeed, the long waiting period that companies have to accept when they order a new machine makes such machines rather unattractive. Moreover, companies need to be able to replace defective machines quickly if they want to remain operational.

Annual Market Growth of 40 %

Today, the market for pre-owned machines has a volume of €380 billion. Over the last few years, the market has seen annual growth of approx. 40 % (source: Ritchie Bros. Auctioneers – the world's largest market player and a publicly listed company). Markets for pre-owned goods show that the trading volume of new goods roughly equals that of pre-owned goods, for instance in the case of pre-owned cars. (source: statista).

We expect the market for pre-owned machines to develop in a similar manner, which would correspond to a fivefold increase in the market volume to €1.2 trillion in 2019. That will be the point when the trading volume of new machines will be roughly the same as that of pre-owned machines.
 

Four Factors Fostering Rapid Growth

1. Trust: Sellers and auctioneers are offering their goods in an increasingly professional way on the Internet. In addition, sales are now more transparent, and it is easier to get in touch with sellers. This fact makes people feel increasingly safe ordering even expensive machines online, so more and more transactions take place on the Internet.
2. Offer: Transparency on the Internet helps people determine the real market value of a pre-owned machine more easily. As they can view the purchases previously handled by TradeMachines, buyers and sellers can very easily estimate the value of a pre-owned machine. As a result, more and more people and companies are deciding to buy and sell machines.
3. Reach: International reach is constantly increasing, thus also increasing the number of sellers and potential buyers.
4. Broker structures: After being sold to their second owner, pre-owned machines are often resold to a third or fourth owner in regions such as Africa or Asia. These owners are increasingly going online.

Sellers of pre-owned machines spend between 2 and 4 % of revenue from machines on marketing. In other words, sellers spend a total of approx. €9 billion on machine marketing today. This is the market where we are generating revenues and want to improve our position in the future.

Our competitors fall into three categories.

1. Marketplaces: These are the Internet platforms where transactions take place. Some of them are dealers, some are auction websites, and some are platforms simply providing the necessary technology. There is no competition in this area; instead, we are trying to attract all companies in this category as customers of TradeMachines.
2. Advertisement portals: Magazines in particular are trying to generate additional revenue through advertisement portals on the Internet. Another example of such a portal is Craigslist. On such websites, sellers usually list their machines, and potential buyers fill out a form to email their address to the seller. Sellers then get the potential purchaser's contact details and have to contact the purchaser themselves, for instance via email or phone. As a result, sellers have to spend much time on communication with potential buyers, which is why sales through such portals take a long time.
3. Meta search engines: TradeMachines is the larger of the two companies trying to provide people with an overview of the international market. The other one, Machinio, is a small company from the U.S., and its team consists of two university graduates in their twenties. Unlike TradeMachines, Machinio only emails potential buyers' contact details to sellers and does not enable direct online trade. In other words, it does not seize the opportunities provided by digitization in the same way as TradeMachines. Machinio's business has stagnated since May 2015.

Therefore, TradeMachines is unique.

Little competition within a new market has made us the market leader, and we want to defend this position.

Small-Scale Launch Two Years Ago

To make TradeMachines a service provider for real customers from the beginning, we sat in a shared office two years ago and talked to first customers on the phone. These phone calls told us that the problem we were analyzing really existed within the market and that sellers were willing to be part of our portal. We increased demand on our website with the help of Internet experts from established companies (e.g., eBay, ImmoScout, dooyoo, Wimdu, and Ladenzeile).

Focus on Service for Buyers

We want to be the most attractive point of contact for buyers of pre-owned machines. Consequently, good customer service and a positive customer experience are our top priorities. Indeed, if every search for a pre-owned machine started at TradeMachines, we would also be the most helpful contact for sellers.

An International Strategy

After attracting our first paying customers, we expanded to additional countries through our Internet platform. For this purpose, we not only had our website translated, but we also adapted it to country-specific technical requirements. Today, our platform has been optimized for 15 countries, and we are reaching buyers from over 100 countries.

SWOT: Improving Strengths and Avoiding Risks

Using Our Strengths to Focus on New Opportunities

• Our scalable IT will enable us to rapidly increase the trading volume of our marketplace and to grow in 2016.

Using Our Strengths to Avert External Threats

• Because of our profitable marketing activities, we are able to quickly react to potential new competitors and to significantly increase the number of users while slightly reducing profits. This fact makes it difficult for competitors to enter the market.

• We will keep focusing on an increase in company value so that we will also have access to venture capital in the future. Indeed, the option of quickly raising additional capital is particularly important to us because it helps us prepare for attacks by new market players.

Eliminating Own Weaknesses to Seize New Opportunities

• Our goal is to convert our machine database into a catalog containing all the information about a specific machine, that is, into a kind of "machine encyclopedia." For those machines traded most frequently, we will create the articles ourselves and simply add some data and facts automatically. Amazon product pages (example on TradeMachines) will serve as a model for this project.

To ensure growth in 2016, we will invest in three main areas, and the total amount raised on Companisto will determine the time of these investments.

1. Optimization of IT and Technical Scalability in 2016

We will strengthen our IT in a way that will enable us to keep data for several million machines up-to-date every second. In doing so, we will rely on the technical experience of the team of Wolfgang Heigl, who founded major German flight search website Swoodoo. Additional mechanisms will help us better structure data and recognize the characteristics of machines.

This will lead to a better search experience for users and to a better Google ranking.

⇨     Automatic structuring of machine data for a better search experience

⇨     Improved pooling of similar machines for a better overview

⇨     Scaling up of our data synchronization technology to position 2 million different machines on our platform until April 2016

⇨     Geocoding of machines to sort them based on distance and to enable search within a defined radius

2. Improvement of Our Internet Platform's Internationalization and KPIs

We are currently preparing our platform for inexpensive translation into many languages. As early as this year, we will start offering Spanish in addition to German and English. In Q1 2016, we will add Russian and Italian. In 2016, we plan to add a total of six languages used within the largest markets. Consequently, we will also have to increase our marketing activities in these languages. This is why we will expand our team.

⇨     Translation of our website into six additional languages

⇨     Expansion of our machine database

⇨     Increase in content and languages used for marketing

⇨     Increase in international marketing activities

3. Increase in Portfolio

We are currently recruiting salespeople in Western Europe and North America in a structured fashion. We will increase these activities in 2016 and focus on select additional countries with a large sales volume (e.g., South Africa, Australia, and Japan). For this purpose, we will also expand our telephone sales team. To support the sales process, we will integrate features into our website that show sellers more details on reach, inquiries, and revenues by TradeMachines users.

⇨     International expansion of sales team

⇨     Development of a trade tracking system that better illustrates the share of TradeMachines in the revenue generated

⇨     Increase in market monitoring to show and compare the revenue share of other marketing channels

A detailed list of the costs of our different projects can be found in our financial projection.

A large pipeline of innovation shows that we know how to grow.

For more details on our team, please see:

www.companisto.com/de/investment/trademachines/team

About Us

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Dr. Heico Koch

Phone: +49 30 / 39875355

Cell phone: +49 177 / 63 24 380

Email: hk@trademachines.com

Web: www.trademachines.de

Web: www.trademachines.com