"The times, they are a 'changin'..."
An old saying, and one that seems to be accurate regardless of just what the "times" currently are. The expression is, nonetheless, an accurate one, particularly as we talk about the HDD marketplace right now.
What is happening to the marketplace? Where is it going? Where are equipment buying dollars best spent? These are questions that weight heavily on the minds of contractors, and they are ones where the answers dictate the course of their company through the economic storm that is being felt, to one degree or another, across the entire globe.
To examine these questions, I have taken historical data from my company's own databases, input from our customers, and my own research to put forth my own opinions, for all they are worth.
Most everyone knows that the economy, and in particular the North American economy, is undergoing a period of major upheaval. They call it a "banking crisis", and as such it impacts not only the economies of North America, but the economies of every country that does business with North America. As I am not an expert in economics, I will leave my opinions in this arena to myself and simply say that these upheavals are making their impression on the buying and selling behaviors of HDD contractors, and that we have seen definite proof in our data that supports that.
Just what are these changes in behavior? Historically in situations like this, the general population becomes cautious with their money and investments, and the HDD buyer is no exception. Where in the past a contractor might buy for the future, purchasing newer equipment that may exceed their requirements in hopes of being prepared for future work, today's average HDD contractor is now looking for equipment to get them through their immediate need only. Buyers who are in the position of potential need are holding back on making new purchases, being cautious with their money in case of a period of low employment for their companies.
From a selling standpoint, we are seeing vendors of HDD equipment in the US taking more and more aggressive stances with their equipment prices, knowing full well that being in a position of chasing deflating prices will result in long turnaround times for their equipment sale. Prices have seen a sharp decrease as sellers attempt to undercut the downturn and lure buyers with prices that are below current fair market prices. That's not to say that equipment is going for pennies on the dollar, however prices have dropped sharply from levels even six months ago. Fortunately, a steady demand for equipment from overseas markets is helping ensure that prices do not fall too far, too quickly.
We have also seen a new directive from several of the major manufacturers of HDD equipment in North America. In an effort to protect domestic markets, and perhaps to capitalize on international demand, these companies have instituted hefty fees on paperwork that is required for exportation. In particular, the parts and documentation necessary to import a piece of HDD equipment into Europe are being charged out at what many believe to be an exorbitant rate. Unfortunately for international buyers of North American equipment, this means longer waits and higher prices due to the paperwork necessary for the importation of equipment into Europe. Fortunately, not all manufacturers are instituting these fees, and now is still an opportune time for the purchase of North American equipment, given the current pricing and availability.
Now, into this mix we throw a new ingredient, or at least one that has historically remained apart from the North American and European marketplaces. Over the last year we have seen a marked increase in vendors originating from China and India. What is interesting is not that they are offering their product for sale worldwide (as they have done so on a regular basis for as long they have been around), but that the products that they are offering are beginning to approach the levels of quality that the North American and European marketplaces require and expect. While the majority of the labor in these Asian countries is enormously cheaper when compared to the rest of the world, the components used in the machines are now being sourced from overseas, purchased for their reputation, durability and performance even though it affects the pricing of the equipment. What we are left with is a sort of hybrid machine, typically solid and very simple, that offers good performance and dependability, and that now has a price tag that can, at times, approach half of comparable machines offered from the North American and European suppliers.
Given the timing of this new push from the Asian vendors, I can foresee an ever-growing percentage of the HDD-buying population seriously evaluating these machines on their merits and taking the risk of purchasing from a Chinese supplier in order to take advantage of the much lower pricing and the offer of the warranties that new machines come with.
So, what does this all mean? To sum it up... it's a buyer's market. Prices are dropping and people are willing to negotiate in order to get the added security of money in their bank versus equipment in their yard. The three year lull in manufacturing between 2002 and 2004 has now passed through the used equipment marketplace, and an ever-growing selection of late model, low-houred drills are now becoming available at a fraction of the cost of a new machine. Vendors are appearing with new alternatives to the major brands, offering comparable performance and dependability with much lower prices.
This market, as unsettling as it may be to some, still offers substantial opportunity for savvy buyers. On the other side of things, sellers willing to realistically evaluate the current market values and price their equipment accordingly can still look at very acceptable turnaround times for their offerings.
As a supplier of used HDD equipment to the worldwide marketplace, we are expecting no downturn in sales, only a change in the form that the sales take place. We're seeing more international customers purchasing more drills at cheaper prices. The economic challenges facing the world are opportunities for many companies willing to take advantage of them, and we are happy to be a part of that opportunity ourselves.