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Death and the Salesmen

Mike Gorman

New stuff is dull. Factory-fresh, perfect and perfectly boring.

But every piece of salvage tells a story. Sometimes it's a disaster story: Hurricanes strike, trains derail, trucks tip over. Sometimes it's a story of everyday human failure: Movers chip dining-room sets, businesses declare bankruptcy, inspection seals get broken. In California, someone stopped paying rent on a warehouse containing 270,000 bars of Nivea soap. In McAllen, 44,880 square feet of plywood and red oak got wet and warped. In Florida, someone ordered too many truckloads of mayonnaise.

Bad things happen, and people try to recover what they can. Salvage is about redemption. Incomplete redemption, dimes-on-the-dollar redemption, but still: redemption.

This is the story of SalvageSale Lot S6923-140.


At Blount, Curry and Roel, as at most funeral homes, the display-room caskets stayed open. That way, the recently bereaved of St. Petersburg, Florida, could stroke the velvet interior of the Polished Bronze model ($18,000) or admire the "moss pink" half-couch inside the Tapestry Rose ($6,125). They could ask themselves where they wanted their beloved to spend all eternity: beneath the high-gloss finish of the Paragon Mahogany ($7,400) or inside the humble, cloth-covered fiberboard of the Herculite Flat-Top ($865)?

Naturally, the caskets were open on the night of December 10, when a vandal set fire to a nearby shed. By the time firefighters arrived, the blaze had spread to the funeral home's attic. The building -- and the open caskets -- filled with smoke.

This was bad. When the newly bereaved are thinking about their loved one and eternity, they do not want to smell smoke. A claims adjuster ruled that the 22 caskets, which would have retailed at $104,840, were total write-offs.

But what happened to the caskets after that? Surely somebody, somewhere, would be willing to buy them at a discount -- but who? And how would the casket owner find the buyer?

Those questions didn't bother Mike Baty, director of funeral operations at Blount, Curry and Roel. "That's why we have insurance," Mike said. He sounded cheerful.


Salvage can be a touchy, secretive business. Sometimes the sellers want to stay mum; nobody wants to trumpet their accidents and overruns to the world. And sometimes it's the buyers who are reticent; even if salvage is cost-efficient, even if it can be made good as new, a customer might get the idea that the company traffics in damaged goods.

Blount, Curry and Roel's insurance company is one of those secretive sellers. It asked not to be named in this story, but it's okay to tell you that it's a large company, one whose name you've heard on TV, and one that encounters problems like this all the time. The company did what it usually does: It paid the policyholder and took possession of the goods.

But what does an insurance company do with 22 smoky coffins? Once, it would have turned to someone like Charlie Wilson's dad, an old-line salvage broker, the kind who traveled to factory explosions to see whether the pieces of twisted steel might be something he could sell. An old-line salvage guy might buy an insurance company's salvage outright, paying pennies on the dollar, or he might arrange to sell it for the company in exchange for half the proceeds.

Charlie grew up in the business. As a kid, he traveled with his dad to the sites of major disasters. At Southwest Texas State University, he studied salvage subjects -- business, technology and meteorology. In 1990, fresh out of college, Charlie took over the domestic side of the family business, while his dad chased offshore deals. After his dad died in '95, Charlie ran the whole thing.

But he didn't operate the way his dad did. He used a database to keep track of supply contacts and customers. He standardized the descriptions of frequently sold commodities like steel. And in '96, tired of overnighting photos to potential buyers, he began uploading the pictures to the Web. In '98, SeaRail started a Web site called SalvageSale, a "storefront" open to all comers.

You remember 1998: Phrases like "B2B" and "Internet startup" seemed like magic spells sure to conjure up money. That said, Charlie's idea was better than most: Why not auction salvage on the Internet?

He packed up his idea and his mountain bike and headed to Silicon Valley. Charlie was an unlikely dot-commer: He was a hair past 30, with "brick-and-mortar" experience in a decidedly unsexy industry. Nonetheless, Garage.com granted him venture capital. Charlie used it to incorporate SalvageSale.com, which then bought out its parent, SeaRail. In effect, Charlie's Web site ate his company.

Charlie enjoyed "the cool dot-com culture," but cool wasn't enough to offset Silicon Valley's staggering rents. He moved back to Houston and rented a downtown office in a Class B high-rise -- not the swankest, but not the worst. Up in suite 600, SalvageSale seems perched in a similar netherland. The conference room offers a cityscape view, but the heat is iffy, and the receptionist's dented desk appears to have been salvaged itself. The main decorative touch is a set of Charlie's framed snapshots of salvage he has known: cargo spilling from overturned trucks, towns wrecked by hurricanes, the raw materials of his business.

 

In July, Charlie proudly pointed out the office's main dot-com-style flourish: In the center of a windowless, fluorescent-lit lounge stood a Ping-Pong table. A Ping-Pong table! Wild and crazy, right? By the standards of the old-line salvage guys, it was.


In August, SalvageSale announced that Charlie had chosen to "hand over the CEO role to someone who can take the business to the next level." The board chairman praised the "high maturity level" that Charlie showed in stepping aside.

Charlie still serves on SalvageSale's board, where his title is listed as "founder." He's said to "concentrate full-time on industry relations and business development utilizing his extensive and unique salvage domain experience." Charlie, once the new wave of salvage, had become the company's tie to its roots.

For the new CEO, the board elected Dan Parsley, who was already SalvageSale's president and COO. Dan, in his mid-thirties, is an MBA who spent 13 years as a computer consultant. His on-line bio says that he supervised a unit specializing in "Internet solutions" and served on the board of "an Internet-based B2B exchange for the vertical energy market." If Charlie is SalvageSale's tie to the old way of doing business, Dan is its link to the brave new e-world.

Still, the idea behind SalvageSale hasn't changed. Dan likes to say that the business model is "scalable," meaning that each new deal doesn't require much in the way of overhead or individual attention. SalvageSale is more efficient than old-line salvage guys in the way that eBay is more efficient than a garage sale: More sellers means that a customer is far more likely to find something he wants. More buyers means that the item will probably command a higher price.

Already that efficiency is obvious in the kind of deals that SalvageSale handles most often: industrial commodities like steel, paper and chemicals. To sell a few tons of surplus paper, an old-line salvage guy might make 40 or 50 phone calls to potential buyers in his region. SalvageSale automatically blasts thousands of e-mails and faxes around the globe. In a recent deal, paper rolls that might have brought $500 in the United States were sold to a company in India for $8,000. An old-line salvage guy might have taken 40 percent of the $500, leaving $300 for the seller. SalvageSale charged 10 percent of the $8,000, leaving $7,200 for the seller. Everyone was happy: the seller, the buyer, and most definitely SalvageSale, which made $800 without any of its employees laying eyes on the paper involved.

But selling paper is one thing. Selling smoke-damaged caskets is a harder, less automated process. SalvageSale had never auctioned caskets before, and didn't already have a list of potential buyers. Besides, Dan knew this would be an especially tough sale. He used to consult with SCI, the funeral-services giant, and had learned that nobody loves a cut-rate casket. "When a family member passes," says Dan, "the last thing you try to do is cut a deal. This isn't selling ice to an Eskimo, but it's close. A nine or ten on the scale of difficulty. A triple lindy with a half-twist."

To buy time, SalvageSale recommended letting the auction run for a longish period, two weeks, from January 2 to January 16. The insurance company opted for a "bid exchange," meaning that the bids included both price and terms of sale, and if none suited the company, it could keep its caskets. In exchange, SalvageSale would command a 12.5 percent commission if a deal was done -- 2.5 percent more than its commission on a plain-vanilla auction.

The insurance adjuster uploaded descriptions of each casket: whether the handles were swing or fixed, whether the coffin had gaskets, its model and its retail value. For 14 of the 22 coffins, the adjuster sent photos.

The caskets' Web page made its debut on January 2. At the top was a short description of the funeral-home fire, followed by a bulleted list of "Offer Terms." Those included SalvageSale's usual "As Is/Where Is" -- a poetically minimal description of salvage -- with the further caveats that the buyer would be responsible for "loadout" and that the caskets weren't packaged in their original shipping boxes.

 

SalvageSale's software then whirred into action, automatically notifying anyone who'd registered a general interest in retail goods. The site's software automatically generated 143 e-mails, plus 23 faxes. Employees phoned 70 more prospects -- the holdouts who prefer to do business the old way.

From there, two "on-line marketmakers" trolled the Internet, typing words like "casket" and "funeral" into search engines and gleaning a few hundred e-mail addresses. Those accounts received mail from Wayne Wickman, another marketmaker. "SalvageSale.com Offers Caskets" said the subject line. A hyperlink in the body offered to whisk the recipient to the caskets' Web page.

"Chris in Connecticut" sent the address to funeralserviceprofessional.com with this irresistible header: "Want to save some money?" The site printed Chris's e-mail in its on-line newsletter, and 20 users clicked the link: 20 of the rare people who would consider buying smoke-damaged caskets.

As it turned out, those people exist in surprising numbers, and they found their way to SalvageSale. During the casket page's two weeks of existence, it received 369 hits. Traffic picked up as the clock ticked. Bidders e-mailed their offers. The amount of the high bid was secret, but e-mail told bidders where they ranked.

In the end, six bidders made 15 offers, most in the auction's last day. The auction was slated to end at 4:01 p.m., but the bids were still flowing. And by SalvageSale rules, an auction can't end until 15 minutes have passed with no new bids.

That moment arrived, finally, at 5:46 p.m., with a high bid of $7,801. The odd amount indicates the bidder was wise to the ways of Internet auctions. That extra dollar offers an edge over the uninitiated, who gravitate toward round numbers.

After the bidder and insurance company negotiated the deal's terms, the buyer wired the purchase price to SalvageSale, which placed the money in escrow until the title was exchanged. SalvageSale then extracted its fee, $975.13, and wired the remaining $6,825.87 to the seller.

The buyer, an East Coast company, chose to remain anonymous. SalvageSale will reveal only that it's a reseller, not an end user -- a significant detail. The new technology may someday displace old-line salvage guys, but for now, they're shopping for deals on-line. Rather than fighting the Internet's new wave, they're surfing it, salvaging whatever they can.


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