Internet-based fish auctions bring changes to first hand sales

EM3 20 FISH auctions1Competition for fish is becoming increasingly international

This article featured in EUROFISH Magazine 3 2020.

The basic idea behind auctions is very old: the goods on offer will be sold to the highest bidder. This method – which is also used to auction fish and seafood – is as simple as it is successful. But the advancement of digital technologies is now making its mark in this area. Many auctions have completed the step into the modern age and are using the possibilities of the internet to prepare themselves for the global fish business.

In many regions of the world it is common practice for fishermen to sell what they catch to just one or only a few wholesalers. This can work, but it has the disadvantage that the fishermen are dependent on the trader and are sometimes not paid fairly because the trader dictates the prices. That is why quite a lot of fishermen consider auctions to be the better method for first hand sale in the fish marketing chain. The principle of auctioning fish catches and selling to the highest bidder is not new and has in some places proven itself for decades. The bell that heralded the opening of the daily fish auction in Honolulu rang for the first time in 1952, and the Tsukiji fish market which closed down just recently in Tokyo, where it counted 900 licensed traders who handled around 1,600 tonnes of fish and seafood a day, was opened as early as 1935. The roots of the Norwegian Sildesalgslag go back to 1927, and Sweden’s largest fish auction in the port of Gothenburg even dates back to 1910. The idea of bringing together suppliers and potential buyers for trading certain goods such as fish and seafood under regulated conditions offers several advantages from which fishermen, traders and ultimately consumers all benefit equally because a constant supply of fresh produce is guaranteed every day.

The auctioning process is fast and timesaving, and it enables the goods to be brought into the marketing chain quickly. The system allows buyers to bid and thus compete for the fish on offer and rewards high-quality goods with higher prices. That means fair competition based on uniform market conditions, paying equal attention to various different aspects (quality, freshness, refrigeration, and careful handling), all of which ultimately pays off for the fishermen. Despite these advantages, fish auction systems are not always immediately popular and they are often difficult to implement, as could be seen in an FAO study from 2011 which focused on improvements to the fish trading system in the fishing port of Thuan An (Thua Thien Hue Province, Vietnam). The trading system at the time was relatively simple and based primarily on long-term business relationships between fishermen and wholesalers or intermediaries. Each fisherman only negotiated with “his” dealer with whom close personal relationships often existed. This network created individual dependencies and blocked direct competition for the goods, with the result that the fish was often sold below value and many fishermen were not adequately paid. The introduction of an auction system in Thuan An, the study found, could make an effective contribution to improving the livelihoods of fishermen in the region. In addition, open auctioning would encourage many fishermen to pay more attention to market signals and fish “more in line with demand” which could reduce the proportion of hard-tosell catches. However, the fishermen had a lot of reservations which could only be overcome through constructive dialogue with all the parties involved. It became apparent that rational arguments – however reasonable they may be – are sometimes not enough to dispel deep-rooted traditions in either business or personal relationships that have grown up over decades.

Auctions are designed for speed and efficiency

EM3 20 FISH auctions2Auctions are objective (even prosaic) and goal-oriented but by no means as anonymous or “unromantic” as is sometimes assumed. Transparency of all processes, clear rules and regulations ensure equal opportunities. The working day often begins around midnight when the goods are delivered for the morning auction. Fish auctions are often located in fishing ports, so that, after landing, the fish can be transported directly to the auction halls. Deliveries by road are of course also possible. Some auctions offer the full range of caught species while others specialise in certain products, such as pelagic or demersal species, mussels or tuna and swordfish. While schooling fish such as herring or mackerel are usually grouped together in larger lots and auctioned by the case or pallet, species such as tuna are in the meantime sooner sold individually. Between delivery of the fish and the start of the auction there is always plenty to do as the fish have to be sorted by species, size, weight and quality before further information (fishing vessel, fishing gear, fishing region and date) is added prior to arrangement in boxes or on pallets in the auction hall for inspection by the buyers. The amount of work involved in transhipment, storage, icing, sorting, weighing and quality assessment is considerable and requires a high level of expertise. The range of qualified skills and employees required at auctions is correspondingly large. Although the focus usually rests on the auctioneers there are far more workers involved behind the scenes to ensure smooth operations. There were allegedly 60,000 to 65,000 people employed at the old 23-hectare Tokyo Tsukiji fish market! Shortly before the auction starts, buyers arrive to view the day’s supply of fish and decide which lots to bid on. It is often the case that they already know the day before what will be on offer because the fishermen report their catches from the fishing ground at sea. Anyone wishing to bid at a fish auction has to be registered and usually needs an auction account which is also linked to a credit limit according to the bank guarantee. The buyers who bid and compete with each other for the best fish can be brokers or agents of fish processing companies, chain stores, local fish traders or restaurateurs. Since they meet regularly, most of them know each other. Traditionally, a bell rings to mark the beginning of the auction. The main task of the auction team is to sell the fish at the best possible price, which depends on the quality as well as the quantity of the fish and on the level of demand. At many auctions, the auctioneer moves along the rows of fish that are on display, followed by the buyers who then bid openly against each other. This can be an entertaining spectacle whose rituals and customs are probably only understood by insiders. The competition continues until all the fish are sold. This traditional fish auction procedure is becoming increasingly rare, however, because modern forms of bidding via the internet allow for much faster transactions. Fish if a perishable product which means that the time factor is of central importance, so anything that shortens the auctions is gratefully adopted.

Defined standards are a prerequisite for fair business

Computer and internet-based auction systems today allow buyers to bid from anywhere. Nobody has to be personally present at such auctions anymore because they receive all information on the offered fish on the auction’s internet platform and can adjust their bids accordingly. The fish auctions’ purpose and tasks have not changed but the customary procedures and techniques have. In the past, personal inspection of the fish was the decisive basis for an auction bid. Today this assessment is a “service” that has been outsourced and delegated to the auctions. By “anonymizing” the transactions, some of the original flair of fish auctions has been lost for many onlookers, but efficiency is what counts and that has increased significantly. More customers are reached, better prices are often achieved and the fish arrive at the market faster and in better quality. A prerequisite for the acceptance and success of internet auctions is of course uniform, binding standards that enable clear differentiation and categorisation of the fish on offer. The detailed information provided by the fishermen and the auctions must be clear and comprehensible to potential buyers. An example of this new form of fish auction is Norges Sildesalgslag, one of five fish sales organisations in Norway. A cooperative first hand sales organisation, it is owned and operated by Norwegian fishermen. Catches are recorded daily for the electronic auction while the vessels are still at sea and presented to potential buyers, whose bids are based on detailed information about the fish caught. After purchase, the catches are landed in the port preferred by the buyer, which guarantees optimal freshness and quality. Since all the basic data on the auctioned catches (including all details of the transactions) are stored in the auction’s computer system anyway, and since all subsequent processes, from invoicing through collection to final payment, are handled electronically, the extension to an internet-based bidding procedure was actually a logical step. The example of the Pan European network of Fish Auctions (PEFA), which was among the first in the world to develop, offer and use fully functional infrastructures for online auctions, also demonstrates the enormous potential of internet auction systems for fresh fish. Indeed, they can help fisheries control authorities and governments to manage the status of their fisheries better and combat IUU fishing. These are imperative conditions for the enforcement of quota systems, the creation of a transparent market, and fair taxation. In addition, such auctions contribute to stabilising the fish market, supporting fair cooperation between fishermen and fish buyers, and ensuring reliable traceability chains. Iceland, where fish have been auctioned over the internet since April 2004, has gone one step further and fully decentralised the auction system. There is no longer a central auction hall, as all catches reported by local small-scale fishermen by radio or telephone from the sea can be auctioned at 27 auction sites spread across the country. When the fish arrives at the port it has usually already been sold to the fish processing company, fishmonger or restaurant operator with the highest bid, which further accelerates entry into the value chains. None of the prospective buyers has seen the fish they are bidding on before. Icelandic fishermen offering fish for auction must provide very precise information (on fishing gear, quality, quantities and sizes of fish, type of ice for cooling, and processing stage, gutted, bled or not) and business is based on trust between the parties involved. Open competition is good for the industry because the auction market penalises poor, and rewards good, quality. Since the introduction of electronic auctions fishermen have increasingly focused on the high-end market and use mainly longlines and hand lines to catch cod, a fishing method which, unlike the gill nets of the past, does not cause bruising of the fish.

Centralisation of market entry facilitates many controls

EM3 20 FISH auctions3Better catch quality is worthwhile for both the fishermen, who are paid higher prices, and for the consumers, who get fresher fish on their plates. A welcome side effect of fish auctions is that they “democratise” competition, so to speak. Two different bidding systems are used. The classic one is the English system which is an open, ascending bid auction. The price is raised until only one active bidder remains. The Dutch system, which was originally probably taken over from tulip auctions, is quicker. Here you start with a price that is a little above the expected value of the fish offered and run a clock with price offers from the highest downwards. The displayed price is lowered continuously until the first bidder stops it. If you strike too early, you perhaps pay a little too much, but you get the goods you want. Those who hesitate too long keep their money but run the risk of going home empty-handed. This bidding system therefore requires a lot of experience. Moving fish auctions onto the internet also has the positive side effect that more market niches and special purchasing wishes can be satisfied. In contrast to direct auctions where the bidders are present in person internet platforms have a much greater, if not even worldwide, reach. This increases the probability that fish species or by-catches with lower regional demand can also be successfully marketed. Ultimately, this is an important contribution to greater sustainability in the fishing industry. In some auction houses fish caught or produced under certified sustainability labels such as MSC or ASC are even presented for auction in colourfully marked boxes to help interested bidders with their assessment. Despite their long tradition, fish auctions are by no means outdated. They have at all times advanced, taken on additional tasks and expanded their range of services to meet changing requirements. Whereas in the past their core business was the auctioning of fish today additional services such as the slaughtering and filleting of the auctioned fish often follow. This eases the work load of fish buyers, saves time and space during transport, protects the environment, and accelerates subsequent processing steps.

Auctions offer opportunities for showcasing their work

EM3 20 FISH auctions4It is not only professional fish buyers who are interested in fish auctions: they exert what is almost a “magical” appeal on tourists and fish enthusiasts among the local population. Visitors to an auction have the unique opportunity to marvel at unknown fish, to experience freshness and quality, and to recognize the effort that goes into getting the fish onto their plates as quickly as possible and in the best quality. Just how great the public interest in fish auctions can be is shown by the example of the Tokyo Tsukiji fish market with its tuna auction which was attracting 40,000 visitors every day before it closed. Since a similar number of visitors is expected in the newly built Toyosu Fish Market, which at almost 41 hectares is almost twice the size of the old site, a panoramic platform was also included in the plans, allowing a clear view of all processes without disrupting ongoing business. There is no entrance charge. And that is surely a wise decision in that it offers the fish industry a unique opportunity to showcase its high hygiene and safety standards, an impressive variety of fish and seafood and the perfection of its organisational processes in an extraordinary atmosphere. It is hard to imagine a better way to advertise one’s own business. As long as there are still auctions in the traditional style they should also be used to impart knowledge and provide specific information about important aspects of today’s fishing sector. A lot of tourist offices even offer guided tours of auction locations during which the operational procedures can be explained step by step. Participants learn how carefully the catches are checked at the incoming goods inspection to ensure food safety, they see the variety of landings and learn a lot about sustainable, scientifically based management systems within the fish industry. Some auctions even hold small auctions at which visitors can bid for the goods themselves. “Eight euros for the cod, nine euros, do I hear ten?” This is fun for everyone involved and is sure to be remembered for a long time. From time to time fish auctions also support charitable causes and donate the auction proceeds to social, charitable or similar projects. In January 2020 the auction of a 30.8 kg kingfish, which was hooked at the Abu Dhabi King Fish and Cobia Fishing Championship brought the record value of 200,000 Dirham or nearly 50,000 euros. The money went to the Emirates Red Crescent, a member of the International Red Cross and Red Crescent Societies. And at the famous New Year’s Auction in Tokyo, which took place in 2019 for the first time at the new Toyosu site, a 278 kg blue fin tuna was sold for 333.6 million yen (2.76 million euros).