After extensive phone interviews with executives at several major commercial consignors and auction houses, I’ll describe the future of wholesale remarketing using the acronym “BOOM.”
The respective letters of “BOOM” describe how auction services and consignors are evolving wholesale remarketing to transform brick-and-mortar, online opportunities and metrics to deliver more value to both ends of the remarketing stream.
Physical auctions continue to serve the wholesale market, but digital disruptors — some from established brick-and-mortar houses — have emphasized to dealers that these online platforms deliver faster results, more choices, better decisioning tools and often better value than had they purchased or sold in the physical lanes.
All this to say, digital remarketing tools give both buyer and seller pivotal metrics once unavailable to help them achieve more value from the assets they’re selling or buying at wholesale.
These digital tools enable upstream remarketing and other resources that help dealers acquire inventory directly. As a result, some important functions of the auction intermediary are changing.
Bricks yielding to data
Brick-and-mortar auction facilities and their advisor and recon services still have legs, but online is creating and making possible more opportunities for buyers and sellers to make a profit.
Ally’s SmartAuction recently announced an agreement with Nissan Motor Acceptance Corp. and INFINITI Financial Services to list those makes’ off-lease vehicles, Ally announced in a recent press release. SmartAuction is Ally’s online wholesale platform. It lists 30,000 vehicles a day for eligible dealers of all brands.
“Margins are being compressed on all sides of the business, which basically means that every client is looking for better ways to work smarter and more efficiently to optimize their business,” said Holly Capps, vice president of commercial sales for Manheim. “We think 2019 is the tipping point where 50 percent of the cars will be sold through a digital channel.”
Data — and its practical use, metrics — is driving the digital remarketing boom.
“One of the things that help our customers sort out the new environment and thrive in it is their use of data to make the smartest decisions possible to achieve their goals,” Capps said. “This allows the client to move faster and then spend time on other areas of value to their business.”
Manheim recently announced in a press release its integration with vAuto’s Provision tool, “to help dealers value consumer trade-ins and act more quickly to list vehicles in the wholesale market place.”
Online opportunities, said Jason Alba, executive director of remarketing operations for Ally Financial, are causing traditional auctions to re-evaluate their operations and business models. “I think we’re still early in a new wave of digital opportunities, but we see the potential for enhancing the efficiency and speed with which vehicles can be sold.”
Brad Bollman, senior vice president, North American operations, for GM Financial, agreed.
“Half of our (off-lease, fleet and rental) vehicles will be sold upstream, and the remainder sold downstream through a network across the two large auction houses and some independents,” he said.
“What’s different in today’s wholesale market,” Bollman added, “are the data-driven analytical approaches to selling the right vehicle at the right location and at the right time.”
In an email from Cox Automotive, manager of economics and industry insights Zo Rahim said off-lease volumes should hit a peak this year. “It’s difficult to pinpoint exactly when we will see the peak in lease maturities returning to market within the year, but it is a reasonable assumption that they will be in the spring months. OEM captives can work with incentives, and their remarketing teams to pull-ahead current leases, so granular forecasting movements is difficult,” he said.
“For a few years now, various players in the industry and Wall Street have had negative views of off-lease returns and noted that they would cause a crisis in the used-vehicle market and collapse prices. However, off-lease units did not cause chaos in the used market. In fact, strong retail demand helped support the increased supply, and the market was able to absorb the units,” Rahim wrote.
“We measure this by seeing the growth in used sales over the past few years as well as strong price performance in the wholesale market. If off-lease units were not being absorbed, you would have seen inventory growth outperform demand leading to price declines, which we did not see in 2017 or 2018. This ultimately suggested to us that the volumes were being absorbed and will continue to be that way this year so long as demand remains high, which we forecast it will,” Rahim said.
For ADESA, about half of its open off-lease volume is remarketed digitally across its DealerBlock Prime online selling platform, said Paul Lips, the company’s chief commercial officer. Last year ADESA launched a dealer-branded mobile auction service to bring auction services to the dealer’s lot or event location.
According to the company’s website, “ADESA Mobile Auctions have all the manpower and technology you would find at a physical auction to facilitate a sale, including ADESA LiveBlock — a live streaming platform — to maximize exposure to interested buyers.”
Lips said the company would soon launch a new feature to its online tools and dealer targeted communications that offer tailored inventory suggestions using the dealer’s rooftop-specific purchase history, sales history and price points. “It can tell the dealer whether its vehicles are priced right at auction versus what they’ll be able to retail it for, so we can show them the data so they can concentrate more on the close. Sellers want to sell as fast as possible,” Lips said.
The auction services use the data they have amassed to optimize services.
“We had a client challenged by their business to improve the bottom line of the business overall, who was working with more than 50 locations across the country,” Capps said, “and by using targeted sales data, we showed how streamlining the number of sites used they could reduce costs and put that vehicle into the right channel to maximize profits.
“I would say it is getting harder to predict were values are going, so when we can offer resources such as our Pricing Optimization tool that reacts quickly to marketplace dynamics it can pick up on those trends faster,” Capps said. “This helps combine the right price, right channel and right (auction) location to target that buyer who will value that inventory.”
One disruptor getting attention is ACV Auctions, a digital dealer-to-dealer channel. Most interviewees for this report mentioned ACV when we discussed alternative remarketing channels.
According to news released by the company at NADA Show 2019 in January, ACV launched in June 2015, and now sells more than 10,000 wholesale vehicles a month on its auction platform, which represents 1 percent of all vehicles sold at auctions today. ACV finished out the year operating in 85 markets coast to coast, up from 30 markets at the start of the year. It plans to be in 140 markets by the end of 2019, it said.
“ACV is a 20-minute digital auction,” ACV Auctions chief executive officer George Chamoun told me at NADA while a live ACV auction played out on his smartphone.
“Sold” alerts clicked off steadily as he talked.
“This auction shows 61 dealers bidding, and already we have 16 bids on this 2010 Mercedes with 100,000 miles. It’s a great car for one dealer, and for another, it’s not the car he or she wants,” Chamoun said.
ACV provides online bidders a full vehicle condition report featuring 30 to 60 vehicle photos, including undercarriage and opened fluid reservoirs, so buyers can observe any tale-tell signs of mechanical issues those systems’ fluids might be telegraphing. It also features an engine-running audio app for capturing the sound of a running vehicle engine. The audio is appended to the listing.
A trained listener should be able then to detect telltale problems, if any, such as bearing knock, valve sticking or other issues. In all cases, this information enables the bidder to make a more informed decision.
“I think when folks think of a digital experience today, they think of ACV, it’s a benefit to be the Kleenex of a sector. Today we’re getting more inventory from banks and commercial consignors. Sellers want digital upstream where cars get the first look.”
Over at KAR Auction Services, the company recently announced upgrades to its TradeRev dealer-to-dealer digital mobile auction application. The upgrade, Move Metal, is designed to do that, faster. In a Feb. 5 news release, KAR said TradeRev shortened its auction timer to increase the velocity of dealer transactions on the platform.
For Ally, SmartAuction is its online flagship. “We’re watching the new entrants move into the market as we speak,” remarketing executive director Alba said. “ACV, for example, has its own in-house inspection staff that assists dealers to transact online.”
Commercial consigners are watching these trends
“There are many new (channel) opportunities out there, and while objectives of consignors remain consistently the same over the years, the business is about matching our vehicles with buyers. That means finding the best channels for making these matches in the shortest period of time and making sure the prices are good,” said GM Financial’s Bollman. “Most new technology revolves around the speed of the transaction, and that is really the opportunity, to help match a retail customer quickly with a car that we have at a GM dealership.”
In so many words, Manheim’s Capps agreed. “I would say we’re focused on engaging our customers where they are, in smarter ways with best-in-class upstream selling tools for all clients, including dealers. We help them use data to maximize their remarketing strategies, add value and get those cars back into retail faster.”