There wasn’t any “grand announcement” from Cox Automotive when Sandy Schwartz took the floor at an NADA Show 2019 press conference here late last month.
Rather, Cox Automotive was touting a range of projects in the hopper designed to “make a difference in the future of dealers,” said Schwartz, the company’s president.
“One is digital wholesaling,” he said. “We’re a big, big player in the wholesale market. That business is going digital.
“We’ve been working and doing this for many years, but we’ve really reached a point today where I think you’re going to see the future change dramatically.”
The present changes in the wholesale car market are dramatic, as is.
Though he acknowledges some may find this stance puzzling given Manheim’s physical auction presence, Schwartz said that, “we believe we should run no cars through the lane. We think there is amazing technology out there today that allows you to move the car less, to get great history on the car. Not everyone subscribes to that. Some of our customers do.”
Many do, apparently. Within Cox Automotive’s Manheim business, 43 percent of sales in 2018 — and over 2 million transactions — involved a digital buyer, the company said.
“And we have seen that accelerate in recent years,” said Derek Hansen, Manheim’s vice president of off-site solutions, during the press conference.
Similarly, at rival KAR Auction Services, which owns the ADESA auction chain, the breakdown in the wholesale mix is about 50-50 online/digital versus physical auction, chief executive Jim Hallett told AuSM at NADA.
“As I said on ‘Mad Money,’ every business is in transformation,” Hallett said, referring to the CNBC television show on which he was recently a guest. “And we’re seeing transformation in our business. We’re seeing a big focus on digital right now. Online and digital.
“We’re now about 50-50. About 50 percent of our vehicles sell either in an online or digital format. And then 50 percent at a physical auction. So, we’ve seen this transformation taking place,” he said. “We’ve made some big bets on digital and online, going back to OPENLANE and obviously TradeRev, but other technology companies that we’ve bought along the way” as well, Hallett said
Grace Huang, president of the Cox Automotive Inventory Solutions group that includes Manheim, said it’s not just that the digital’s share at the auction chain is growing, but that the rate of growth is increasing, as well.
“And we’re pretty confident by the end of this year it will be in the 50-percent range,” Huang said in a forthcoming podcast with AuSM that was recorded at NADA.
“And this is going to be the year of the tipping point,” she said. “Obviously, we’ve been talking about it for 20 years, but believe it or not, it’s here.”
It has been a steady and evolving movement, for sure. Online wholesale platforms have been around for more than a decade. So, it’s not a new concept, but is likely one poised to pick up more steam.
“I have to tell you, when I took over Manheim eight years ago, I was convinced in a year or two we’d be at 50 percent (digital sales) … we’re not at 50 percent today, but we absolutely believe this is the way of the future,” Schwartz said.
“And that’s the technology with Manheim Express, with RMS, that we’re investing in, because that will be better for the dealer, it will be better for the wholesaler, it will better for the end consumer when it gets to them,” he said.
New players emerge
Tech investments are what some of the relatively new entrants to the space are betting on, as well.
ACV Auctions, for example, is a dealer-to-dealer online wholesale marketplace that is not just securing funds (raising $93 million in a Series D round of funding in December), but also putting a big emphasis on tech development.
ACV debuted a new feature at NADA Show called ACV AMP designed to let dealers hear the recording of engines of cars listed online through the wholesale platform.
The ACV AMP feature is part of the company’s condition reports and is slated to be rolled out later this month.
“Our team continues to develop game-changing technologies in the digital auction space,” ACV chief executive CEO George Chamoun said in a news release. “ACV AMP is another example of our commitment to listening to what our dealers want to see and hear when buying wholesale vehicles, and delivering the next-generation auction experience.”
Canadian online auto auction EBlock is also betting on this market. The company announced last month it officially set up shop in the U.S., as well.
EBlock’s U.S. operations are headed up in Burlington, Vt., and led by former Dealer.com executive Mike DeCecco. (Dealer.com is also headquartered in Burlington).
EBlock will begin its U.S. expansion in the Northeast, and leading the company’s North American growth is president and chief operating officer Jason McClenahan.
There is an “aggressive hiring plan” on tap this year, including for sales and operations positions, the company said. EBlock exhibited at NADA Show 2019, as well.
“Our dealers see the hammer drop on over 200 units per hour and they are incredibly pleased with the results they are experiencing using our technology,” EBlock chief executive officer Ryan O’Connor said in a news release. “Launching in the U.S. around the NADA convention makes perfect sense for us.”
In that news release, DeCecco, who is vice president of sales and operations for EBlock in the U.S., said: “Most wholesale vehicles in the U.S. sell in 60 seconds; why change this formula? We’ve seen what EBlock has done in a short amount of time in Canada and we are confident that the product will thrive in the U.S. market.”
Independents get in on action, too
In a late summer interview with AuSM, ServNet CEO Pierre Pons said he believes independent auction technologies such as Auction Edge, and the independents’ embrace of technologies from their corporate chian competitors, show that the traditional auction companies can be strong competitors with the technology “disrupters.”
“We are every bit as disruptive in our own industry, and that’s what keeps it going,” Pons said. “The independents and ServNet are at the cutting edge of everything that is technology-related.”
ServNet continues to keep an eye on the disrupters, ServNet president Eric Autenrieth wrote in an update last year. But ServNet is not looking avoid those channels. Instead, it wants to use those tools to strengthen its online capabilities.
“We can sell (a vehicle) in lane, we can sell it online before the sale, we can sell it online after the sale, and we can … sell the vehicles while they’re sitting on the dealer’s lots. So we’re looking at it as an opportunity to expand our coverage of what services we do offer,” Autenrieth said in a phone interview this summer. “We’re trying to stay on the front cutting line of what’s happening in the industry.”
Correspondent Daryl Lubinsky contributed to this story.