Part II: Off-lease volumes, STRATIM purchase open doors for KAR

Rendering of the courtyard at KAR Auction Services headquarters. Photo courtesy of KAR.
CARY, N.C. - 

Much like the multi-layered benefits from greater off-lease volume for KAR Auction Services, the company’s recent purchase of STRATIM has several prongs of opportunity. KAR announced in early February that it had purchased STRATIM, a mobility and fleet management software company.

It’s a move that gives KAR a strong foothold in the world of on-demand car- and ride-sharing services, urban commute providers and autonomous vehicles — a world in which many of KAR’s customers already take part.

KAR chief executive officer Jim Hallett and chief financial officer Eric Loughmiller addressed that and more with AuSM by phone last week, shortly after the company conducted its fourth-quarter and full-year 2017 earnings call.

‘Connecting a very fragmented supplier base’

Through real-time data and predictive analytics, STRATIM’s software digitizes fleet management and helps streamline operations for mobility service providers, KAR said in a news release announcing the purchase earlier this month.

So, for instance, a fleet owner can use the company’s automated vendor management platform to onboard, manage, service, dispatch and pay vendors.

STRATIM, which has a presence in 25 cities throughout North America, has processed service transactions for several leading mobility service providers and automakers.

And its customers include many who are already working with KAR in other capacities.

As far as how STRATIM fits in to KAR’s enterprise, the company will be a part of KAR’s digital services group. That group, which is led by KAR’s Peter Kelly, includes various software-as-a-service platforms that KAR has implemented into their end-to-end remarketing offering, such as an asset like the CarsArrive Network.

“These are platforms that connect our customer base with a very fragmented supplier base,” KAR chief operating officer and chief strategy officer Don Gottwald said in a phone interview with AuSM shortly after the purchase.

“In the case of STRATIM, that’s what they do — they have these fleet owners that are in ride-sharing and car-sharing and other parts of the shared mobility segment and supplier bases that are bringing services necessary to optimize the uptime and the use of those fleets.

“We do that type of thing with CarsArrive between those that have cars to ship and those who have the ability to ship them — trucks,” Gottwald said. “We do that with our Recovery Database Network, or RDN, platform. So, STRATIM fits nicely in the type of assets that we’re used to running and growing and scaling.”

Providing service within a transaction

STRATIM offers “a marketplace of suppliers” to help mobility fleet operators manage their fleets more effectively, Gottwald explained.

So that gives KAR opportunities on the front and back ends of the fleet process.

For instance, some of those could come as the cars are entering the mobility fleets, with things like installing various technologies on the car. And on the back end, it may be removing that technology when the car is de-fleeted and then selling the vehicle.

Other tasks that might include things like cutting keys, fixing dents, sale preparation and shipping – all of which KAR could provide to companies with mobility fleets.

“So, it’s continuous service levels,” Hallett told AuSM.

He added: “A lot of these vehicles require repositioning and you need to rebalance the fleet in terms of how it’s located throughout an urban area. You need to gas these cars. The services go on and on. That’s really what STRATIM does.”

The approach is similar to many of the entities within KAR, which are service providers between the two parties of a transaction.

“When we look at our business, we have got some businesses that have had great platforms for us to drive revenue out of transactions between two parties, not including us,” Loughmiller said in the phone interview.

An example would be the Recovery Database Network, which goes between the lender and repo agent when a loan goes south and the car needs to be repossessed. 

Or check out CarsArrive, which goes between the shipper and logistics company, Loughmiller said.

“We were pleasantly surprised when we bought OPENLANE that these assets were included,” Loughmiller said, referring to KAR’s 2011 purchase of the online remarketing platform.

“At that time, we didn’t fully understand the power of it, in terms of generating revenue off of these transactions,” he said. “We’ve learned and now we’re looking for more platform plays like that and STRATIM is one of them.”

Early reach into mobility

And KAR is pleased to have gotten into the ridesharing and car-sharing segment of mobility early.

“With that (STRATIM) customer base, we’ve established a trusted relationship. If we can be in the market early, we think that they will want to deal with a company with our substantial capital and the ability to provide those services, versus what’s becoming an entrepreneurial industry, where there’s a lot of people out there with their last dollar on the line trying to make it work,” Loughmiller said.

“And so we think it’s a chance for us to play – play aggressively early on but use our trusted adviser role with them,” he said.

Part I of this story can be found here

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