Hundreds of independently owned, non-chain auto auctions dot the U.S. landscape, each a unique business unto itself.
As is the case in many industries, an individually owned auto auction often faces a different set of challenges than, say, a corporately owned business or chain of businesses.
Keeping up with evolving and rapidly scaling technology on a national level, for example, is one such challenge.
Thus, pooling resources with similar businesses can often be a deft strategy for these auctions, and that’s where companies like Auction Edge come in.
Chief executive Dan Diedrich has been with the company since its outset in 2012, when Auction Edge was formed through the acquisition of Auction Software, Inc., Auction Pipeline and Diedrich’s former company, AutoLookout.
Six years in, he finds it important for independents to work with a partner like Auction Edge for many resources, the most important of which is that it aims to be “represent the pooled resources of a lot of independent companies,” Diedrich said.
“And (for) any one auction — really, kind of regardless of size — it’s a pretty big challenge to keep up with the evolution of the market, the changing requirement of consignors and buyers, and what the competitive auctions are offering,” he said in a phone interview late last year.
“It’s important because the requirements keep changing. It’s really, really fast-paced and we have a lot of people that get up in the morning, and eat and drink auction and remarketing technology,” Diedrich said.
“When you have a single company that has finite resources to dedicate towards technology, what inevitably happens is, you have single points of failure. You have an individual who has the absolute best intentions and could be very, very skilled,” he said. “But the ‘lottery factor’ is a big thing … if you’ve got a small business, and there’s one or two people in that business that basically keep all of your technology operational, that’s really, really structurally risky to your business.
“And Auction Edge, being a larger company — we’re not a big company, but we’re certainly, I think, more substantial than any single auction can provide — we have built-in redundancies and we have a lot less risk of a single point of failure bringing a company’s business to a halt.”
This strategy, he said, allows auctions to focus on where their strengths lie, while Auction Edge focuses on where its strengths lie.
At the time of the company’s founding, roughly 65 auctions used Auction Software, and “several” used the other two systems, as well, Diedrich said.
“There was kind of a defensive strategy initially, because the auctions were kind of unique in the fact that our shareholders are also our customers. And the reason that they founded the company initially was because they depended on these products so much, they wanted to make sure they were viable, make sure they were vibrant and make sure that they didn’t fall into hands that didn’t have a similar mission,” Diedrich said
“So, the initial mission was largely, ‘we need to protect these systems that operate our businesses.’”
That strategy, as described above, has grown over the past six years. As Diedrich points out, it’s not just about expansion in rooftops using Auction Edge, but rather, how they’re using the various services.
One example of that comes from this past autumn, when the aftermath of hurricanes in Texas and Florida left hundreds of thousands of vehicles damaged, leaving many dealers with depleted inventories.
Auctions used the company’s Edge Pipeline platform to expand the viewing area of the inventory listings. So, auctions in Indiana were attracting Texas dealers, in need of an inventory boost following the storms, via simulcast.
In short, auctions were generating activity from areas they might not have otherwise had exposure, Diedrich said.
“If you just take a market event like that, where you have hundreds of thousands of vehicles being taken out of the market, when there’s a void there, auctions that aren’t necessarily local can expose their inventory and be there to service the needs of buyers in a scenario like that,” he said.
Likewise, another evolution has come in the compliance, which is becoming an increasingly pressing topic for auctions these days amid events like widespread data breaches and Consumer Financial Protection Bureau regulations.
Auction Edge, Diedrich said, emphasizes “security” to its auction partners.
“We’ve done a lot of work to, I guess, button up some risks for auctions … we provide some best practices, consulting. We participate in industry groups, like the Auction Academy … and we give the auctions a little bit of insight, better ways to operate their businesses, in addition to taking a really proactive role in guarding their data and helping them interact with their consignors that have pretty high compliance bars to pass,” he said.
As for where the company goes next, it’s not necessarily adding more auctions, as he said Auction Edge works with close to 250 independents. (He estimates there are about 300 total independently owned, non-chain auctions)
“Expansion for us, I think, is taking a more active role and a more visible role in the remarketing industry. If you’re a national consignor and you are doing business through a Cox website like Manheim.com or (through) ADESA.com, you’re probably not going to want to go 30 different independent auction systems and interact with those individual systems. So we’ve kind of become the third leg of the stool, if you will, for national consignors and big, big buyers,” he said.
“So I see growth for us being more of a visible entity in the remarketing industry as opposed to a company that powers auctions. I think Auction Edge as a brand, Auction Edge as a destination is going to be something that we are really going to be focusing on because we do represent a really, really huge percentage of the overall market.”
AuSM recently interviewed Aaron McConkey of Auction Edge for a podcast at Used Car Week, which can be found below.