With advanced tools and unrivaled access, online auctions are dramatically changing the way dealers are buying and selling used vehicles
In automotive retailing, much like any business, dealers are often looking ways to save time and money. And when it comes to buying and selling used vehicles, the advent of online auctions has been, for those that have embraced them, a huge benefit.
“It provides dealers and their employees, the ability to bid, buy and sell cars without leaving the dealership,” says Joe George, vice president of Digital and In-lane Development at Manheim auctions.
“Whereas in the past you had to physically send staff to an auction to bid on vehicles, which meant time away from the dealership and potential loss of business, today you can actively be involved with the auction process without leaving your desk.”
Manheim has been involved with the online auction process since the late 1990s, when parent company Cox Enterprises Inc. first started seeing the potential of the web as a significant platform for generating revenue. “
At the time, around 26 per cent of Cox’s revenue came via automotive and the Manheim business,” says George, “and the company was taking a look to see how, by using the Internet, we’d be able to help dealers sell more cars at auction.”
RAPID GROWTH
The initial strategy started off with Cyberlot, which enabled dealers to go and bid on vehicles and re-stock inventory as they needed, rather than wait for a physical auction. By providing proactive education support, Manheim went from selling $31 million worth of cars via Cyberlot in 1998 to over $100 million the following year.
Nevertheless, as George relates, convincing dealers to bid online still proved to be relatively difficult. “When Cyberlot morphed into Simulcast in 2002, a lot of dealers weren’t happy bidding on vehicles against remote buyers, but over time they’ve come to realize the benefits,” says George.
In the first full year of Simulcast, online transactions represented just one per cent of Manheim’s auction business, today it’s up to 16 per cent. “We have now sold $60 billion worth of vehicles across the Simulcast platform.”
Thanks to the advent of increasingly sophisticated online tools, such as the Manheim Market Report, which is the industry’s only daily wholesale price indicator, based on over 30 million transactions; dealers are able to determine the true value of vehicles on a 24/7 basis to ensure they’re able to make profitable decisions when it comes to buying and selling via auctions.
With smartphone apps, online auctions can be conducted
anywhere and anytime, with dealers able to “attend” multiple auctions in one day and bid 24/7.
SMARTER PHONES EMERGE
And thanks to the advent of platforms to support them such as smartphones and tablets, dealers can have true accessibility to auctions all the time.
“It really has changed the process,” says George. “Dealers and wholesalers can cover far more ground than in the past and with online listings there is access to a far greater number of vehicles, because you can bid on cars listed anywhere in North America. Additionally, you can attend multiple auctions in one day and you can bid on them anytime you like, even in the middle of night if you want to. It’s something simply not possible via a traditional in-lane auction.”
Don Wallace, director of Commercial Accounts for Manheim Canada, has seen that, in lockstep with the flexibility online auctions provide, the growth in vehicle history reports and the National Auto Auction Association’s standardization of arbitration and disclosure guidelines, the buying and selling process has become much more transparent.
“It’s really given more dealers the confidence in bidding for vehicles online and in conjunction with the recently introduced disclosure laws in Ontario, Manitoba and British Columbia, there’s been a significant growth in transactions both on commercial and dealer vehicles,” says Wallace.
Joe George, Manheim’s vice-president of digital and in-lane development sees online auctions accounting for 50 per cent of Manheim’s business within the next decade.
TRAINING REQUIRED
With technology constantly evolving, however, Manheim is taking steps to ensure that its customers are able to get the most effective and satisfying service possible.
As a result, the company is constantly on the road, engaging employees on the very latest tools and processes. “We’re always looking at ways to make the customer experience better,” says Josie Donehoo, Director of International Marketing at Manheim. “One way is by keeping our employees up to speed on the latest developments, such as Cyber Auctions in Europe, where unlike Simulcast there is no physical component, buyers compete online at a specific time for vehicle listed anywhere on the continent.”
According to Joe George, the online aspect of auctions is only really now starting to gain traction and while he says it will likely be “a wild ride ahead,” at least in the short-term, as new tools and techniques are developed and existing process evolve, the result will be “a very elegant redistribution system that will be extremely effective for buying and selling cars.”
SMARTER AUCTIONS
Ally SmartAuction has seen business grow exponentially since it started out in 2001. Testing the waters via Cyberlot, the idea initially, was to off-load used lease return vehicles without incurring transportation or auctions sales fees.
“The process was to have lease customers return the vehicle to the dealership, where we would send our own inspectors, who would take photos, and make reports and then post the information online. We developed an arrangement with GM dealers, which would give them priority during the first day of the sale, before we opened up the auction to other retailers,” says John Carere, Remarketing Manager at Ally Credit Canada.
Today, SmartAuction sells more than 90,000 cars a year across Canada and has expanded its portfolio from purely off-lease to dealer and rental vehicles. However, as Carere explains, part of that has been driven by changes in the market.
“Because, as a company, we fall into the bank category, we cannot offer leasing in Canada. As a result, when the leasing market dried up in wake of the credit crunch in 2008-09, particularly with GMAC, it forced us to look at other avenues for generating business, so we’ve seen a significant increase in dealer cars, ex-rental vehicles and fleet/commercial lease returns.”
Don Wallace, Manheim Canada’s director of Commercial Accounts, believes that greater transparency in the buying process has significantly improved buyer confidence.
Nonetheless, via tools such as Virtual Showroom, potential buyers can gain access to thousands of vehicles listed nationwide and the ability to bid on them only when needed, not when dictated by a “physical” auction. As a result, SmartAuction has seen its business expand significantly.
Furthermore, SmartAuction has proven to be an increasingly valued service among dealers, thanks to aspects such as its QuickTurn inventory management system. “This enables potential buyers to see which vehicles in the market have the quickest turnaround time, which sell the fastest as well as providing real-time appraisals, instant pricing recommendations and obtaining customized vehicle buying lists on a daily basis,” says Carere.
Combined with SmartAuction’s Mobile tool that enables dealers to buy and sell vehicles any time, anywhere via a portable device, plus even a physical auction that allocates premier lanes at major auctions across Canada (with a dedicated network of remarketing specialists to handle the process, from consigning cars to auction to the point of sale); it’s easy to see why more and more dealers are embracing this online auction and its portfolio of tools.
Currently, SmartAuction boasts an average 60 per cent sales rate, with more than 35,000 monthly transactions and vehicle turnover of around two days — impressive numbers by any standards.
Book Smart
Trust your little digital Black Book
When buying or selling used vehicles at auction, dealers want to ensure they can get the right vehicles for the right price, which means having access to the latest information on book values.
Canadian Black Book has been the leading valuation guide for used vehicle prices in this country for the past 50 years and with the advent of online auctions, it has expanded its services to help dealers in the buying and selling process.
“Dealers have been carrying around copies of Canadian Black Book in their pocket for decades at auctions,” says Josh Bailey, CBB’s vice president of Editorial and Research.
However, as auctions have migrated online, so has Canadian Black Book; developing tools specifically designed for the virtual marketplace.
“We offer two main tools,” says Bailey. “One of them is an online subscription service that enables dealers to enter in a vehicle’s VIN number, allowing them to decode it and make adjustments based on mileage, options and region, so they can make informed decisions when buying cars and ensure they get the best value for their dollar.”
Furthermore, with wholesale and residual values updated weekly, instead of monthly (as in the case of the printed Canadian Black Book), dealers can better make decisions on which vehicles to buy or sell based on current market conditions.
Additionally, Canadian Black Book is able to sell its own data to third parties online such as vAuto; a service that’s designed to provide dealers with accurate information to improve results both in inventory turn and profits when it comes to their used car departments.
vAuto offers, among other things, provisioning (the ability to see which vehicles are hot sellers and where they can be found), as well as appraising (getting live, accurate data on what cars are selling for in the dealer’s respective market) and pricing (how their own vehicles fare against those of competitors in terms of pricing).
“We’ve witnessed a significant growth in our online business,” says Bailey “and it’s likely to continue, since in terms of convenience, online values and auctions cannot be matched in terms of convenience and efficiency.”
It also means dealers no longer have to travel to big auctions to buy and sell. “We’re in the process of upgrading our existing online services to make them even more user friendly and time efficient for our customers, which should bode well for the longer term.”
