When you want to look ahead, it is usually best to reflect on the past. When we look back on where we’ve come from to where we are, we create a vision for the future.
About 12 years ago, we started to hear the initial noise of all the dot-coms and the Internet in various industries and how it would revolutionize the remarketing industry, replacing brick-and-mortar auctions.
It was also a time when the leasing phenomenon would begin to return an onslaught of vehicles to the marketplace. Commercial sellers were looking for new ways to attract more buyers for their increased volumes, as well as find ways to reduce overall cost of sales. The Internet was the answer. It worked for other industries—banking, newspapers, and airlines. Why shouldn’t it work in the remarketing industry?
As the newly appointed CEO of ADESA in 1996, I sat with many of the industry leaders: Darryl Ceccoli with Manheim, Tony Moorby with ADT Automotive, and well-respected independents Larry Tribble, Ray Nichols Larry Brasher, and others to share thoughts on how our industry could work together to put a fence around our customers, preventing outside third parties from putting us out of business.
The quote that has remained vividly in all our minds, and that has been referenced many times since, came from Darryl Ceccoli when he stated, “We need to jointly create a single system that we could offer to all our customers.”
He referred to it as “a set of railroad tracks” on which we could all travel together with our customers. Darryl probably did not realize the impact of his statement and how it is reflected on to this day.
Walking away from our initial meetings in Dana Point, Calif., we began to try to figure out how all of this could possibly work.
Keeping in mind competitive differences, distinct cultures, independent resources, and individual philosophical beliefs, the question was, “Where should we place our bet?”
Starting with AucNet
This all started with a company known as AucNet. The company originated in the Japanese auto industry, where cars were successfully being sold electronically in a theater-style facility using joysticks and keypads.
AucNet likely created the impetus for Manheim and ADT Automotive years ago to begin listing and selling vehicles electronically, first on simple bulletin boards and then using interactive online sales.
Taking First Electronic Steps
Manheim’s first program was known as “Cyberlots,” with which I became very familiar early on because ADESA partnered with Manheim in 1996.
Manheim’s parent company, Cox Communications, was familiar with electronic listings through its newspaper business and particularly the Auto Trader publication (which later became AutoConnect). It was a natural progression to begin to list classified ads on electronic bulletin boards.
ADT Automotive was also looking hard at electronic business and probably conducted the earliest electronic auction within the industry on ADT Lion. In fact, ADT patented this electronic auction system, and it has continued to impact our industry.
Knowing the industry was moving into the electronic marketplace and having only a limited partnership with Manheim’s Cyberlots, ADESA entered into a more comprehensive alliance with ADT to work on technology initiatives, especially online selling.
About this time, all the major chains and independents created an industry consortium, pooling resources to offer the remarketing industry a universal inventory management tool.
In 2002, the new terminology of “upstream selling” was introduced. Toyota wanted to offer lease terminations to franchise dealers at the grounding site prior to auctions. ADESA was awarded the contract to build a custom site for Toyota Upstream.
Honda and Ford previously pursued similar programs with outside providers who were beginning to service the industry’s Internet demands.
Manheim offered its inventory management tool to the industry through the newly created Auto Auction Services Corp. (AASC). Manheim backed up Darryl Ceccoli’s speech by delivering this system to the industry to preserve our collective business interest and provide the best possible service to our mutual customers.
Manheim retained Cyberlots as its online selling platform and created Manheim Online, but continued to offer this selling tool to ADESA and independent auctions.
Before long, ADT was sold to ADESA and Manheim. ADESA then created its own online selling solution and developed DealerBlock in Canada.
For a while, the independents used products called LiveLot and LiveLane that were attempts by AASC to create an online selling system. They then introduced the next evolution of technology—broadcast selling in conjunction with a live physical auction, Online Ringman.
The launch of Online Ringman achieved success at the Idaho Auto Auction in Boise, Idaho, where General Motors was achieving maximum retentions in one of the country’s more remote areas. Owner Steve Marlow brought the entire country to his auction with the power of the Internet.
Manheim and ADESA soon embraced this successful technology and created similar systems such as Simulcast and LiveBlock, respectively.
Rather than selling on a single screen in a single lane, selling occurred on split screens in multiple lanes. In addition, instead of selling at only one auction, multiple auctions viewing several lanes on a single “dashboard” was now possible.
ServNet and Independents have since abandoned LiveLot and LiveLane, and the ServNet auctions upgraded to their own proprietary system known as Auction Pipeline.
Manheim began broadcasting “Mega Sales” from one location, reminiscent of AucNet’s initial business model. In December 2007, ADESA took Mega Sales to a new level with multiple commercial customers selling from multiple auction locations.
Offering One-Stop Shopping
Today, a myriad of systems, inside and outside players all with proven technology, are working to serve customers with broadcast sales and Internet-only sales offering static or interactive purchase options.
The National Auto Auction Association (NAAA) Portal is a single Web site designed to be “directional.” The OVE, DealerBlock, Pipeline, MOL, and ADESA Web sites are brought together with both physical and virtual inventory in one place for the entire industry.
Recently, NAAA modified this one-stop shopping opportunity by offering all our inventories on respective Web sites. By going to Auction Pipeline, for instance, users can view not only Auction Pipeline auction inventories, but the inventory for all auctions by the click of a button. Rather than creating a separate “portal,” we each use established Web sites as the portal, if you will, to all our inventories.
We’ve effectively created a simple solution for the entire world to easily and efficiently view all our inventories. As we are often reminded, the Internet allows us to operate in a truly global economy. People buy vehicles at our auctions from all over the world —South America, Europe, Africa, Asia, and Australia. The key is to understand that this inventory consolidation will drive more traffic to all our individual Web sites.
This solution will make it easier for our dealers and sellers to do business. It will work, but will require everyone’s cooperation regardless of competitive differences. All participants must be willing to cooperate with each other for the collective good and the good of our mutual customers.
Selling vehicles electronically continues to present challenges that must be overcome as an industry. How do we create a standard condition report that all our customers can trust and rely on? Customers may have to give it up for each other.
Imagine, if you will, General Motors, Ford, and Chrysler all agreeing to exactly the same documented condition report.
The industry has been talking about a standard condition report for the past 12 years. Notwithstanding some limited success by the NAAA and AASC in standardizing a condition report, each auction company continues to build a proprietary system, each customer continues to request individualized condition reports, and as an industry, we continue to confuse our most important customer—the dealer.
To truly expand national and international reach, a clear, concise, easily understood condition report and grading system is needed. Any fear that the dealer will be deceived must be removed.
This mission will require auctions and sellers to give up individual idiosyncrasies for the continued expansion of the electronic market, which will only continue to grow. The Japanese appear to have been successful in creating a standardized condition report and grading system, so it is possible.
Individually, OVE, ADESA DealerBlock, and Auction Pipeline have all made it work. Now we need to make it work together as an industry.
Transporting More Efficiently
Auctions transport a tremendous volume of vehicles. Yet, no one has less knowledge of what they are doing in the transport business than auctions. The auction industry has cars zigging and zagging everywhere across the nation, like ships passing in the night with no idea of the other guy’s cargo.
How do we as an industry take advantage of our massive size and figure out the efficiencies that would save us and our customers millions of dollars?
This dilemma is compounded with Internet sales where vehicles are transported an average of 500 miles compared to 200 miles in the traditional physical auction situation. What competitive advantage could there possibly be to not work with each other?
What I envision is the creation of one national Web site on which all transported vehicles are posted and all the national and independent carriers can build their own loads on their own time, coming and going quickly and efficiently.
We’ve created this fallacy or myth that there is a shortage of haulers and gasoline prices are putting them out of business. However, there is a lot of work, and gasoline could be affordable if we make it easy for the transporter.
Running a successful business is about making it easy for the customer. Again, to expand the electronic marketplace, we need to become more efficient in the transportation business. And, of course, this must be an industry initiative.
Standardized condition reports (CR) involve training. Just as training dealers to understand five different condition reports would be unreasonable, we cannot expect CR writers to be proficient in completing multiple report versions. Customers must help us be more efficient and cost-effective with one condition report. Auctions—get over it and get on the same program.
Bottom line: Auctions want to sell more cars electronically. Create confidence in the buyer with one simple, easy-to-read form and simple, consistent arbitration rules when questions arise. When it comes to arbitration, there can be no gray areas in the dealer’s mind. SmartAuction figured it out. If the car doesn’t match the condition report, bring it back—no arguments.
For Internet purchasing to really work, customers must be able to quickly and easily access online sales events and purchase vehicles. We must expand our buyer base by organizing dealer registration globally.
A few great examples are the salvage and heavy equipment auction industries. Copart and IAA have taken the lead in global moves throughout the rest of the world with the help of VB2 and Online Ringman technologies.
Currently, an excess of 25 percent of salvage units are sold and transported outside of North America. Why shouldn’t we expect that someone in Budapest would buy a whole car in Kansas City, the same as or similar to a rebuilder from Cairo buying a salvage unit in Sacramento?
These sales are even more attractive to foreign markets as the U.S. dollar continues to weaken against many world currencies.
Ritchie Brothers sells equipment worldwide. A single auction, for example, might sell to buyers in Asia, Russia, China, South America, or the Middle East, all at the same time. Ritchie Brothers also uses Online Ringman as its technology of choice.
This industry has spent hundreds of millions of dollars and even with all those expenditures, new outside companies are seizing opportunities where we have failed to provide needed services.
These outside companies have not spent the extremely high capital dollars to invest in facilities. They’re still missing the piece that auction operators have with value-added service capabilities—real estate (bricks and mortar); reconditioning, mechanical, and body shops; and a trained/skilled workforce of title clerks, recon staff, CR writers and inspection personnel. All aspects of the remarketing process must be committed to.
The salvage industry has evolved into two major players. The car industry has continued to consolidate. Salvage and car business have both gone global. Through this, a new word has been born, referred to as “coopetition” —cooperating with your competition while maintaining your competitiveness, distinct culture, and service capabilities.
As we continue the evolution, we are going to continue to reduce the virtual marketplace to fewer players. The question is, which will survive? The key to survival will be inventory. “He who has the cars will win the day in this space.”
Now, we take the hundreds of millions of dollars we’re spending and cooperate in a joint effort. We stand to save millions of dollars while at the same time creating a marketplace that services our customers better than anything that exists in the industry today. Imagine a combined marketplace in which all our inventories are accessible on integrated Web sites with many listed and sold through electronic media.
Consider again the stock exchanges, airlines, and banking industry.
Fewer virtual sites or perhaps eventually a single platform does not represent a new concept when considering how these industries have evolved.
A great example of “coopetition” is the ATM network across the world through which banking customers access their cash no matter their location, any time of day or night. They are not required to visit the banking office during normal banking hours. Similarly, our customers want to access car inventories wherever they might be in the world and to do so any time of the day or night as soon as their customers have a need. By eventually establishing one operating system, a coopetition could be possible—one system in which all customers could access all their information in one location—all cars purchased or sold, all funds received or paid, consistent reports, all inventory accounted for, all charges tracked and kept current.
Why are we still in the Dark Ages with checks couriered one at a time to the auction? Why not simply push a button as most industries and individuals do? Again, the banking industry allows the convenience of online bill payment with the push of a button. Cash inventory, investments, and print statements or other documents are available for our records.
In many ways, the auction industry has been compared to the banking industry. In the airline industry, people make reservations, select seats, pay charges, and print boarding passes all online.
As an industry, the major chains and independents will see the benefit of standardizing many of the initiatives I mentioned: condition reports, arbitration, transportation, dealer registration, and even a single operating platform.
Jim Hallett is chairman and COO of ADESA, a provider of wholesale used-vehicle auctions. He can be reached at [email protected].
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