AS MORE CONSUMERS GO ONLINE TO DO THEIR SHOPPING, MORE DEALERS ARE DOING THE SAMEGE
By Ted Reckas of DealersLink

Internet sales are steadily increasing, and have been for years. The latest from JD Powers and Associates estimates that 86% of people shopping for a car look online first. For serious dealers interested in growing their business, this is nothing new.

What is somewhat new however, is the wholesale action happening online. The past year has seen a flood of new firms touting their online wholesale solutions as the next big thing. And while the quality of these operations is highly variable, some of them are right. Dealers and auction houses alike are starting to realize that the expenses of traveling to, and participating in, physical auctions are to a large degree becoming unnecessary.

“Sure,” say the skeptical, “but there’s no substitute for seeing a car and putting your hands on it before buying.”
That is true to a  degree. But many dealers buy units sight unseen from wholesalers because they have worked with them for years and know what they are getting. In short, they are trusted. The same is true now for some online outlets. Some have very a strong track records, with many online transactions and buyer reviews to back it up. And as more firms enter the online wholesale arena, they’re doing a better job of handling the physical auction processes in the virtual world. With in depth condition reports, streaming video direct from the lanes, full 360 photos and video, and seller ratings, an online buyer can know as much as a buyer actually at the auction. After some successful transactions, dealers can establish reliable sources that serve as “go to” suppliers when they need a hard to find piece.

As more commerce takes place online, the costs associated with real world, physical processes becomes more of an extra expense. The large auction companies need to charge fees to keep up with their huge infrastructure of auction houses, personnel, inspection facilities, etc. With the online model, a large portion of this is gone or decentralized, replaced by good software, marketing (Otto the ferret running all over your screen: not my fault), and a customer support team by the phone. Wholesale trading can now take place for a fraction of the trouble and cost.
Online wholesale forums come in several formats, the most basic of which runs via streaming video made popular by Manheim’s Simulcast. In this scenario the user participates in the auction like anyone else, and sees the same thing as the buyers in the lanes, except the user is seated at their computer, in their office, watching streaming video. It’s the real auction, minus the fumes – what many people refer to as telecommuting to work. The major auction houses now have this option.

A second common format is the online auction, where you can access a website and search for cars. Bidding is done online, eBay style, often with a “buy it now” price. In almost all cases, bidding and transactions go through the online auction house, which means dealers do not communicate directly with each other. Vehicles are still being physically transported to a central location from which the auction company controls the trading process, so transaction fees still apply, though often at a discounted rate. Some of these operations specialize in consolidating inventory from rental car companies or major corporate dealership groups.

A third model is the dealer-to-dealer trading network. Dealers can search for vehicles through a network, and are free to communicate and trade directly between each other. They look at other dealers’ inventory online, while the actual units are still on the ground at the dealerships, available for retail. If a retail customer buys the unit great. If a dealer makes a bid on it through the network and it gets wholesaled first, that’s fine too. Welcome to “wholetail.” In this case, the company that provides the trading network does not get involved in the deal – it just provides the information and the forum for communication, which is available 24/7. Because everything in the trading process, from the actual cars, to the negotiation of the deal, arrangement of transport, etc. is decentralized, there are no transaction fees. These are self-regulating markets, with seller reviews (modeled after the biggest e-commerce site the world – eBay) keeping dealers responsible for the quality of their trades.

There are risks associated with doing business on the internet. But as online vendors are getting better at reducing those risks, more dealers are choosing that over the risk, in time and money, of physical auctions.

For more info – ted@dealerslink.com