Any independent dealer’s profits can suffer if they don’t efficiently manage their stock. Now that supplies of used cars are on the increase, and consumers’ disposable income has improved thanks to such low interest rates, every forecourt space should be fully utilised.
Dealers should focus on trading out the low-demand, ageing stock that risks losing money and replacing it with in-demand used cars that still have a strong margin. For many independent dealers, particularly larger ones requiring significant levels of stock, online trade auctions offer an opportunity to remain in control of the business while still filling gaps on the forecourt.
The adoption of vehicle condition grading by the major auction companies means buyers should have more confidence in the quality of the vehicles on which they are bidding, and sellers can remarket their unwanted trade-ins and overage stock with greater clarity.
However, there are downsides. Many used car traders value the camaraderie and insights to be gained by being on the auction floor first-hand and continue to see this as a key part of a wider mix of activity.
Independent Dealer asked several of the UK’s major trade auction firms for their top tips on getting the best out of online stock selling and buying services.
Market to traders and consumers simultaneously
Jon Mitchell, UK sales director at Autorola, said the internet allows you to upload all of your used car stock and make it available to the trade to buy, at the same time as the vehicles are sitting on your forecourt for sale to the consumer. The benefit is in reducing stocking days, as depending on your stocking policy once the car is nearing over-age, it still has one last chance to attract a retail buyer while being put out to gain trade interest.
Kevin Watson, a founder and director of CarToTrade, said independent dealers should have more than one avenue to turn to. Often dealers limit their buying and disposing source to only one or two partners. This approach can be too restrictive. “If you run a group auction-only policy, but haven’t yet done the deal with the consumer, you could place a ‘trying to do a deal’ advert online. Around 75% of prospects are not converted in a typical showroom, so this in itself can be a very useful tool to have in your toolbox. We strongly believe that one provider cannot provide all things required to run a successful dealership. The very successful dealers we have as members have a number of providers,” he said.
Keep it simple
With support from an online trade auction supplier, the set-up should be simple, because the supplier can manage the technical aspect of taking a data feed directly from the dealer management system (DMS). This is generally done every night, so as not to impact on the day-to-day business. “All you have to do is choose the stock you want to be uploaded to the online portal and everything else happens automatically,” said Autorola’s Jon Mitchell.
Gavin Smith, managing director of Dealer Auction, Manheim’s trade-to-trade system, said dealers can use technology to save time, thanks to apps on smartphones and tablet computers that allow them to upload images and enter vehicle details and appraisal information into the listing while they are physically walking around the unwanted vehicle.
“Our system allocates each vehicle its own slot and sellers can select between 24 to 72 hours for each vehicle, and no two auctions ever end at exactly the same time, maximising bidding opportunities,” said Smith.
Kevin Watson of CarToTrade said general sales managers, sales managers and group buyers are extremely busy, so an efficient website is a must.
“Our members love being able to simply jump on, do the business and jump off. Too many sites have bells and whistles that can get in the way, often introduced just to warrant a price increase,” he said.
Accuracy and honesty
Dealers can upload a car in minutes, said Dealer Auction’s Smith, “but I will always tell them that if they spend five more minutes carrying out an accurate and honest appraisal, they will get a better return”.
“If it is clear to a buyer that a thorough appraisal has been carried out, they will have more confidence and likely bid higher,” he added.
It’s a view shared by Mitchell at Autorola: “As online buyers never see the vehicle until they have had it delivered to their premises, the pictures and descriptions of your vehicle must be as accurate and clear as possible. Even if the used vehicle has slight damage on it or has paperwork or the spare key missing it is better to declare this and ensure you achieve a fast sale.”
Barry Cooper, managing director of Cooper Solutions, which operates Full Auction, said the best adverts are clear and concise, and warned that buyers will often dismiss a listing rather than search for extra detail, so independent dealers must be sure to add in all the relevant information: the exact mileage, the service history – if it’s partial, indicate how many stamps are in the book and include the most recent service report – appraisal marks and tyre tread depths to the nearest mm.
“Additional comments on the condition of the vehicle help draw attention, gives you a chance to inject a little personality and really make the listing stand out,” he added.
Price it to appeal
Online trade portals may allow independent dealers to offer stock to fellow dealers at the same time as marketing them to retail buyers through classified websites, but the seller must recognise the difference in the two target markets.
Autorola’s Mitchell said dealers should not load a car on a trade portal at a retail price as trade buyers won’t bid on it. Instead, they should ensure the car is offered at a realistic reserve. If you are unsure about the reserve, your online remarketing partner will help you price the car using CAP, Glass’s and their knowledge of the current used market.
At Dealer Auction, Smith added: “It may seem strange, but vehicles with a realistic reserve and lower starting price often end up selling for higher prices. These vehicles meet reserve and therefore go ‘on sale’ sooner, attracting more bids as soon as that happens, which enhances the profit opportunity for dealers.”
Cooper pointed out that one of the most popular search filters is ranking results from low to high, so a lower price will bump your cars nearer the top of the search results. “Launching with a low starting price will stimulate bidding activity,” he said.
For online auctions it’s all about confidence. An excellent presentation of a vehicle is just as important as for physical auctions, if not more, as buyers only have the images and description to go on. Smith said Dealer Auction’s analysis shows vehicles presented professionally almost always achieve higher prices. Imagery should be detailed and consistent to give buyers greater confidence when looking at vehicles online.
Cooper, of Cooper Solutions, said without images, a listing will get no interest. He suggests uploading a minimum of five photos including different shots of the exterior, interior, special features and any damage.
“It’s not all about quantity either. There’s no excuse for blurry, dark photos. Nearly all smartphones have high-definition options, so make sure you get up to speed on how to use your technology to its maximum potential and show your vehicles off,” Cooper said.
Ebay Advertising’s head of advertising, Phuong Nguyen, said the online auction company’s insight has shown mobile will be the biggest battleground from 2015 onwards as independent traders are more confident buying on their mobile devices.
This year, the proportion of mobile purchases of four major car brands on Ebay was 17% higher than in March 2014.
Although online auctions are largely automated, good communication between dealers and the support team at the auction operation is critical. If bidding on a vehicle has not met its reserve price, the auction team will often act as a broker and contact the last bidder within minutes of the lot’s end to see if a sale can be agreed, or approach the seller to see if they’re happy to let the vehicle go at below the reserve.
This is where the timing of the sale can be important, in that an auction listing ending well outside of usual trading hours may provide little opportunity for such contact.
Many online providers run an escrow scheme, which means a buyer’s money goes into an independent bank account and only gets released once they are happy with the car. Likewise on selling a car, the buyer’s money is only released once they are happy.
Others provide the buyer with the seller’s details and leave the two parties to arrange payment and vehicle collection between themselves.
Some are able to arrange funding for the buyer, such as BCA’s Partner Finance or Nextgear Capital, which has partnered with a number of auctioneers, including Cars Direct.
Many online auction firms provide a negotiation process to resolve issues that may arise, such as if the buyer receives the car and finds it was not as described. Users of BCA’s Live Online service are referred to a manager in the first instance and if no resolution can be found some cases can be referred to independent arbitration.
Identify what you need to buy
A benefit of buying used cars and vans through an online portal is that it gives you access to thousands of used vehicles to buy from the comfort of your office PC, or while you are away using your smart phone, iPad or tablet.
Most sites also enable you to set criteria to automatically filter listings for the used cars that suit your dealership’s stocking policy, such as by marques, age brackets and minimum or maximum mileage. With these in place, many will email or message you an alert if a fitting model is entered for sale.
Once registered as a trader on their portal and your line of credit and a signed direct debit are in place, you are ready to buy. Many sites, such as Cooper’s Full Auction, or Autorola, have proxy bid systems whereby the bidder can set the maximum they’ll pay and allow the system to bid for them.
Andy Brown, of Cars Direct, said online auctions can be more cost-effective than the big physical auctions and can offer an array of nationally available stock.