Dealers have broken new records for online buying in recent weeks when they turned to the internet to source stock as snow storms hit Britain.
Auction companies reported record demand as dealers decided to brave the world of web-buying rather than the snow drifts. But when the snow clears, will the appetite for online purchasing remain?
The companies providing online auctions – and online access to physical auctions – believe that once dealers have used their web-based services, they will remain committed buyers. And that pool of buyers has been increased significantly by the recent weather.
Over a two-day period during some of the heaviest snow falls, Manheim Auctions reported more than 1,500 buyers logging onto the internet to view its physical auctions and bid through its Simulcast service.
As a result, web-buyers made more than 4,000 bids and bought vehicles worth £4.5 million.
Simulcast sales usually account for up to 25% of all vehicles sold at any one of Manheim’s auctions, but reached more than 82% for some auctions during the worst weather.
At the same time, rival auctioneer BCA reported record demand, with 41% of a single day’s sales being sold nationwide to internet bidders via the company’s Live Online service.
During the first sale of the year, nearly 2,500 online buyers competed with customers in BCA’s auction halls.
Overall, online bidders seem to have consistently made up more than a fifth of bidders at recent auctions.
BCA’s communications director Tony Gannon said: “As the severe weather affected travel, BCA mailed SMS messages to more than 7,000 buyers reminding them they can bid online. We expect to see even more activity from internet buyers via our Live Online service in the days ahead.”
This sudden peak in demand may have been brought about by exceptional weather, but if dealers liked what they saw and their experience was trouble-free, they are likely to repeat the exercise – blizzard or no blizzard.
Certainly the people behind these services are bullish.
Malcolm Fryer, commercial director of Paragon Remarketing, an online real-time auction company launched last year which has more than 3,000 registered buyers, said: “Existing customers of the Paragon Group who defleet to any of our six sites already have the vehicles onsite and these can be, and are, offered to franchise networks and independents.
“Eliminating unnecessary transport movements not only saves time, but also money.”
Mike Pilkington, managing director of Manheim Remarketing, added: “As it becomes more readily accepted by buyers, it has become an integral part of the remarketing ‘landscape’.
“Simulcast is now recognised as a well established, trusted and reliable business tool that complements physical auction by bringing benefits to both buyers and sellers and has certainly kept the wheels of business turning during the extreme weather.”
Their confidence seems to be well-founded, with a strong base of dealers supporting regular sales.
For example, BCA is staging nearly 1,000 Live Online sales in the UK every month, currently selling around 7,000 vehicles to internet bidders.
And rapid acceleration in demand is almost guaranteed.
While companies in the B2B automotive market celebrate sales totalling millions of pounds, retail experience has shown that the potential prize is a multi-billion pound market.
Online sales are healthy, currently accounting for several tens of thousands of vehicles, but with tens of millions of used cars traded each year, it is a drop in the ocean.
However, despite this potential growth, the traditional auction hall is likely to remain busy for years to come, according to Ken Trinder, head of business development at automotive e-commerce provider Epyx.
He said: “Among dealers buying from our e-commerce platform, those that thrived were using not just advanced online sources but also traditional auctions, vehicle brokers and even buying direct from existing owners.
“In the current climate, while this is a rapidly growing area of the market, few successful used dealers are getting all the stock they need from one source.”
Auction houses are showing their confidence in bricks and mortar with a series of investments, including the sale of BCA, which has 45 remarketing centres, to private equity company Clayton, Dubilier & Rice (CD&R) for more than £400 million.
BCA has also bought a 20-acre facility in Perry Barr, Birmingham, which will be developed as a multi-channel remarketing and logistics facility.
Wilsons Auctions recently announced that it was doubling capacity at two of its auction houses following a £2 million investment.
The firm currently has six permanent auction complexes in Northern Ireland, Scotland, Wales and England.
Aston Barclay Group has completed a rebrand of its three auction sites with a view to increasing market share, which has included investment across the network, such as a three-acre extension to its Shropshire-based Prees Heath site, while the 10-acre Westbury operation is set to double the size of its viewing canopy by mid-2010.
And Manheim is opening a sales facility at the former US air base Bruntingthorpe in Leicestershire, including a 30,000sq ft auction hall.
The strategy that drives these companies is simple. Cars take up space and they will need somewhere to go and be stored, so it makes sense to offer them for sale from the same venue, even if buyers can also bid online for the same stock.
Indeed, every major auction firm operates a ‘bricks with clicks’ strategy to cope with the need to store vehicles before they are delivered to the buyer.
As normality returns, experts believe the auction halls will remain full, but a wider audience will be aware that there is an alternative when time, distance or weather keep them desk-bound.
- Sewells Information & Research has been acknowledged as the pre-eminent source of motor industry knowledge for nearly 40 years, providing authoritative management information and innovative business solutions to help the retail automotive industry run businesses more efficiently.
For information, log on to www.sewells.co.uk
No matter how good the technology behind internet sales, dealers need two age-old ingredients – confidence and trust.
If they aren’t in the auction hall to see the car, they need to be confident in the description of the car they receive and trust that they will get exactly what they bought.
Dealers who have used online sourcing successfully say they are pleased with the results.
Buyers include Wesley Daniel, from WP Motors of Ilford, Essex, whose purchases have included a 2002 BMW 3 Series being sold at Manheim Auctions, Leeds.
Daniel, a regular user of Simulcast, said: “Simulcast is a good system that allows us to stay close to our business. Buying online is the future. It is convenient for our business needs and we rely on it a lot to buy our vehicles.”
A recent online sale by BCA generated bids worth more than £8 million, with the highest price BMW 750L topping £57,000.
Dealers are also putting part- exchanges through online auction to expose them to a wider audience.
Manheim reports more than 50,000 vehicles being offered for sale this way.
Perceived wisdom is that only lower mileage, higher value vehicles will attract online trade buyers.
However, supported by highly detailed condition reports and multiple damage images, that assumption is no longer accurate, the firm claims.
A total of 22% of the dealer cars sold online were for less than £1,000, 43% were between £1,001 and £3,000, while barely a third were more than £3,000.
But many dealers still need to be convinced. One major concern is price. Online sales bring in more buyers which can push up prices.
And being absent from the auction hall could mean dealers miss out on spontaneous purchasing decisions and vital networking opportunities to pick up market information.
One senior executive warned the online surge is an aberration rather than a precedent.
He said: “The industry is getting very excited about online. But there is no evidence that cars are making more money through this route. The margins are smaller. Online is a marketing buzzword – a box to tick when you talk about it.
“Plus an online buyer will set their sights on a particular vehicle. When they don’t win the bidding they walk away: at a physical auction they are more likely to stick around and buy something else as it catches their eye as it comes under the hammer.”
Successful buying online
Before auction day
Ensure your computer is com- patible with the auction provider’s systems. Key issues to check include whether you have the right web-browser (eg Internet Explorer). Do you need any ‘plug-ins’ (eg. Java). Will your security settings allow the auction to work properly?
Have you got the right equipment, including speakers to hear the auctioneer?
Get a login and approval from the auction provider. This may take a few days, so plan ahead.
If the computer is shared, make sure you will have access to it on the day.
Read the bidding instructions carefully. You don’t want to miss your first car because you don’t understand how to bid.
On the day
Connect to the auction as early as you can to familiarise yourself with the layout of the screen and identify any problems.
Depending on the type of sale you should be able to hear the auctioneer and watch on video.
If you connect in the middle of a sale, be aware you may not be able to bid immediately.
Check the standards used to inspect vehicles. Will all damage be listed, or just anything exceeding a set level?
Check the condition of each vehicle thoroughly before bidding.
Read the vehicle summaries carefully, as your bidding may be changed by even the smallest issue.
Ensure you know what time the sale you are interested in starts. In larger auctions, these timings will be approximate.
If you need more information on a car, ensure you call the auction centre before the sale so you can bid with confidence.
Keep the number for the technical helpdesk handy in case you incur any problems during the sale.