This white paper is also available as a downloadable PDF.

Introduction

The auto remarketing industry is being transformed by the power and the potential of the Internet. The World Wide Web is revolutionizing how used vehicles are bought and sold in the wholesale marketplace. The Internet provides sellers and buyers with new opportunities to increase sales and raise profit margins. Using the Web, consignors can reach more buyers than anywhere else, and dealers can access inventory nationwide without ever leaving their dealerships. Online marketplaces can help dealers turn inventory faster than ever before and sell more vehicles in less time.

History

Technological innovations in the auto remarketing industry are rapidly changing the way business is done. As the online auto remarketing industry has matured, online providers have enhanced and streamlined their online tools to make them ever more efficient, effective and reliable.

Online auto remarketing milestones:1

Current environment

Today's economic difficulties have fueled faster migration to online remarketing channels, as consignors and dealers look for ways to maximize their revenues and reduce their costs. The current online wholesale market is estimated to be 1.7 million transactions annually, 18 percent of the 9.6 million formal wholesale auction transactions taking place each year. Manheim (37 percent) is the online transaction leader, and GMAC SmartAuction (26 percent) is close behind, though there are many additional smaller outlets.



Dealer participation

Franchised dealers (71 percent) lead the way in terms of online participation, compared to independent dealers (45 percent). Large dealerships (67 percent) and medium dealerships (66 percent) outpace small dealerships (44 percent). Despite the perception that dealers who are online are primarily younger, the average age for heavy users (more than 50 percent of sales online) is 45.3 years; the average age for light users is 42.5 years, and the average age for non-users is 42.7 years.3

More than 60 percent of U.S. buyers have used the Internet to source their wholesale vehicles. Nine out of 10 of them expect to maintain or increase their levels of online purchasing within the next year. Meanwhile, sellers in virtually every category, including dealer, bank, fleet and rental sales, anticipate making more vehicles available for purchase online this year and beyond.4



The benefits of going online

Buyers are turning to online marketplaces because they gain greater access to a larger number of vehicles for sale, and sellers are offering vehicles via the Web because they can reach more buyers. The benefits of transacting business online are substantial:

The most significant hurdle for many dealers to overcome when going online, the desire to "kick the tires" to evaluate vehicles in person, is being addressed head-on by the industry. Many sites now offer more thorough and more accurate condition reports, and some have buy back policies; both of these measures are intended to provide buyers with an increased level of comfort and confidence when purchasing vehicles online.7

Getting started online

For dealers who are weighing the decision to take their business online, trust is the critical factor. They need a marketplace they know they can depend on, and they expect great customer service, buy back guarantees, and equitable arbitration policies and procedures. Dealers need a consistent, efficient online experience, and online marketplaces are adding features and making improvements continually in order to meet and exceed those expectations. As in the real world, online buyers have to do their homework on the front end to get their questions answered before they choose the right online channel(s) for their business.

Dealers who want to begin doing business online should:

Dealers who succeed online typically:

Virtual retailing

Some dealers use a strategy known as "virtual retailing" to sell to customers who don't find the car they want when they visit a dealership. Many online marketplaces provide a "retail view" feature that shows a vehicle's features, photos and condition report without displaying its wholesale purchase price. When a dealer finds the right vehicle online, he can show it to the customer on his computer and still make the sale. The dealer can purchase the vehicle and have it transported to the dealership for the customer.

Successful selling

Sellers can win big by taking their inventories to the Internet. Because the Web can help them reach a broad, national base of potential buyers, consignors can reach their target audiences faster than ever before. Some consignors maximize their potential buyers by pursuing a strategy known as "online wholetailing," where a seller offers a vehicle for sale via both retail and wholesale online channels. This allows sellers to double their buying audiences.

Trust is the key

What does it take to make online wholesaling work? Again, trust is absolutely critical. Developing a reputation for doing business openly and honestly online is the only way to achieve long-term success. To sell consistently, the offering price for the vehicles being sold must be comparable to the going market rate in publications such as the Manheim Market Report and Black Book.

The condition of every vehicle offered for sale must be accurate and be written specifically with the target audience of wholesale buyers in mind. Listings should display multiple, high-quality photos of the vehicle, too. It's better to divulge as many details as possible, such as paint scratches, the gauge of the vehicle's tires and overall impressions about the vehicle's history, than to omit them. Sellers should fill out online condition reports with all of the information that they would want to know if they were the ones buying the vehicle wholesale. It may sound old-fashioned, but the "Golden Rule" (treat others as you would have them treat you) is the gold standard for selling vehicles via the Web.

Best practices

Even though online vehicle transactions are a relatively new method of doing business, there are well-known best practices that buyers and sellers use to succeed via the Web:

Evaluating online marketplaces

When evaluating an online marketplace, it's important that the site provide user-friendly features and support to make the Web experience as efficient as possible. Buyers and sellers should look for a good mix of fresh inventory and industry endorsements or partnerships. Be sure that the marketplace provides:

Leading online marketplaces include all of these capabilities and more, and they will help you make the most of your time buying and selling online.

1The Wholesale Institute, 2009. 2The Boston Consulting Group, 2008. 3BCG, 2008. 4BCG, 2008. 5BCG, 2008. 6TWI, 2009. 7BCG, 2008.

Manheim.comSimulcastove.com