THE BIG DEBATE: Online remarketing gears up to challenge auction dominance
26 May 2009
One is long established, the other starting to gain momentum, but which type of disposal service would work best for your fleet? Here, representatives from both sides of the divide argue in favour of their business model.
"The online direct-to-consumer remarketing channel is a fast-emerging and increasingly popular alternative to wholesale auctions, which have been and are still the core disposal route for fleets to remarket their stock. They are very efficient operations, but since their end-customers are traders, they are inherently constrained to selling cars at trade prices.
Fleets have, for a long time, been looking to capture a slice of the retail margin. Previous attempts have included setting up car supermarkets, but these have mainly been unsuccessful because of the associated costs of running a retail operation.
Online direct-to-consumer remarketing companies use trade premises to replicate the low-cost structure of the auctions, but by selling to consumers via the internet they achieve prices for the cars that are between retail and trade.
Dealers, on average, obtain 20-25% margins. Removing dealers from the supply chain enables online remarketing companies to provide consumers with a considerable saving (10% over car supermarkets on average) and the fleets with an additional return over what is typically achieved in wholesale auctions.
Because of the large savings to consumers, cars sell very quickly through the direct-to-consumer remarketing route. Days to sale are typically 20 days, which is slightly longer than wholesale auctions but well worth it given the additional return.
While online direct-to-consumer remarketing started to gain mainstream traction in 2008, 2009 is proving to be the year it really takes off. Of the top 20 leasing companies in the UK, 11 are already selling cars through this new route.
Direct-to-consumer remarketing companies are continuing to find innovative ways to introduce further efficiencies in the used car supply chain to provide fleets with additional benefits. The newest innovation is Pre-order. Pre-order cars are remarketed before their lease finishes and are then delivered directly to the buyer after being inspected. This dramatically reduces the number of days to sale."
Gary Hobson is the CEO and co-founder of Autoquake.com
"The undeniable argument in defence of auctions is that they provide the key elements demanded by vendors and buyers. Vendors want the peace of mind of working with established, credible, proactive and financially sound professionals who can also offer a wide range of complementary and support services, while buyers want convenience, volume and choice. Turning vehicles into cash quickly is also seen by vendors as a key benefit of auction.
Choosing an auctions company with national coverage means vehicles can be de-fleeted easily and cost-effectively at a fleet's choice of auction centre. The ability of vendors to offer a dedicated sales programme and market their brand at auction also means they can develop a network of buyers. A loyal buyer following means demand always exists throughout the UK and can adapt in line with the volume of vehicles on offer from the fleet.
The depth of the buyer base not only extends throughout the UK and beyond in specialist segments but also provides coverage of every vehicle type, age, mileage and price of vehicles. Only auction companies can attract motor trade buyers ranging from 'scrap' merchants to buyers of £150,000+ specialist sports cars. An additional benefit is the increasing acceptance of auctions by the public, which is an added benefit to vendors of lower value vehicles. Auction firms can also provide products and services that add value to the remarketing activity of vendors such as driver sales, end of contract collection and inspection, smart repair or the provision of comprehensive reporting and analysis. Online sales channels are an integral part of the larger auction company's proposition.
Auction companies can offer additional disposal channels for fleets. For instance, Manheim's wholesale operation vehicle remarketing solutions provides a direct remarketing channel. This is particularly important where fleets have a need for discreet remarketing, such as when there is a high volume of returns of one product.
A firm's financial strength is crucial in the present climate. This provides fleets with assurance on payment for vehicles and means that as a remarketing partner our customers understand we're here to stay."
Mike Pilkington is MD of Manheim Auctions & Remarketing