REMARKETING: Crunching the numbers
01 October 2015
Author: Jack Carfrae
The use of analytical data from an ever-expanding range of sources to monitor used vehicle performance has mushroomed in the remarketing industry - and it's more than just simple figures on a spreadsheet. Jack Carfrae reports
There's still a case for remarketing using traditional methods. Knowing the market and understanding what sells well, where, and in what kind of condition, still counts for something. As a result, the personal touch is far from extinct.
The granularity of information generated by the used vehicle industry has increased exponentially, though. While there is a place for insider knowledge and a rolled-up used vehicle price guide, there are now huge amounts of data and analytical tools available to hone the defleeting process, and track and make the most of how vehicles are sold.
"The use of business intelligence data and analytics within remarketing is becoming more widespread, and demand for this information will inevitably grow," says Simon Henstock, operations director at BCA.
"This includes looking at a wider range of data to inform reserve price setting," he adds. This includes daily, condition-adjusted vehicle valuations - rather than traditional monthly data - and vehicle demand data (such as, which channel the vehicle is most likely to sell in and which sales to enter it in).
It also includes making the most of consumer data such as retail market pricing and demand information.
"There is also inclusive data around the benefits of vehicle preparation, mechanical checks, vehicle movements and other activities" states Henstock. This can be combined with information including inspection costs, appraisal images, the length of time in stock, auction viewing interest, and market or performance data for similar vehicles.
"All of it is key to helping fleets make the right remarketing decision. Real-time access to this data can help to improve first-time conversions, and make sure provisional bids are dealt with using the most up-to-date information available."
The real-time element is potentially the most valuable aspect of modern remarketing. The ability to see live values, and observe how vehicles and segments are performing, is a world away from retrospective pricing.
Jon Mitchell, sales director of Autorola, sings its praises: "Access to real-time used pricing data, based on a day or a week in the life of the used market, and being able to access that information easily through a tablet or a smartphone, has to be the biggest development in remarketing."
Mitchell adds that fleets shouldn't rely solely on value guides, as they are out of date as soon as they are published. "Obtaining live market data is the most valuable data available, as it gives an immediate snapshot of how a used car is performing in the market at that specific time, by region or nationally." Referring to this data to set realistic reserve values can then speed up sales.
"However, we don't advise overreliance on one pricing metric, such as 100% of Cap Clean, as it makes a remarketing strategy too restrictive."
Henstock agrees that modern techniques, such as employing mobile devices, are now very much part of the data collection and implementation process, both for fleets and for the remarketing companies.
Meanwhile, although it isn't data in the traditional sense of numbers on a spreadsheet, visual information from online videos is now used extensively to appraise and list vehicles.
"Video is an increasingly important tool that is being used to catalogue vehicles online," says Henstock. "It generates a lot of valuable data around the individual vehicles themselves that helps sellers make informed decisions about valuation and preparation."
Tim Hudson, managing director for remarketing at Manheim, thinks there's a lot of value in tracking the performance of vehicles of varying conditions, then working out where best to sell clean used cars and vans, compared with those requiring work.
"The buyer data available shows that car supermarkets are increasingly buying only upper-grade vehicles. So far, this year has seen grades one and two making up 54.7% of units bought, rising from 49.3% in 2014 - a 5.4 percentage point rise. The data from franchised dealer buyers shows a similar trend, with grades three to five making up just 17.2% of units purchased in 2015, compared with 20.3% in 2014."
However, having the data is one thing - what you do with it is where it proves its worth. Practically applying the results can be extremely worthwhile, as Hudson explains: "For one fleet company, the data showed that the largest volume sold were grade three vehicles. National sales data indicated that raising grade three vehicles to grade one could result in an uplift in values of £317.54.
"The company's second-largest group of vehicles were grade four. The sales data indicated that if these were raised by just one grade, the residual value uplift could be £392.88.
"We undertook reconditioning work on a proportion of the fleet's vehicles, and the resulting return on investment was 96%. This clearly demonstrated the benefit of investing in reconditioning to raise the quality of the stock offered for sale at auction."
However, despite the benefits, it's easy to overdo it on the data analysis side of things. Mitchell says there's now so much in the way of information that it can become overwhelming for fleet operators.
"The amount of data available to support the sale of a used car during pre- and post-sale is enormous. Getting bogged down in that data can sometimes distract a vendor, rather than help them. Keeping focused on setting the right reserve, based on what the market is currently doing for that make, model and age of car, is important to ensure the car sells quickly, and for the best price."
For better or worse, Mitchell adds that much of the remarketing industry is still catching up with data analytics, and the available tools aren't as widely used as we are led to believe.
"Not everyone is using these methods because the industry is still in the process of communicating the benefits of accessing this type of information. The used market is still very traditional, so new technology and initiatives take time to be adopted."
Slow burn it may be, but both BCA and Autorola claim the industry is in a transitional state, as more buyers move to online auctions and begin making use of analytical data.
"With more and more buyers using online channels to purchase, the critical factor is to have the tools and processes that make buyers feel as comfortable buying via their laptop or mobile device as they are seeing the vehicle being driven through an auction hall," says Henstock. "It is about being 'easy to do business with'."
"There will be a wider acceptance of the power of online remarketing," adds Mitchell. "If you can reduce your stocking days, while removing the need to spend money on moving a car to a physical auction for sale, online has to be taken much more seriously."
The residual value expert's view
The need, and demand, for analytical data is something that's growing, says Rupert Pontin, head of valuations at Glass's: "The use of data is becoming so important. With the market now shifting from a vendor's to a buyer's market, this is the first time in many years there has been a need to be secretive to gain the upper hand in a toughening sales arena.
We produce a set of reports for the National Association of Motor Auctions based on its data, which is used extensively by its members to understand the shape of their market.
Elements of this are made public but we know that certain parts of the information set are used internally, and in different ways, by each auction company to advise their clients on the best way to remarket their cars on a month-by-month basis.
"We also know from our client base that there has been a significant increase in the number of requests for both high-level and granular analysis of trends in different market sectors and, indeed, different vehicle sets."
Overlaying different data sets, such as those from trade and retail buyers, and historic values also has its benefits, according to Pontin: "Market intelligence can be exceedingly useful for fleet operators on two fronts. Understanding what has been happening in the trade market over short and 12-month periods gives an indication of how the market has changed.
This can be from a value perspective, but it can also show demand, and the market sector trend position. Combine this with data on the retail market, and fleet operators can clearly see what has been selling to retail consumers, where it has been sold and how quickly.
"It is the historical piece combined with current retail activity, and mapped against the trade activity, that not only helps to determine current and future remarketing strategy, but also gives a steer on what could be the right strategy commercially."
Pontin agrees with Simon Henstock, operations director at BCA, and Jon Mitchell, sales director at Autorola, that mobile devices have been one of the biggest breakthroughs for advanced, analytical remarketing practices. However, like Mitchell, he maintains that the market still has some way to go when it comes to adopting them.
"The greatest steps forward have been around the just-in-time hand-held products," says Pontin. "They have increased the speed with which a car can not only be defleeted, but also offered for sale.
"Dovetail this with improved smart repair technology and online auctions that allow modern, switched-on buyers the ability to buy from anywhere, and you have an incredibly quick and easy remarketing process. Unfortunately, these activities cost money, and until recently some organisations have not understood the need or benefit, but as the used car market sees more volume, the picture will change."