BUFFALO, N.Y. –
In the midst of this history-making global pandemic, the auto industry is reeling.
Each day, each hour, we’re learning new updates and trying to adjust accordingly. With varying rules and laws from state to state and even county to county, it’s understandably an overwhelming state of the industry. In fact, it can be easy to lose focus or just ignore certain parts of the business in the interest of trying not to lose more money.
But here’s the thing: if you’re really committed to being around in a couple weeks or months, once this virus levels out and passes, you have to keep moving —business as usual. It will be slower. Your volume will be down. But you have to continue to transact. If you don’t, then you might as well shut down now.
So now that you’ve committed to continuing to operate, what can you do to make sure you’re maximizing on your wholesale business? Consider this a SparkNotes version of the rulebook that has never been formally written for the wholesale marketplace.
- Cars get bought at auction — not sold. This means the buyers are actually in control of the outcomes far more than the sellers are, even though most sellers would never want to admit to that reality.
- You must trust the auction process if you’re going to use an auction, and know how to play it to your advantage.
- The way to get the most out of the auction is to ensure you have the biggest audience.
- The way to get the audience is to ask the least, by setting a low reserve. This is a classic risk = reward strategy.
- Newsflash: Buyers don’t really care what a seller owns the car for. Buyers want the best deal possible, but there is a way to make them pay more — you must create a competitive bidding environment on your vehicles.
- The only way to get a buyer to pay more is by creating competitive pressure by having a low reserve price. Think about the energy and the vibe at an auction and the fast-chanting auctioneer. Just thinking about it and your blood pressure starts rising. You can replicate this same competitive atmosphere with an online auction by lowering your reserve price to pull more potential buyers in on your vehicle.
- If you do the opposite and set a higher reserve price, all of the potential buyers vanish away from your vehicle, or never even take a good look at it. What seems “safe” by setting a high reserve is actually the worst thing you can do. All that you are ensuring is that you’ll be stuck with that depreciating vehicle even longer!
- It is the same strategy that seasoned auction reps know: the first five cars in your run are getting sold no matter what. Why? Because it pulls in the audience and then you will average out ahead overall.
Here’s what I’ve been seeing while observing the ACV marketplace these last few weeks:
- The sellers who have embraced the strategies outlined above have experienced higher volumes of views per auction, unique bidder count per auction, more total bids per bidder, higher sell through rates (conversion), higher final prices paid for their vehicles, less reliance on IF deals, and dramatically increased wholesale profitability compared to their peers who try unsuccessfully with an above-market reserve price.
- The ACV marketplace rewards the sellers who set aggressive reserve prices because their listings stand out among the rest and get more audience, action, and pull more money.
- When we have worked with sellers historically and influenced them to adapt these strategies, they have realized a $200-900 average lift per vehicle for their wholesale compared to their previous results.
- There is no better time to embrace digital wholesale into your process. It can safely sell your cars the same day, giving you the cash flow, you need. With ACV, we are able to accomplish this without any personal contact with dealers and your vehicles stay safely on your property until they are sold. Our inspectors are armed with masks, gloves and appropriate sanitization tools. They are successfully inspecting and launching thousands of vehicles every day nationwide in the midst of this crisis.
- ACV has thousands of buyers from across the nation, which allows sellers to reach buyers outside of their current market, some of which may be severely limited or shut down by local or regional market conditions and emergency efforts as a result of COVID-19.
Holding out for more money is a fallacy. Each time you run a vehicle through an auction and don’t sell it, you actually devalue it and turn off potential buyers from engaging because they have seen it, and watched it not sell. Buyers do not want to waste their time chasing the same car multiple times.
After the second time seeing it, they’re generally disinterested and will no longer bid on it even if they were once interested. That’s why pricing aggressively and letting the competition occur is paramount to a seller’s success.
In the current environment, many sellers are fearful about cutting their wholesale inventory loose and actualizing the losses. But the reality is that they have already lost the money — even if they continue to hold the depreciated assets and hide their losses. Actualize the loss, free up the capital, and move forward with your business.
Right now, the best move is to stay as current as possible with the market and ride the waves, instead of trying to time the market perfectly and get in and out at the right times. To achieve this, reduce inventory turn times, and get wholesale inventory off the books as quickly as possible, even at a loss. Take that now-liquid valuable capital and reinvest it in right-priced inventory.
We’ll get through this together. ACV is here for our dealer partners and appreciate all the new dealers reaching out and asking for our assistance. We’re fully operational and committed to supporting you however we can. Like everyone else, we’re rolling with the volatility, making changes and updates where we can and looking for ways to keep innovating while we weather the storm together. What doesn’t stop us only makes us stronger.
Joe Neiman is the co-founder of ACV Auctions