Digital Wholesale Online Auctions Drive to Serve Dealers in New Ways

By Jeffrey Bellant

The digital wholesale business was already growing before COVID-19, but the pandemic pressed the industry further into the digital world by necessity.

Auctions have responded with a variety of tools and systems to make buying a vehicle easier than ever.

The pandemic and the tight supply of inventory have pushed more dealers online, looking for inventory.

Several auction general managers have said that some dealers who used to come to the physical sale now do everything online.

Serving the digital market, like the physical lanes, is a matter of serving the dealer, said Kelly McAllister, vice president of digital strategy and sales for America’s Auto Auction.

“We’ve got to let the dealers tell us what they want us to do,” McAllister said. “I think a lot of auctions across the country and business are telling customers what they want them to do.”

One example is what America’s Auto Auction didn’t do during COVID.

“We didn’t shut down,” he said. “We kept running our day to day business. The dealers loved it and they came back. They appreciated it.”

McAllister said while digital sales were still important, its customers wanted to come into the physical lanes.

However, the pandemic made Manheim lean into its digital strategy.

Manheim pushed into the digital realm as hard as anyone, even before COVID-19 changed everything.

“Pre-pandemic, we had just crossed the threshold where the majority of our buyers were digital buyers, around 52%,” Zach Hallowell, SVP of Manheim Digital, said.

The pandemic forced Manheim to go all digital and now it’s going to what Hallowell described as a “new normal.”

Today, the number of digital transactions sits a little above 70%.

“Even as we started providing full physical auctions (post-pandemic) that number has been pretty steady,” Hallowell said. “We have a very strong, robust digital audience. But we recognize we have a segment of dealers that want to buy physically.”

A recent study from Manheim on the comfort level with buying digitally pre-pandemic showed 20% were very comfortable, 40% were willing to try and 20% were uncomfortable, Hallowell said.

Today, the percentage that are very comfortable jumped to 54% from 20%. The reason is that buyers are really seeing the convenience of buying across multiple auctions.

“We have a long tail of buyers and they now buy from an average of more than two auctions per customer,” Hallowell said. “I believe our top 300 buyers buy from, something like, 27 different auctions.”

Average transport miles from digital buyers are 400 miles.

The big auction companies are using their size and resources to try and capture digital buyers.

BacklotCars, part of Openlane (formerly KAR Global), is a digital marketplace that sells all types of inventory, including dealer-to-dealer, consumer-to-dealer and repossessions.

“Soon, with Openlane, we’ll also offer off-lease,” said Jason Houseworth, senior vice president, products.

Through its dealer websites, BacklotCars has its Guaranteed Offer that it fully backs. It takes the cars so dealers can have a consumer tradein program.

Houseworth, whose career has involved building software for 25 years, said one of BacklotCars’ goals is to have the most diverse mix of inventory for dealers.

“We also want our sellers to have many ways to get us the inventory, so the consumer-to-dealer offering was (the next step),” he said. “It’s directly embedded in our website, in order to offer consumer trade-ins and a guaranteed trade.”

BacklotCars has a live auction and a fixed price listing.

The live timed auction is an exciting buyer experience, with a countdown sale that creates engagement, Houseworth said.

“That generates real engagement,” he said. “We see our buyers adding 75,000 vehicles to their watchlist every day. The auction buyer is active. The average auction buyer makes about 45 bids on auction day.”

The fixed price, or bids sale listing, is a 24/7/365 sale, drawing buyers whenever they are available.

TradeRev and Carwave are also added into BacklotCars.

Houseworth said more buyers are bidding on their mobile phones after hours than on their desktops during the day.

“We have a very diverse mix of in- ventory as well as a growing network of buyers and sellers,” Houseworth said. “We also continue to simplify the experience.”

Bottom line: BlacklotCars makes each dealer feel like the system was built for their needs, Houseworth said.

Independents are just as aggressive to responding to digital buyers and sellers.

Gregg Henderson, online sales manager at State Line Auto Auction in Waverly, N.Y., illustrated the changes made since 2020.

“We probably used to sell 20% of our sales on simulcast, pre-2020,” he said. “But lately, it teeters around 50% We sell almost half of our (vehicles) on simulcast.”

That’s the live sales, not the static online sales that can happen at any time.

Meanwhile, the Spokane, Wash.based McConkey Auction Group (MAG) wants to thread the needle, bringing a physical sale model to digital sales.

Brian McConkey is vice president of digital strategy for MAG, which has three physical sales, DAA Northwest in Spokane, DAA Seattle and DAA Las Vegas along with its digital MAG Now sale.

“Mostly, I focus on our MAG Now sale,” he said. “MAG Now is our Wednesday afternoon online sale that happens on the EBlock plat- form.

A recent sale ran about 600 vehicles, though the average is around 550, he said.

McConkey said the company believes in the auction model and MAG Now is simply trying to replicate that without lanes or an auctioneer.

“It runs like an auction, with six cars at a time, about a minute each, with lanes,” McConkey said.

What all the digital auction players have learned is that they have to do extra to entice wary digital buyers.

Because buyers can’t physically look, drive or touch the cars, MAG Now includes services to bring buyers peace of mind.

“Our CR for MAG Now includes things that our in-lane CRs wouldn’t,” McConkey said. “That includes everything from simple things, like scanning a car, to a test drive.

“We’re really trying to make our CR writers into amateur mechanics.”

MAG, being a family business, has an old school approach, McConkey said, by investing in people through mentorships and training them the best they can to keep a low turnover.

“In Spokane, we’ve had guys testdriving cars as a full-time job for 20 years,” McConkey said. “So, we lean on their knowledge and have them

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