Market Conditions Commentary
 
Good and Bad
by Robert Hollenshead
Feb 16 2014 8:56PM

First I want to thank everybody for a bang up MADE sale at CFAA and thank them for an amazing facilitation and thank all the dealers that participated in Friday's sale in mMaheim that was a Simulcast only sale which turned out to be a 88% auction in my lane.  Here goes some after-thought:


The same way technology changed communications forever, it  is changing the wholesale business and remarketing in general (in ways  that are good and bad).  It will never be the same.  The Pony Express disappeared due to the telegraph,  newspapers (and now cable) disappeared due to the internet and unfortunately, the days of auction lanes packed full of buyers competing with other buyers is over.   The bad part is that it will never come back. 

 

It might not seem like it but when I am on the block bell to bell I am not just selling cars.  Generally I am absorbed in the moment but the truth is  I specifically pay attention  to things that are probably worthless anyone else on earth, except to us as auction rats.  I pay close attention to who is there, where they are from, what they buy and where they sell.  Also,  if they come back, why not, who is no longer buying what, who is on line, how many people are on line, and for what kind of cars. 

 

At any given moment there can be as many as 500 dealers logged into our lanes on simulcast (good), and nobody, nobody, nobody in the lane, nobody (bad).  It can be on an absolute creamer with color, miles, gear, no paint (good), and nobody, as in a ghost town, on the floor (bad).  The fact that it gets sold on line and brings normal money is great, and I appreciate it, but it just doesn’t feel right.  It’s like a fugazy.  It doesn’t give the same sense of a fait accompli.  It’s like going fishing on TV or something.  It’s almost like eating like  a vegetarian.  You can eat lettuce all day and night, maybe even blow up from overeating but still feel like you need something to eat (bad). 

 

This is no complaint, it is the description of the death of the business that I love as we know it.  I deeply appreciate the fact that dealers trust us to buy our merch sight unseen.  We do the majority of our business on simulcast at this point and I  know that they appreciate the fact that we have the cars they want and sell them (good).  That’s great.  But what is really bad is the fact that there are next to no boots in the lanes (bad).  There are a few sharpshooting professionals left and a few junk scavengers but the average dealer no longer comes to the sale and to me that is a disaster on many levels. 

 

Is it the fact that there are no real cars at the sale?  Is it the fact that it is too difficult to justify coming when it is too hard to get the job done there?  Is it because the sale conversion ratio is at an all-time low which frustrates the buyer to the point they can’t waste their time?  Is it the cost of doing business?  Is it the absolute fact that dealers don’t bring anything to the block  other than shop flunked scrap?  Is it because dealers  used to keep what was smart for them to keep, wholesale off brand units and replace them with brand specific units that grossed better and could be serviced by them because that is what the current trend is peer pressuring them into buying into?  The net result of any or all of these possibilities is that it is the cumulative reality that we find ourselves in.

 

I love simulcast.  This past week I sold 88% of our cars on simulcast as there was no regular auction because of the snow (good?).  They tell me I sell more cars on simulcast than any dealer in North America by a factor of five.  But I have to tell you that watching the live auction die in front of my eyes is painful (bad).  That probably sounds corny or ridiculous but it is true.  There is nothing like a lane packed full of dealers following a lineup of jammed up, stone cold puffs looking better than they will ever look again  hoover on to the block and watching the testosterone fly, winner take all (super good).  It ain’t even about the money at that point, it’s the action.  It’s the culmination of working the street, pinching  creamers, snapping those suckers to attention and letting the market do its duty… find market value (triple good). 

 

While I was standing on the block with a foot of snow outside and the cars were getting sold with a picture and a condition report, that has little to nothing to do with the condition of the actual car, I was trying to get pumped up watching the internet blink in five different colors just isn’t  the same as having hand to hand combat (I’ll never get the logic of a CR rating of 2.9, well below average, close to junk, regularly bringing $5,000 over the market, or triple 5.0 price, over extra clean anything, and expect anyone to trust the rating, disconnected anti-trader rationality (silly)).  This week we had a new item on the CRs that said on nearly every car "seats worn, needs replacement".  Not a single car of the hundreds that had that added to the CR needed anything replaced, truely mind numbing (not just bad, suicidal for buyer and seller).    I left the auction feeling like I was dreaming.  All the cars got sold but it didn’t feel like there was an auction, weird (good and bad).    

 

Don’t get me wrong, I am all for staying ahead of the curve.  I am spending massive amounts of money developing  technology to be sure we aren’t relegated to a superimposed status quo.  Our goal is to build a bridge between what we are losing and what “can be”  to include what  it seems we have lost (sure hope it changes our world for the (good) or my Peruvian wife says she  will show me her version of the Sendero Luminoso  (bad, really bad)).    I am committed to pressing the envelope with people that are like-minded and truly care about the direction we are going. 

The Pony Express rider faded into oblivion with truly amazing stories/experiences accumulated over years on the trail.  If you ever have a chance to read them you’ll love it as it will remind you of an  “Auction Rat’s” story (Us, Good, capital G), our story, the one that the candle is  beginning to flicker on, maybe go out.   There are some simply unbelievable stories that decades of auction action reveal (good, but nobody cared about the Pony Express riders and they definitely won’t care about ours either (bad)).    I sure hope we can leverage or experience and program it into common sense products  before our candle goes out as well (trying really hard). 

 

Join the PIADA if you haven’t.  It’s silly not to.  


3 Readers' Comments

1
Steve Apter
Export
PA 15632
8 years ago
Sad....VERY VERY Sad.......But you are 100% on the money. Going to the auction was my most favorite thing to do.......My favorite part of the business. NOW.......I stay at home, and bid on simulcast. The wave of the future!!!! Very SAD!!

2
Edward Hurst
Schuylkill Haven
PA 17972
8 years ago
Bob what is the #1 complaint about Manheim? The fees are out of control if you are a buyer. If you are a seller it is post sale. Go to the other auctions in the area. Harrisburg, ABC, Lock Haven, etc, they are selling at 85%. Many dealers I talk to say they just can't afford Manheim. Back in the day Manheim was the place to buy a clean low mileage car. Now walk the lot 60% of the cars are over 100K miles. The small auctions will continue to grow and Manheim will continue to decline. Manheim is like the government as revenue falls they raise the taxes(fees) to cover the shortfall.

3
Robert Hollenshead
MANHEIM
PA 17545
8 years ago
Ed
Different price range car as well. The smaller auctions sell an average price of ten thousand dollars. The 17545 sells an average unit that is twenty thousand. That requires a buyer that is a franchise dealer deep in the mix. Very few new car dealers buy at those auctions. But you are right on the money on post sale. Of the last 500 units I sold at MADE there has not been a single post sale issue other than a title issue and a single mechanical issue that was resolved, not blown up. On a normal i sell 500 cars the post sale prevention typically blows 40 deals over a five day period. I am not sure who benefits by this. It sure isnt a car dealer. It is dysfunctional and a major reason why dealers don't come back. I can't tell you how often I hear this. Cumulative effect is less people willing to come. Such a pity.