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This is our wholesale and remarketing version of the Arab Spring Revolution, it's called the Universal Condition Report Revolution
by
Robert Hollenshead
Jan 22 2012 1:43PM
What is a condition report? Who needs it and what is it for? Listen careful, I am speaking for you, the dealer, big or small, it has a drastic effect on us all on both sides of the podium, buying and selling.
First, The history: A condition report started decades before the one you view on-line today. It began when we were writing on the driver’s window of the cars at the auction. I personally have done this 500,000-700,000 times (lost count a decade or so ago); Local one owner trade, No paint work, Never smoked in, Spare never down, New Mercedes trade, and so on ad nauseam. This was the origin of the condition report and it was used to communicate from the seller to the potential buyer, who he may or may not know, what he is representing, his merch, to be what he says it is, to the prospective buyers at the auction.
This evolved with the advent of the internet on On-line Ringman and then Manheim’s Simulcast and so on. It became evident that there will be a future in selling on-line. eBay Motors went a long way in proving the model at the retail level. As usual the remarketing industry was slow to follow. The general consensus (but not mine) was that dealers will always want to touch what they buy (I’m shocked it took us this long to get to the underdeveloped state we are in). Smart Auction has done better than most but that is due to trust, and better isn’t good enough. We are looking for an absolute industry solution. There are many factors that play into this lack of industry wide integration of technology and here are a few.
1. What we were doing wasn’t really broke, it still worked even though the cost and speed were (are) dinosauresque
2. Lack of will to change what was working. The middlemen were happy with the status quo. Why create a more efficient model that modifies their importance in the chain, devalues property, and encourages a more cost and time affective model? Especially if the model is not Brand specific loyal, how could it be? When I asked them this exact question six years ago the answer was “you are a lunatic, look at the numbers, we are doing just fine”. How you doing now that you have to depend on us, the dealer, for your merch? The future look any different to you now? I have been preaching this for 20 years. Call Greg Gehman and ask him. He won’t lie for me or anyone else.
3. Lack of knowledge of the wholesale industry. Who recognizes the fire is in the kitchen? Who is going to declare there is a fire and risk looking like me, a lunatic, and risk your gold watch? And if you would take the chance of losing the gold watch, how would you create a posy to risk doing it with you? This creates brain and action freeze. Who else has the inclination, vision, or technical capacity to take on the initiative? A Dealer? A dealer group? A manufacturer? An outside company that isn’t in the profession? A Dealer Trac? Who? Who feels the pain standing on the auction block with you “bag of money” exposed, needing to sell, with their own money, not other people’s money, skin in the game money, and has no access to the broader market due to the lack of a real condition report? We do
4. Who else knows or understands the wholesale industry that would create the solution?
5. Who knows the wholesale industry exists and sees the inefficiencies and then has the inclination to tackle the process?
6. What resistance would a prospective idealist encounter from the existing players?
7. The existing players have billions invested in the status quo
8. With insider or player developed technology the status quo players have no security in their dominant positions. Technology is constantly making “game changers” obsolete. This isn’t going to stop. It is ever evolving and ensures no guarantee that one process will not be out done by another (look at what eBay Motors did for the average guy putting his merch with a background sheet and good pictures, he could compete with a guy with 300 employees and a $30,000,000 facility)
9. The “Bid Lot” is an outgrowth of a new car dealers ability to compete or participate in the live auction arena. It is not their skill set. It requires a commitment they are unable to make and thus the Bid Lot. Successful wholesale is not retail and retail has nothing to do with successful wholesale. Same commodity, two different worlds.
The existing Condition report product was developed for the commercial accounts but more importantly to encourage the commercial accounts to do reconditioning. This is the where “grading” of a car with a number disaster started. A commercial account is not in the wholesale business so they have zero understanding of what is needed to elevate an asset to a different level regardless of what they want to believe (how to increase the desirability of a unit to make it bring more money in the open market is an art, not a science, and if you believe differently, spend some time with us, I’ll let you see inside). The auctions needed to feed their recon department with never ending work as this is a profit center for them, if it is run correctly. On paper the number system quantified their desired results. Spend X and get Y, an increased value. They gulp it and now a skin in dealer is subject to a rating system that is obtuse to his reality.
Here is my point, not twisted facts trying to cover the sun with your thumb as so frequently happens in surrealistic conversations on this matter. The word “average” has a specific meaning. The middle of a statistically chosen sample added up and divided by two. So there can’t be multiple averages. If average mile adjusted MMR is the price a unit has brought back as an average unit you would assume a 3.0 on a CR would be what it brings in average condition right? All dealers in the open lane can use their eyeballs to determine the price they are willing to pay for a unit. If the CR numerical system, based on their algorithm determines a unit to be a 2.2 , ROUGH, and that unit sells for $5,000 over MMR average you would assume the rating system needs to be examined and we eliminated any simulcast bidders as they can’t bid on a ”rough” unit they can’t see. And if that were to happen 100,000 times it is safe to assume that the rating system is not only invalid, it is worthless, no, way worse than worthless.
It hurts a guy with skin in the game by Millions (large M not by accident) of dollars per year, in fact many millions of dollars per year. It also eliminates thousands of willing simulcast buyers from bidding on cars the really need. It is developed by really good, well-meaning folks, that have never had skin in the game, bought or sold a car, and took the advice of non-players. Their world is OPM, other people’s money, period. It turns out to be a divine process of “sales prevention”. They are in charge of a system that they fundamentally can’t and are unwilling to understand. It’s not their bags of money. It’s ours.
We have the solution.
Second, facts and effects: The guy standing on the auction block for a factory account can’t do what we do. He looks like a hero, but he is getting a salary. He has no skin in the game. He is playing with monopoly money, other people’s money (OPM), not his. If you don’t think there is a difference, stop smoking crack and do less LSD. We can definitely do what he does, eyes closed, left handed, mouth deep in quicksand, with a terminal illness, gout, pace maker battery on defibrillator mode and two broken bones. However, give him a check book or better yet, let him get his checkbook out and hit the street to hustle 500-600 units to the sale, per week. See if he comes back with more or less money in the account at the end of the week.
He can’t find money, set up a business, get tags, walk into dealerships and buy cars from a pro at a price that can be sold with a little recon to another pro for an advanced price, write a laser check without a title, transport them, ding them, clean them, touch them, know what recon needs done (and not done) to elevate them without over doing it to cut any possible return, get a number, prey for an auctioneer that can count, sell them (without the benefit of simulcast because the average dealer doesn’t have access due to lack of a real CR) (nobody trusts a seller disclosure), find a title (HA, HA, HA), go through post-sale prevention, deposit the check if it happens to be ready, get a dupe title for an out of state unit that the dealer you bought it from lost it and tells you “good luck”(dead money for six months), and repeat this process enough times to pay your employees, insurance, accountants, lawyers, truckers, sub-contractors, managers, workman’s comp, health insurance, gas, tolls, and about 40 other items, and come back for more. Not likely. The consequence of adversity is invention.
We have the solution.
It’s really funny the tens of thousands of times I have a CR done that is completely out of whack. A car with, what I call, “a look” is hard to put an algorithm driven number on. But “a look” creates emotion. Emotion creates energy in an auction. Energy in an auction creates an atmosphere that is called momentum. Momentum is what is needed to allow “crowd behavior” to creep in and ignite positive, sometimes irrational, sales results (especially for units with a “Look”, you get it?). The residual of positive sales results is a guy with merch that he is excited about that he gets home and sells immediately because the sales force feels the excitement of the buyer. The salesman’s enthusiasm is transmitted to the customer. The customer feels the residual effect of the excitement the buyer felt from the electricity of the lane. Of course there is always casualties of war, but at the end of this process when we are cleaning up after the party is, everybody got what they were looking for. This I am not guessing about. The process has been vetted millions of times. Meddling with the process is shortsighted and economic suicide.
We have the solution
The surrealistic part is not understanding why after the first ten million out of a seller’s pocket it would make a guy so mad (“wow, this guy is irrational, a maniac, downright ignorant, he treats us bad”@#$%#@!!). Please pay attention so the myth that I am a ranting irrational lunatic may be, at least partially, allayed. How can anyone rationalize the discrepancy between “average MMR and the condition report numeric rating”. It can’t be way under average on a CR, 2.1, and $9,000 over average MMR on the result of the sale. The wheedle is flipped when the two don’t coincide. THE NUMBERING SYSTEM IS STATISICALLY BROKEN AND CAN”T WORK USING THAT ALGORYTH, AS THE NUMBERS AND THE DEFINITION OF WORDS DON”T LIE.
We have the solution
The acid test is when you ask to do a CR on their personal car (a little skin in the game please) and represent it for sale with a 2.1 and accept the results, on your car, coming out of your pocket. Oh, how does the story change. Do that a few hundred thousand times where you are road kill, blowing thousands on a car that you found, paid for, transported, shaped, sold, post-sale prevented and waited two months for the New Car dealer you bought it from and paid for to get around to giving you the title. See if you would have the intestinal fortitude to come back and come back and beg and plead for rationality and beg and plead…for years and years.
We have the solution
But where does this leave a dealer? On the outside looking in with your tongue hanging out. We are the odd man out. No, we were the odd man out. Too much to read, but read on anyway.
We really do have a solution that works for everybody. Wholesaler, New Car dealer, Used car dealer, Exporter, BHPH dealers, Auctions, Captives, Banks, Residual makers, and the retail public. Don’t stop now read on.
Third, circumstances: Why do we need a CR? It’s obvious, right? It’s to sell your stuff to somebody that can’t see it right? It is to get enough information to make the buyer comfortable buying something he can’t see, and TRUST it. So all the pertinent information has to be there and it has to be accurate or the buyers’ will to use it will evaporate faster than a drop of water on hot pavement. Just like when we wrote “no paint work” on the side of the window and once a month it was wrong, you had to buy the sucker back. A CR is worthless if a guy using it can’t rely on it and then gets a run around. It loses credibility and is no longer an ally of the on-line sale but meshagas, or worthless gibberish.
The industry in general is in desperate need on a universal condition report that is guaranteed and standardized. Nobody gains by having twenty versions, all completely different. The intent is the same and the result is meshagas on steroids. The guy paying for the broken plates is the user, the seller and the buyer. The maker currently sits in the middle pointing fingers. The one that shows all the information in a screen that is easy to read but absolutely comprehensive and guaranteed will be the universal winner. It has to be trusted and if it is not accurate the buyer has to have recourse. It is on a mobile ap that anyone with an Auction Access number has can use, and follow the process, step by step, so when we are done the entire industry has a standard result. Guaranteed.
We have the solution
Forth, a solution: A seller generated guaranteed report is the solution. This solution will be available on an iPad, an iPhone, and a droid. It will be available to any dealer or seller that has an Auction Access number. It will include the normal items and some things that have not been included or thought about until now. A desirability index to help sellers understand the market is included. A rational floor price that infuses the auctioneer with information he needs to do his job is integral. One of those items is the biggest killer in the auction setting. When you talk to real auctioneers, career professionals, we know what their response is to the question, “what stops you from doing your job?. The categorical response is, “a seller that doesn’t know what his car is worth and is looking for an unrealistic price.” Paint meter readings in every case or the CR can’t be guaranteed. A “value impact box” that will change a buyers’ behavior for life. We all know what happens to a unit that has a hit on Car Fax. This is included as well.
Nobody else has thought of it or could duplicate it without doing decades of research and development. We have this solution, and it is done.
It is based on transparency, honesty and verification (for those out there that might just test our ability to catch a mickey or a trickster that thinks he figured out something we haven’t bumped into over the past 40 years of wholesale. To that cat I offer him good luck. I’m here waiting. I can’t wait to find the wrinkles that haven’t been on our plate to date). In our opinion this is what is needed in the remarketing arena to ensure much higher conversion rates so we can stop with this 10%-70% that we are currently acting like they are acceptable. It’s ridiculous.
The solution is the Universal Condition Report. We know that there is a wide variety participant that are in need and use condition reports. And there is a rainbow of difference in how buyers interpret a condition report. Some love to pick flies out of the cow dung. Others are just covering their backside on paint work of recon cost needed. They also see the same things differently so the Universal Condition Report that is guaranteed is deep enough and flexible enough to match any users specific needs. It includes enough detail to be the reference point for differing interpretations.
Fifth, why do this and what is the future of what we do?: When we consider the future of our business, wholesale remarketing and sourcing inventory, let’s consider what is needed to turn metal into money using simulcast and a UCR going forward:
1. Merchandise. Enough merchandise to attract enough buyers to the arena, in lane or on-line with a UCR created by a professional, a guy with an auction access number. Someone that can use a paint meter, detect paint work and what is previous and existing damage.
2. If the buyer is unable to be present, a universal condition report that guarantees he will get what he thought he bid on, not something materially different.
3. A competent auctioneer that is sober and can count.
4. The ability to identify and reveal all active participants in the sale, in lane and on-line so the lane bidders can see the 40-300 buyers in the “lane”. This creates the insurance that a seller will feel as though their merch was exposed to a degree that they feel confident they achieved ACV, actual market value.
5. Trust. Having a mechanism in place to ensure the buyer that he is getting what he thought he bought and a system to middle differences so he can trust the process. Hot line follow up. This leads to follow up with the seller to be sure the discrepancies are oversites and not mickeys.
6. A system that generates a release that includes the condition report. This is needed so when the unit leaves the care and custody of the seller or the auction the condition can be verified. That same CR is used by the buyer when he receives the merch.
7. An operations procedure that facilitates security and immediate pick-up by transportation with full details of where it is, who has the keys and any local idiosyncrasies that go along with a specific location. Times, gates, keys, transporter instructions.
8. The ability to regulate dishonest or deliberate misuse of the process.
We have this solution in house. It is overdue and on the way. We are looking to get everyone integrated into this product and I think we will. We all need it more than ever and we won’t need it less next week or next year. Unite! Spread the word. This ain’t Arab Spring, this is unite in the Universal Condition Report Spring so we can start the remarketing revolution that is a decade overdue and will benefit us all.
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