A myriad of factors are pushing dealers toward online auctions.

Economic conditions continue to pinch both consumers and businesses. Lagging new-vehicle sales have tightened wholesale volumes for months. Technological advances now allow dealers to scour for inventory at 2 p.m. or 2 a.m., not just during the weekly sale day.

As a result, auction companies and independent operations are carrying on accordingly, making investments in technology and pushing as many vehicles through online channels as possible. Simply put, online sales are steadily becoming as common as vehicles coming down the lane.

“It’s a service. It’s the same as having a recon shop or a cafeteria. It’s part of the auction experience in 2010. You have to have a serious Internet presence both on the information side and the sales side,” explained Lynn Weaver, owner of Harrisburg Auto Auction, an independent operation in the Pennsylvania state capital.

Auto Remarketing turned not only to Weaver, but also executives from ADESA, Manheim, OPENLANE, ServNet and SmartAuction to gauge how online auctions are behaving now and what might happen in the future.

Steady Rise at ADESA

ADESA pinpointed that it experienced 30-percent growth in its online sales last year, including LiveBlock, DealerBlock and private-label platforms. The amount of units going through online auctions — almost 390,000 — represented more than 19 percent of all vehicles ADESA processed in 2009.

Benjamin Skuy, executive vice president of international markets and strategic initiatives for KAR Auction Services, ADESA’s parent, sees online activity continuing to grow this year. Like any other element of the company’s portfolio, certain unique factors are coming into play.

“For commercial consignors, the biggest issue is channel management,” Skuy indicated. “Most commercial consignors utilize many of the channels — upstream closed, upstream open, in-transit and at auction — but they’re not being used to their full advantage.

“To optimize the various channels requires determining how many vehicles should be sold in each channel and at what price, and then ensuring that the overall portfolio value is maximized,” he continued. “This plan should also consider the varying quality of vehicles for each sale environment in order to maximize the number of buyers actually bidding.

“This isn’t an easy task, but it is encouraging to see all commercial consignors using the simulcast environment. In fact, ADESA Worldwide registered sales to more than 100 countries this year,” Skuy added.

The ADESA executive also touched on fluid circumstances from dealer perspective.

“For dealers, the use of the Internet as a viable sales venue will be a key factor moving forward,” Skuy noted. “Typically, the majority of vehicles sold online have been commercial vehicles. But dealers are becoming more and more comfortable selling vehicles online.

“Because of this upswing, finding solutions for dealers as consigners will be extremely important for everyone participating in the online auction environment,” he went on to say.

Online Activity Surges at Manheim

Executives calculated the number of transactions on Manheim’s OVE.com has grown by 39 percent year-over-year. Joe George, group vice president of Manheim Online Solutions, contends time-saving and resource-sipping solutions aimed specifically for dealers are fueling that increase.

“Our online marketplaces allow dealers to save time and travel expenses by providing a way for them to buy and sell remotely from any computer. And, with the introduction of new seller services, such as Manheim Direct, it’s even easier for dealers to list cars for online sale right from their lots,” George indicated.

“Savvier dealers are discovering that it’s just as easy to sell online as it is to buy, and they’re able to maximize their own staffing potential in a much more efficient way,” he explained. “We’ve also heavily increased the number of special online event sales during the past 12 months, which maximizes the volume of inventory available to dealers nationwide. The online event sales have been exceptionally popular, which tells us the market is eager to tap into new channels for the latest inventory.”

George doesn’t foresee activity slowing any time soon, especially with wholesale conditions being so soft.

“Clearly, a factor affecting the entire marketplace — and our customers — will be the continued decline of late-model, used cars available at auctions, including those found online. With consumers keeping cars longer due to economic pressures, plus fewer cars being offered by national consignors, dealers must become even more creative and agile as they seek to define and build their portfolios,” George said.

“But this can also be an opportunity to refocus for stronger business positions. For example, I foresee dealer-to-dealer trades aided by online marketplaces as one solution that will help dealers make up for the current inventory shortfalls,” George declared.

OPENLANE Enjoying Record Year

The company previously reported that its second quarter was the most successful of OPENLANE’s 10-year history. As its U.S. Open Auction broke records, executives mentioned their Canadian business also grew by more than 50 percent year-over-year for the second quarter.

“The exceptional growth that OPENLANE has experienced throughout the first half of 2010 is in part due to an increased focus on new value-added services and partnerships,” company executives emphasized.

“The recent launch of OPENLANE’s iDEAL Open Seller program in Canada, as well as the program’s continued success in the U.S., has created a significant boost in dealer-to-dealer sales for the company,” they continued.

Beyond program rollouts, OPENLANE emphasized its acquisition of Recovery Database Network in August and its recent partnership with MBSi Capital Corp. to delve deeper into the repossession space, should be highly beneficial going forward.

Like many other companies, OPENLANE executives are keeping a close watch on how the national economy behaves since it’s so closely tied to online auction activity.

“Since more customers are driving their current vehicle longer and are buying used versus new it’s no surprise there has been increase demand for used vehicles,” company officials asserted.

“Dealers are keeping older vehicles on their lots now, and they’re spending more time and effort to find the right used cars to sell,” they went on to say. “It’s become more and more critical not only finding the right inventory but also to find it in the most efficient manner possible. Not only will we see more vehicles being sold online given the economic benefits of an online auction, but we should see greater variety and different vehicle types will be sold online.”

ServNet Watches Online Activity Climb

ServNet president Jeff Brasher described how online activity has grown throughout the group’s 23 auction operations.

“Online volume has picked up tremendously with the continued addition of lanes offering vehicles via a live streaming product,” Brasher began. “Where in the past auctions felt that only certain segments of vehicles would sell online, many are finding that dealers are willing to buy repossessions, dealer trades and surprisingly many ‘as-is’ vehicles with no specific condition report.

“Dealer attendance and activity online has increased substantially as well due to the lack of inventory in the overall marketplace,” Brasher interjected. “However, the success of vehicles selling in the lanes, either physically over the block or online via live streaming, has cut down the number of vehicles that auctions have available to post on mid-stream channels such as Auction Pipeline.”

Brasher also reiterated the value proposition ServNet offers dealers and consignors who might look online to fill inventory or move out aged units.

“ServNet auctions continue to work very closely with Auction Pipeline in new development and improvements within the current platform,” Brasher emphasized. “Additionally by being independents auctions, we are free to consign cars on any of the available platforms to better serve the needs of our customers and clients.”

Brasher touched on a host of factors that could sway future online auction activity — mentioning elements closely related to the industry before returning to broader strokes.

“We see the most significant factors moving forward for online sales will be available product inventory, consistent condition reports, improving technologies, increased dealer usage and awareness,” Brasher stated.

“But probably the single most driving issue will continue to be the economy,” he conceded. “The overall health of the retail car business and financing sources may continue to move dealers online to solve inventory issues.”

SmartAuction Sees Double-Digit Gains

SmartAuction revealed that the company posted a 14-percent increase in its dealer-to-dealer transactions through the first half of the year as compared to 2009. Executives said dealer-owned vehicles now compose a majority of the 12,000 daily postings on SmartAuction.

The company also shared that its dealer body is also up from about 7,000 active users beginning 2009 to more than 10,000 through June of this year. In total, SmartAuction recorded nearly 260,000 transactions through June, totaling both the U.S. and Canada.

All told in 2009, SmartAuction handled 520,000 transactions between the two countries.

“We would suggest that the overall industry shortage of vehicles has increased dealer activity to satisfy their business requirements,” noted Mark Newman, SmartAuction’s managing director.

“In the absence of abundant local inventory, the virtual network of dealers via SmartAuction is a robust and trusted source of quality used vehicles,” Newman added.

Going forward, Newman doesn’t foresee SmartAuction’s activity level dipping at all.

“We think the industry supply of used vehicles is going to remain constrained for several months,” Newman stressed. “This should increase dealer adoption rates of SmartAuction to supplement the lack of vehicles available at local physical auctions. In this process, what remains of utmost importance is the ability to ensure the complete trust in the system for the integrity of the auction, and engender even greater confidence to participate.”

Technology Key to Online Future

No matter the scope, the executives surveyed by Auto Remarketing agree that maintaining the most advanced technology available is going to be crucial to online auction activity.

“If auctions looked at their expenditures over the last couple of years, they’ll probably see that they’ve spent a whole lot more money in Internet infrastructure than brick and mortar infrastructure,” Harrisburg AA’s Weaver surmised. “We have to have the best technology. We have to have the smartest people. We have to have good sales people to sell the product.”