Seen as the best time to test new business procedures with wholesale market conditions being what they are nowadays, Mercedes-Benz Financial Services is converting two of its live auction sites to exclusively online auctions.

While explaining the decision to Auto Remarketing, MBFS indicated it will start with exclusive online High Line auctions in Milwaukee at 1 p.m. CST on Friday at Manheim Milwaukee via Simulcast. Online auctions will take place every two weeks on Fridays with approximately 100 late model Mercedes-Benz vehicles available for bidding.

Joe Bedwell, national auction manager for MBFS, stressed these sales are independent of any other sale and will take place exactly two days after the regularly scheduled High Line auction.

The second location is Manheim Dallas-Fort Worth. Those online sales will take place every four weeks on Wednesdays at 1 p.m. Central, starting Nov. 16, followed by Dec. 14. The volume at these sales is expected to be approximately 175 late model Mercedes-Benz vehicles.

“In the last several months, we’ve had the idea of doing this,” Bedwell shared with Auto Remarketing. “We’re at a unique time in the industry, particularly those of us in the leasing business. Three years ago obviously the economic situation impacted new-car sales tremendously and impacted the number of leases so today we’re seeing a much smaller volume at auction than we would normally see.

“Because of that, not just within our product but many products, the volume of cars at auction is considerably smaller,” Bedwell continued. “There’s not nearly as much supply as there has been in the past. Obviously, there is still good demand for the High Line products and high demand for Mercedes-Benz product. Because of that supply and demand, proceeds are high.

“The prices of the cars are very good. It provides us with an opportunity now to test the business model that we have today,” he went on to say. “Because our proceeds are doing well and there is still demand for the product, we can try some different things. It allows us to test the business model we have today and find out if there is a better way to do it. Is there a better way to get cars to dealer quicker? What is the buyer’s behavior today as compared with several years back?”

Along with volumes being down, Bedwell believes the amount of dealers walking up and down auction lanes is not as high as it used to be, either.

“One of the things we’re finding is dealers are utilizing online at a greater rate than they have in the past,” Bedwell mentioned. “Part of that is a new generation of buyers coming in that’s tied in with social media, that buys things on their mobile phones, that buys things online.

“Our existing dealer base that’s been here for years is now having to source cars from multiple locations,” he continued. “In the past, maybe they had one or two auctions they would go to source their vehicles. Today, they are having to go to five, six, seven, eight locations to source their cars. You can still do that by hopping on a plane and be gone for three or four days out of the week, but the pre-owned manager at the dealership can’t do that. The smaller independent owner that’s also the buyer can’t necessarily do that. They’ve been forced to look at online as an option to source more cars.”

Mark Knauss, general manager of Mercedes-Benz of South Atlanta, said he is buying 98 percent of his pre-owned inventory online.

“The online sales events are easy and productive,” Knauss insisted. “The cars are what they (MBFS) say they are. Very seldom do I have an issue because the condition reports are accurate.”

Marc Rhima, an independent dealer and owner of eCarOne, who buys 2,000 luxury models a year, stated that he would prefer to be in his office in suburban Dallas where he can monitor and purchase vehicles at auctions in Dallas, Nashville, Tenn., and Atlanta simultaneously.

“The No. 1 advantage to online auctions is avoiding mistakes,” Rhima emphasized. “I have four business screens where I can monitor cars, condition reports, sales data, and I am less likely to make a mistake because of the quality of the research I can do online in real time.”

Getting the Word Out

While Knauss and Rhima are examples of dealers who are significantly engaged in online wholesale channels, Bedwell acknowledged to Auto Remarketing that one of the largest hurdles Mercedes-Benz Financial Services needs to clear to make these new Internet-only sales successful is ensuring dealers know about them.

Bedwell applauded the efforts Manheim’s key account marketing team. He said it has done a fabulous job of identifying buyers who regularly purchase Mercedes-Benz units in Milwaukee and Dallas, ensuring dealers have been reached by phone and email.

“Like many of our customers, Manheim’s future is digital as much as physical. We’re excited about partnering with Mercedes-Benz to meet their dealers changing needs for acquiring used vehicle inventory,” noted Nick Peluso, senior vice president of customer management for Manheim.

Bedwell also mentioned the MBFS vehicle remarketing manager at each location has stayed in close contact with dealers to let them know about the new time and process of the Web-driven sales.

To further enhance notification about the new sale, MBFS is offering up to $500 per vehicle in transportation assistance for dealers who purchase a vehicle through one of these new High Line sales.

Guaranteed Vehicle Quality

Bedwell also told Auto Remarketing Mercedes-Benz Financial Services will institute a 100 percent satisfaction guarantee on all Internet purchases, giving the dealer who buys from one of these online auctions 14 days to notify the auction of any concerns.

“If there’s an issue with the car or there’s something he doesn’t like about and decides it’s not the car for him, we’ll take the car back, no questions asked. I don’t know of anybody else in the industry that does that,” Bedwell declared.

The MBFS auction manager explained why the company can roll out a program like this one.

“A lot of the banks and captives, they have reps multiple locations. We have one person at every location. They’re there every day. They have an office there. That auction is there home,” Bedwell highlighted.

“Every day they’re looking at cars right after the auction’s report writers look at the cars to validate that disclosures are accurate and if they’re not, we’ll make the accurate disclosure. We make 100 percent of the reconditioning decisions on the cars,” Bedwell continued. “That’s a little bit unique in the industry. But that allows us to have the confidence to say to you, ‘You’re going to like your purchase and if you don’t we’ll take the car back.’

“We’re taking arbitration rules and really throwing them out the window and saying we’ll stand behind our product. If you have an issue, we’ll take it back,” he went on to say.

Physical Auctions Still Vital

Though MBFS is making these changes, Bedwell reiterated the crucial role physical auctions play in the entire remarketing process.

“If you think about the physical auctions in these scenarios, the only thing that’s changed with them is we’re not driving cars through the lanes and we’re not having a physical sale at the auction that day,” Bedwell explained. “The auction is still doing all of the reconditioning for us and reconditioning is extremely important to us. We do a lot of reconditioning to these cars to make them stand tall and make them as retail ready as we can.

Having been in Mercedes-Benz’s remarketing division since 2001, Bedwell admitted he’s seen plenty of changes. He remembers vehicle condition reports being done all on paper.

“When I first started, you would have guys call in after the sale wanting a copy of the condition report. That was taboo back then, a no-no. So the auction would come to us and say hey one of you big buyers wants to know if he can see a copy of the condition report,” Bedwell recalled.

“That’s the way it was 10 years ago. Today it is full disclosure. Here is everything we know about the car,” he continued. “Buyers have gotten a sense of comfort of buying online that they didn’t have in the past. I would credit the auctions for a lot of that as well. They’ve put together special criteria so that regardless of what auction you go to, you’re going to have a similar condition report.”

By combining the best attributes of physical auctions and online channels, Bedwell asserted the MBFS has high hopes for these new sales.

“Everybody is being asked to do a little bit more, operate more efficiently than we ever have. It makes it even more valuable for that independent owner or that pre-owned manager to stay in the dealership rather than traveling to all these multiple locations,” Bedwell stated.

“I don’t expect we’ll have many dealers turning cars back. They have a purpose for them. They want to sell them. They want them for their inventory,” he concluded.