COMMENTARY: Let’s get physical! Lessons learned from the downstream physical auction world

So far in this series, we’ve spent a lot of time on upstream digital sales.

In fairness, though, the physical downstream auction locations bear the heaviest load, with 8 million-plus vehicles a year sold off their premises. Some of those move through digital platforms, but this is where the rubber meets the road, literally and figuratively.

After overseeing the sale of more than a million vehicles at auction over my career, the one thing I can say with certainty is that consistency, or the lack of it, makes or breaks the physical auction experience for sellers and buyers alike.

That applies to every part of using a physical auction as a seller: transport, condition reports, reconditioning, communication with fleet coordinators and management, lane position, auctioneers, run times, sale prices, and arbitrations. And consistency isn’t always consistent in the auction business, for a host of reasons: labor struggles, weather, timing, and sometimes the seller’s own inconsistencies.

The condition report problem

The area that continues to frustrate both sellers and buyers most is poor condition reports at physical auction. We’ve been talking about CR inconsistency for my entire 25+ years in the business, and probably long before that. Anytime a human looks at something and reports on it, there will be some level of variance. I used to prove this to new teammates by having each of them write up the damage on the same vehicle, then comparing notes.

The differences were always eye-opening, and it’s a solid argument for regular accuracy reviews by both sellers and auctions.

Still, with the technology available today, I feel we should have come further. One thing I enjoyed about working for an auction company with both digital and physical platforms was seeing the differences between their condition reports, and comparing both to competitors I’d used over the years in each space.

As you’d expect, the results varied widely. Even among companies producing a very good digital CR, there still isn’t a consistent standard that carries into the physical lane.

Why? I have a couple of theories, but to keep this article a reasonable length, I think it comes down to the technology platforms used in the physical auction space, by both auctions and sellers. Those systems haven’t changed dramatically over the years, even as the tools for evaluating vehicles have. We now have tools that can:

• capture clear underbody photos and predict frame and prior damage
• measure paint depth
• read codes and predict outcomes from them
• analyze engine and transmission noise to flag potential issues

But that data doesn’t flow well through auction reporting systems and on to seller and buyer systems, many of which are equally antiquated. So even when a better CR exists, as some digital players have been producing for a few years now, it doesn’t fully make its way into the physical auction ecosystem. I believe artificial intelligence can help here, and I’ll dig into that in a future article.

Trust, but verify

One thing that certainly helps consistency is having a seller auction representative or auction manager who regularly attends sales in person. Since early in my career, I’ve been a big believer in sellers representing 90–95% of their physical auction sales in person. I learned that lesson early.

A teammate visited one of our auctions unannounced and found a mess that had been going on far longer than it should have. Regular visits matter for catching condition reporting and reconditioning problems. They also build strong buyer relationships and secure the right lane position. Almost any service business requires a “trust, but verify” approach to get the most value out of it, and the auction business is no different.

During the pandemic, the use of auction reps dried up. Coming out of that period, I interviewed several candidates for auction manager roles who didn’t want to go back to visiting sales regularly. I’m glad to see expectations have largely reverted over the last couple of years.

Trust, but verify applies to your network as a whole, too. I’ve always believed in regularly looking at locations outside your standard network. That means paying attention to who their strongest buyers are and how their sales data compares to your current auctions. Sometimes a test sale is the best way to evaluate a new location, and to confirm your existing ones are performing the way you think they are. This is almost always a win-win for the consignor.

For auctions, that’s an opportunity. Be ready to earn the test by sharing your buyer base and performance data, so a seller can evaluate you fairly. Then get creative with how you assure that seller a minimum standard of net performance can be met.

Transport assistance and other short-term fee concessions can go a long way toward taking the risk out of a test. Once you’ve earned it, make the test sale(s) count.

Partners, not servants

Just as important is the relationship between the auction rep and the auction. I suspected it before, but my recent role on the auction side confirmed it: not all auction reps are created equal, and they don’t all treat their auction relationships the same way. The same goes for sellers’ inside coordinators. Treating auctions as business partners and not as servants is a must, and in some organizations that attitude starts at the top.

Many sellers don’t realize the tremendous effort, resources, and time that go into putting on a physical auction every week. Some see it as Groundhog Day, and on the calendar, it is. But the physical work behind it is anything but routine when it’s done correctly and with attention to detail.

Sellers can do several things to strengthen these relationships. It starts with open communication flowing both ways between auction management and the seller’s remarketing leadership.

The seller evaluates the auction regularly. In the same way, the seller should ask the auction how its own representative is doing, what’s going well and what isn’t. That requires transparency and a real assurance that an auction won’t be punished for honest feedback.

I once had an auction rep who, we learned, was not treating our auction partners with the appropriate level of respect. An auction general manager called me about an incident that day involving our teammate. It made me sick to my stomach that our institution was being represented that way, and we took immediate action.

What was eye-opening was what happened after that teammate was gone: other auctions came forward about similar behavior. From that point on, I changed how we evaluated auction reps. I also made open communication with auction management a standing part of every meeting, whether in our offices or on site. That could never be allowed to happen again. It has to be a two-way street.

Both sides have homework

Consistency is a shared responsibility, and both sides of the gate have homework. Here’s a quick checklist of what I believe sellers owe the auction lane, and what auctions owe sellers in return.

If I had to pick one item from each side, it would be scorecards for sellers and the hard phone call for auctions. That call from an auction general manager changed how I ran my team for the rest of my career.

Closing

Physical auctions will likely carry the bulk of the wholesale load for the foreseeable future, though the definition of physical auction may change some in the near future. Consistency won’t come from better technology alone. It comes from both sides showing up, communicating openly, and holding themselves to the same standard they expect from each other.

Having now worked on both sides of the gate, I’ve seen that the best results come when sellers and auctions stop thinking of it as a gate at all and start treating it as a shared lane.

This article originally was posted here: Part 3: Let’s Get Physical! Lessons Learned from the Downstream Physical Auction World.