vAuto founder Dale Pollak told the industry about the company’s new Stockwave sourcing tool earlier this week, and the industry innovator says the solution is designed to tackle four problems “all dealers have.”

Pollak went over these four issues in an interview with Auto Remarketing shortly before the sourcing product was officially announced.

Stockwave isn’t just for vAuto dealers, it’s an independent product for both franchised and independent dealers, whether or not they happen to subscribe to vAuto, Pollak stressed.

Through the solution, wholesale inventory will be coming to users in a constant stream from all over the country, “no matter the auction, no matter the seller.”

So, why would Cox Automotive create a tool that enables dealers to buy vehicles from auctions other than its own Manheim? Pollak said the answer is what inspires him the most to work at Cox Auto.

“The answer is that Cox is enlightened enough to realize that at the end of the day if you don’t put your clients’ interest first before your own, you aren’t going to win,” said Pollak. “If you are Manheim and you are the market leader, things are pretty good the way they are, why would you want to disrupt the current status quo?

And yet, Janet Barnard (president at Manheim North America) and Sandy Schwartz (president of Cox Automotive) recognize that if you are going to continue to be the leader, you have to create and deliver solutions that serve the dealers’ interests first.”

This tool is agnostic, and Pollak pointed out it will make wholesale recommendations with zero preference to any particular company’s products or services, “most importantly, including our own.”

And Pollak pointed out sourcing solutions, and tools that increase efficiency in dealerships, are about to become even more important as he predicts some tougher times might be on the way.

In fact, Pollak spent the last year or so traveling the country trying to temper dealer enthusiasm following record new sales.

Most dealers had a really phenomenal year in 2015, which is great, and we should all be happy about that and celebrate that success,” said Pollak. “But what I saw is some dark clouds on the horizon that I thought dealers should be mindful of.”

Those “dark clouds” include the fact that the industry is enjoying historically high levels of sales volume, but it’s a cyclical business, and “they aren’t going to last,” said Pollak, who noted that “sales volumes will level off and ultimately go down.”

No. 2, used-car margins are compressing at a rapid rate, and with an influx of off-lease used supply expected to hit the auctions this year, this is bound to become even more of an issue.

“If you combine all of these events, it is undoubtedly going to mean for dealers tougher ability to make profit. I went around last year telling dealers they need to anticipate this changing environment, and sure enough here we are in 2016, and everything you read says margin compression, over-supply of cars, pressure on profits, etc.” Pollak said. “Seeing it coming, I think Cox Automotive, being a leader in the market for dealer solutions, I think it is our obligation, and frankly our opportunity, to create and deliver solutions to dealers that they need most, when they need them.”

In that spirit, Pollak saw an opportunity to leverage a lot of different capabilities across the Cox Auto family to solve four particular problems that he said every dealer in the country has when it comes to sourcing and stocking their used-car operation.

  1. “They really don’t know as well as they think they know, or could know, what they should stock.”  

Pollak asserts every dealer has this issue, but this is one not all stores will admit to. To explain the functions of Stockwave that are designed to help with this issue, Pollak says to imagine a spreadsheet.

Imagine the columns are vehicle segments, while the rows are price-class ranges. Every cell on that grid represents a particular vehicle on a dealership lot, at a particular price point. With this data, the tool can take a look, for example, at a dealership’s compact SUV category in the $25,000 and up price point, and if the dealership has eight in stock but has only sold two over the last 125 days, “I can tell you have six too many of those units,” said Pollak.

And the same strategy is used, of course, to discover what units the dealer needs more of, as well.

“So, with that sort of perspective on every dealers’ inventory, I see all the sorts of improper allocation of investment capital,” said Pollak. “I see some categories in their inventory where they have too many based on their sales, and their current stock levels, and I see other categories in which they have too few, based on their current stock and past-sales history.”

Pollak says the solution aims to help dealers reallocate and redistribute their capital investments in their used-car inventory to sell more cars and make more profit.

  1. “When they do what they want to stock, it’s often very difficult to find those cars, and it takes a lot of searching and researching.”

Most every dealer and buyers is well aware of this issue — sourcing cars takes time, lots of it. Often, buyers have to spend hours, sometimes days, searching for the cars their dealership needs, and when they find those cars, they have to spend more time researching their history, equipment, features, and on and on.

“I’ve got the ability technologically, that once I know what you need on your lot, to show you every vehicle available that meets that criteria,” Pollak said.

"For example, if you needed compact SUVs in the $20,000 to $25,000 range, I can show you everyone in the country, or within a certain radius, that meets that qualification, and I can rank order them anyway you want: which are the hottest sellers, I can show you the ones with the greatest profit opportunity, I can show you only green ones,” said Pollak. “I could sort them and filter them and rank order them based on all this criteria, so you don’t have to spend a single second searching or researching. So, I could take that problem off the table.”

  1. “When they do find them, there is a lot of uncertainty to what they should pay and whether the vehicle is too expensive or not.”

And once the cars are found, of course, up pops the issue of knowing what one should pay for the units.

Stockwave works to solve this problem by taking a look at your target profit. If the dealership needs a compact SUV it can sell for around $20,000 and you want to make a $2,000 profit, and your recon expense is normally close to $1,000, the solution knowns that you ought not pay more than $17,000 for the unit to meet your profit goal.

“So I can show you on every car, only the cars that you need, what is the max bid limit that you should be prepared to pay,” said Pollak. “So I can take that question that you spend hours researching and often don’t come to the correct conclusion after you spend all that time, and take that problem off the table, as well.”

  1. “The whole process takes a lot of time and effort.”

Lastly, sourcing vehicles is key to a dealership’s success, but it takes a significant amount of time and effort.

The team at Stockwave asks dealers to one thing with the new solution — “just turn it on,” said Pollak.

“And it takes all of those things that you spend hours of days trying to figure out, and often don’t get the right answers I might add, I can do all of that for you and give you the best answers,” he continued.

Pollak also shared the tool might increase operational efficiency to the point dealers could potentially reallocate some of their investment in full-time and part-time buyers and perhaps use those employee’s expertise elsewhere in the dealership.

The technology behind Stockwave can see the dealers’ inventory in real-time — what they have sold and what they haven’t sold — and bounce those stats up against a target supply.

Why is this especially important now?

“In this year that we are entering right now, where margins are going to be compressed, dealers are going to have a lot of difficult time achieving profit levels comparable to prior years,” Pollak said. “What they need is two things: They need more sales and gross profit generated, and when I help you allocate your investment in your inventory to be more optimally balanced, it is certainly going to help you sell more cars at more profit.”

When dealers get to the point where Stockwave has pre-selected and pre-filtered the best cars for them, and have chosen the ones they want, all they have to do is click a button, and the solution will open a window right to that auction house and bring them right to the spot where they can bid on the unit.

“At that point, we just drop them right into the auction houses site at the right spot,” Pollak said.

Product to launch at NADA

The companies aim to launch the all-new Stockwave at the upcoming 2016 NADA Convention & Expo in Las Vegas.

And if dealers go to stockwave.com, they can register for a demo. And beginning on March 1, vAuto will invite those pre-registered dealers to participate in group Web demos, after which they can either get started and sign on, or they can schedule a one-on-one in-dealership demo.

The initial entry-level product, interestingly, will include most all the solution’s functions. There are two add-ons available, though: GeniusSync and MarketSync. GeniusSync allows a dealer to use Stockwave in a live-bid environment; in other words, if they are participating in a LiveBlock auction, for example, users can have Stockwave open at the same time. And MarketSync basically gives dealers access to the vAuto Live Market View data and recommendations.

Pollak pointed out that the only reason vAuto can release a solution such as Stockwave is through the combined resources at Cox Automotive.

“When we formed Cox Automotive, the thesis was that if we combined our resources across our vast enterprise, we ought to be able to do things that nobody else can do,” he said. “The different pieces of the solution I just described to you are plucked from and pulled from various different technologies and various services and capabilities that we have across the Cox enterprise network.”

“And that is really our obligation and our opportunity at Cox — to provide solutions to dealers that they need the most, when they need them,” he concluded.