In a letter to the auto auction industry shared Monday, ServNet executive director John Brasher offered an emphatic counterpoint to criticism of the industry’s handling of COVID-19.
Brasher said he is proud of how the industry has adapted historically to such crises and sea-changes as Sept. 11 and the Great Recession, and he expressed the same sentiment regarding the industry's response to the pandemic.
The letter comes less than a week after KAR Global chief executive officer Jim Hallett shared his concerns about the return of in-person auto auction sales with cars running through lanes, urging the industry to take greater responsibility for safety amid COVID-19.
Hallett contends the auto auction industry has been “irresponsible,” even “reckless” at times, in how sales are being handled amid COVID-19.
While Brasher’s letter did not specifically mention these comments, it offered a decidedly different point of view.
“Some are critical and ashamed of how our industry has handled the COVID-19 nightmare,” Brasher said. “While I believe that everyone may look back and perhaps see some things they would have done differently, I can say that I am proud of how the independent auction community and ServNet have responded.
“The ServNet auction owners’ response has not been hasty, rash or simply driven by business-centric concerns. Our owners are the same ones in the lanes every week with lifelong customers, team members and even family members who mean a great deal more to them than profits, risk or reward,” he said. “No, for our owners and our managers it is not a matter of risk/responsibility; it is a matter of personal, familial commitment.”
Brasher then expanded on that.
“The illness or death of a coworker or customer means more to our auction owners than it does to any other manager/officer/CEO in this industry. They are not acting out of calculated risk,” he said. “They are acting and operating out of a deeply personal commitment and love for their business, coworkers (not employees, but coworkers — because they actually work side by side with them), and lifelong friends and customers.”
He said auction partners are vital to their customers “now more than ever,” calling them the “lifeblood” for dealers. Brasher stressed the necessity of auctions “safely doing what we do” to help dealers survive financially, as well.
“If one of these dealers or coworkers gets sick or, heaven-forbid, loses their life over contracting an illness at one of our facilities, this means something to auction owners personally, not just as a financial liability,” Brasher said. “It means something more to them because they know the spouses and other family members of the folks involved, and they have known them personally for years. If anyone thinks that they would do anything to compromise the health and safety of these family members (not just customers, employees, or ‘stakeholders’) then they don't know ServNet auction owners.”
Brasher says the ServNet auctions’ response around the pandemic has been motivated by “commitment and love.” He also emphasized how the operators of ServNet auctions take a boots-on-the-ground view, having been involved in the day-to-day operations of an auction.
“They are personally scouring the latest and best information and statistics on the pandemic. They are personally consulting with experienced professionals. They are personally working with all parties involved to establish policies to ensure the safety of those who walk through the doors of the auction. They are personally working closely with local government agencies and law enforcement to ensure the established plans are in line with public edicts and policies,” Brasher said.
“Then, they are there, at the auction, personally, to observe, watch, listen and see firsthand how these policies are applied, adopted and practiced by coworkers and customers alike. They are there to constantly evaluate and make changes as needed — sometimes right on the spot. And then they do at all over again. Every day. Every week. Every month.”
He also touched on how all this has changed operations within the ServNet auctions.
“This process has led to numerous large and small changes in ServNet Auction lanes and offices. This process is making it possible for their coworkers to be at work and support their households,” Brasher said. “This process is enabling enabled small and large customers to keep working buying and selling cars. And this process is ongoing, leading to more and wiser changes on a weekly basis
“It is incredible what I have observed these auctions do, and I am proud of them all.”
To say that 2020 has been a year like no other is a true understatement, from a global pandemic and social and political unrest to devastating wildfires and a hurricane season that is already one for the record books.
On top of all that, before anyone had ever heard of COVID-19, Manheim was planning to celebrate our 75th anniversary this year. It all has me reflecting on where we’ve been, what lies ahead and why auctions remain critically important to the auto industry.
Manheim’s first 75 years
In 1945, five entrepreneurs from Manheim, Pa., fulfilled the dream of auctioning off a handful of cars from their single-lane location. By 1959, that dream had become the world’s largest wholesale auto auction facility and remains so today.
Manheim’s flagship auction also launched our company, the nation’s leading provider of end-to-end vehicle remarketing services, from inventory management and buying and selling to reconditioning, logistics and assurance.
Several milestones along our 75-year journey fueled Manheim’s growth. They include our acquisition by Cox Enterprises in 1968, hosting our first live satellite auction in 1994, introducing the first Used Car Market Report in 1996, launching our dealer website in 1997 and holding our first online Simulcast sale in 2002, an innovation that laid the cornerstone for Manheim’s digital future. Today, Manheim has grown to include 76 auction locations in the U.S. and a robust digital marketplace that conducts business across the country, offering over 7 million vehicles for sale each year.
COVID-19 changed everything
March 2020 will forever be another defining moment in Manheim’s history. Last year was a record-setting one, and we were on pace to do it again this year. We had big goals to accomplish and Manheim’s 75th anniversary to celebrate. Then, COVID-19 hit.
From that moment on, every decision we made was in support of the health and wellbeing of our clients, team members and the communities we serve.
Things that were once inconceivable, or just inconvenient, were now unavoidable. The CDC’s strict safety protocols, along with various state and local mandates, immediately disrupted Manheim’s long-standing tradition of hosting live, physical sales and with it, the social interactions we all enjoyed. Nearly overnight, we made the switch to all-digital sales, a decision that proved to be one of the most difficult and pivotal moments in Manheim’s history.
Even though we had been investing in digital channels for several years, COVID-19 and the Simulcast-only option accelerated the pace of adoption beyond what any of us could have imagined. It was a huge adjustment for our dealers who demonstrated incredible resilience during this extraordinary time.
Our clients have always counted on Manheim to deliver the latest technology and expertise to help solve their business needs. I am proud of how our company rose to this uniquely challenging time with a solution that would help keep their businesses moving forward.
The state of the auto industry today and why auctions remain critically important
The resilience and adaptability of wholesale auto auctions played a crucial role in bolstering used retail sales during these difficult six months and will remain critically important to the auto industry’s continued recovery.
As Cox Automotive’s chief economist Jonathan Smoke explains, “The primary concerns for the auto industry heading into 2020 were affordability, credit and inventory, with used car dealers expecting their best spring since 2014. But, by March, hopes for a record year quickly shifted to concerns about survival as the industry and the economy experienced the most dramatic and sudden declines on record.
“In the second quarter, used retail sales started to improve, benefitting from the pent-up demand created during the two-month lockdown, a build-up in wholesale supply, and the stimulus funds provided to businesses and consumers. By June, most markets were seeing year-over-year growth in vehicle sales. However, as we entered the back half of the year, conditions became less favorable for dealers as COVID-19 cases, which had been declining, started increasing again, new restrictions were added, and consumer fear grew. Until the risk of spread greatly diminishes, we cannot expect to return to a more normal activity level.”
And yet, in good times and bad, wholesale auto auctions play a vital role for both the auto industry and its car-buying consumers. Auctions provide market liquidity by allowing consignors to quickly convert cars into cash and offer the ability to move large volumes of vehicles without depressing prices. Auctions also deliver credible pricing that comes from an objective view of what vehicles are worth in the marketplace and enable sellers to maximize their return on investment when using a reconditioning facility that many auctions provide.
For consumers, the indirect benefits of auto auctions range from ensuring dealerships have large selections of used vehicles to meet their needs and preferences to determining true vehicle values through wholesale marketplaces. Auctions also instill trust with strict standards and protocols determined by the National Auto Auction Association.
As the largest player in the wholesale vehicle marketplace, Manheim brings together this efficient mass of buyers and sellers to determine true vehicle value while creating a dynamic and trusted marketplace.
What’s ahead: Digital paves the way for Manheim’s next 75 years
The wholesale vehicle marketplace is now more digital than ever before. Manheim was already headed in that direction before COVID-19 catapulted us forward, with 52% of our sales already going to digital buyers before the pandemic hit. And year to date through July, that percentage jumped to an overwhelming 78%. In addition, 97% of Manheim buyers today are using Simulcast to bid on vehicles.
It’s become increasingly clear that the auction business model is changing. These numbers and others suggest that the digital marketplace is growing stronger. Due to the circumstances brought on by the pandemic, many of us, including our clients, have developed new behaviors. It is said that it takes roughly 60 days for a behavior to become a habit. For me and my family, hiking has become our new habit as we spend more time outdoors. At Manheim, many clients have also formed new habits such as conducting more business digitally. But, that’s not to say that physical auctions are going away anytime soon.
For example, more than half of our auction locations have returned to offering clients in-lane bidding or hosting Digital Block sales. Digital Block sales are those held at Manheim physical locations using Simulcast. The vehicle never physically moves across the auction block; it is only displayed on screens. Digital engagement, however, continues to outpace this way of doing business. Since February, we’ve seen triple the number of bids on Simulcast and our average online “lane” attendance has increased from approximately 240 to 700 per sale.
Manheim is embarking on key priorities that will move us forward as the industry leader in this new digital marketplace, just as we have been for 75 years.
One initiative I’m especially excited about is our Digital First Marketplace, a strategy to transition our auction marketplace into a single client experience that is maximized for digital interactions and supported by efficient and flexible physical operations. That means unifying our digital platforms — Simulcast, OVE, Manheim Express, and our new Manheim mobile app with our physical assets — to give clients a seamless, transparent and personalized experience no matter which way they choose to conduct business.
Another effort we are continuing to invest in is the next generation of vehicle information. To give clients the best online wholesale experience, we will be providing even more information digitally —more images, higher quality visuals and more mechanical and safety data to help remove subjectivity and drive greater buyer and seller confidence.
The global pandemic also accelerated some aspects of the mobility evolution that will forever change the future of transportation. The primary drivers are digital retailers, fleet managers and new automotive technology, including ADAS and electric vehicles. Manheim has reimagined our reconditioning services — the power to get and keep vehicles on the road — to provide vehicle solutions for this future state.
75 years of leadership will continue
For 75 years, Manheim has been a trailblazer in the auto industry, demonstrating grit, determination, and a relentless passion to pave the way for clients to run their businesses smarter, faster and more profitably.
Over the past six months, we’ve experienced extraordinary highs and lows. Historic collapses in vehicle demand and complete reversals in a matter of weeks. The steepest decline of resale values ever recorded, followed by the fastest rise on record.
Much uncertainty still remains and none of us has all the answers to the challenges our industry faces. However, one thing is certain: Our Manheim team is well-positioned to continue leading the industry and working hard every day to find solutions that will help us all prosper.
Grace Huang is president of Manheim.
