Editor's Note: This is the second in a three-part series on the auto auction operations of KAR Auction Services. Part I discusses the focus on revenue per unit at ADESA and Part III discusses potential expansion at KAR.
KAR Auction Services made a change on Aug. 1 that could end up being mutually beneficial to both its ADESA physical auctions and TradeRev online auction platform.
The sales teams for those business units are now aligned.
“Up until now, I would tell you that ADESA and TradeRev have, for the most part, operated as independent offerings, almost independent companies, and you could say in fact they were actually competing with each other to some extent,” chief executive officer Jim Hallett said during the earnings call, according to a transcript of the call posted to the KAR website. “In some cases, you had two different salespeople on two different days calling on the same dealer, offering a different value proposition, one on TradeRev and perhaps one on physical auctions.”
In aligning those sales forces, Hallett said KAR’s focus is on dealer consignment and winning that consignment no matter the channel.
“We want to be able to offer the dealer a digital offering on TradeRev, but we also know that not every dealer is going to take that offering. We want to be able to offer that dealer the opportunity to sell the car in a physical auction and allow the dealer to make the choice of use one channel, use the other channel, or perhaps use both channels and maybe one channel for certain cars and another channel for other cars,” Hallett said during the earnings call.
During a follow-up phone interview with Auto Remarketing, Hallett said that when a salesperson now speaks to a dealer about his or her consignment, the salesperson explains the options of selling in the physical lanes with ADESA and online with TradeRev, speaking to the “benefits and economics” of each one and asking the dealer how he or she would like to sell: physical, digital or both.
“We’re going to market with a unified approach,” Hallett said.
They also talk with dealers about using both and how that can be beneficial
Chief financial officer Eric Loughmiller, who joined Hallett on the phone interview, gives this example: say a dealer is set up to run a vehicle in an upcoming physical auction sale and is in spot No. 148. However, the dealer can run that car on TradeRev the day prior. If it doesn’t sell there, no harm, no foul: the car hasn’t lost its position for the physical sale.
But if it does sell, its already ahead of the game of those cars being sold the next day at the physical sale.
“The (buying) dealers have a chance to see your car before they see 147 cars in front of your car” at the physical auction, Loughmiller said.
And say a car doesn’t sell on TradeRev and is moved to a physical auction, where it also does not sell. It can still be moved back to TradeRev — and KAR can provide guidance to the dealer on pricing using their suite of data and analytics.
“There's no dealer that sends a car to a physical auction that wants to take it back. They want to get the car sold,” Hallett said.
There can be a lot of pressure on dealers, particularly in urban areas, to get vehicles off their lot and maximize their use of real estate for retailing, Hallett said. It’s of utmost importance
“I mean, it’s critical,” Hallett said. “They would pay extra money to get the car off the lot within an hour.”
Stay tuned for Part III of this feature series.