What’s happening with sourcing? Q&A with Dealer Auction CEO
Our webinar host, Stu Leatherbarrow, caught up with Le Etta Pearce, CEO of Dealer Auction, to discuss her unique view of the wholesale and auction marketplace. In this Q&A, Le Etta shares insight into the activity she has seen across the wholesale sector and what to look out for in the coming months.
Q. Firstly, can you share with us the impact of COVID-19 on wholesale remarketing over the past couple of months?
A. Yes of course Stu.
Let’s consider what we knew running into Lockdown:
New car stock shortages put more pressure on used volume
More part exchanges were retained for Retail
Demand was high, supply was low
Prices realised through auction were super strong
So, if this was the market we were experiencing, what has happened since 23rd March?
As we went into lockdown it only took about a week for the activity to slow down, as businesses did the right thing and put the safety of their people first. Most physical auction centres closed immediately. Several dealers imposed buying bans. Any transactions that were completed, were for lower-priced vehicles, where risk was reduced.
As we progressed through April, online trade sales were the only way to acquire stock, but volumes remained consistently lower as buying and selling under the strict government guidelines prohibited much movement.
The positive news is that the pace is beginning to pick back up. Auction houses are offering existing stock through online channels. Manheim have offered stock online with buy now options and this week began their digital sales programme. So far, the results have been encouraging.
We have also seen a shift on Dealer Auction in the last week:
The number of vendors listing vehicles has doubled
The number of vehicles listed for sale has increased by over 400 units
The number of buyers actively bidding has increased by over 200
The number of daily sales has trebled
Prices achieved are stronger
Average vehicle values are creeping back up
Conversion rates are increasing
One interesting perspective is that we are receiving double the number of bids per vehicle we would normally experience – albeit influenced by the overall stock volume it clearly shows that demand is there.
One thing to remember, though. Before lockdown, sourcing stock was tough, so many dealers still have spaces to fill on their forecourt. Stocking loans, cash flow and uncertainty need to be considered and balanced before spending.
We’ve also heard that online retail sales or reservations have been increasing, I’m sure you’ve seen the social media activity amongst the dealer community. In fact, over the last week, the number of funding settlements has grown rapidly suggesting stock is selling.
Q. That’s certainly a shift in the last couple of weeks and encouraging. How do you think the shape of the wholesale market will change as a result of COVID-19?
A. Well as always it is going to be influenced by supply and demand, but probably not in the traditional sense!
We don’t know yet the full extent of the emerging consumer behavioural trends and the impact of attitudinal shifts towards public transport and car-sharing for example but, undoubtedly, retail demand will play its part.
However, from a purely wholesale perspective, the flow of vehicles through the remarketing ecosystem took a hard and fast stop. Many fleets, OEM’s and dealers are holding large volumes of stock that they are keen to trade - and as you know, those vehicles will need to move.
If you consider the different sectors and their future remarketing needs, we are most certainly going to experience some peaks and throughs.
We talk to OEM’s, Fleets and Captive Finance providers regularly and right now they are keen to push stock through the platform.
Expect to see increased volumes in the short term.
We know some fleets have extended consumer leases but will see a peak when these expire concurrently with standard contract terms so will need to increase their disposal volumes.
Expect to see a dip after the immediate increased supply but anticipate higher volumes in the future.
Where we would normally see OEM’s and Captive Finance volumes repatriated inside their network, the question is - will there be the capacity or demand from franchise dealers to absorb the sheer volume available in the short term? Will more volume reach the independent market?
Expect to see a more diverse stock allocation.
Dealers are currently evaluating their stock holding. We’ve been approached by several groups to assist them in trading out of stock, this is good stock it just isn’t right for their forecourt now. We’ve already seen dealers – both sellers and buyers make smarter more informed data-driven decisions about their stock choices.
Expect to see more dealers push retail stock to trade.
New car stock supply will still be a challenge, but we understand the impact is varied amongst manufacturers.
Expect to see new car shortages continue to impact part-exchange volumes.
Rental companies have been strategic with their stock holding, careful not to rack up mileage on vehicles approaching end of term so they can maintain a more consistent disposal programme.
Expect to see continuity in some sectors.
Sounds important for dealers to re-evaluate their forecourt stock given some of the changes anticipated.
Q. But what about the approach to sourcing stock, surely we can expect some radical changes here given the government restrictions?
A. Absolutely Stu.
Fingers crossed we get the green light on 1st June, it might have felt a long way off on Sunday night as it wasn’t the news we hoped for or expected but it will come round pretty damn fast and it doesn’t allow much time for dealers to be ‘Retail Ready’.
The only way to buy trade stock right now and potentially for some time is through online sales. Dealers must embrace this change - well, being frank, there isn’t much choice. Although I suspect some dealers who don’t ordinarily buy through these channels are concerned about sourcing online. But it is important to remember that technology has improved significantly and with it brings a greater level of confidence.
Last year Dealer Auction alone transacted over 120,000 vehicles that were purchased unseen, using imagery, condition reports, damage splats and vehicle descriptions - so it isn’t about trying something new it is about adapting and embracing the change that would inevitably have happened over time, it is just happening much quicker.
I saw a post on LinkedIn recently that simply said – ‘What drove your 2020 digital transformation - Plans or COVID-19?
It feels kind of a relevant question right now. Either way, whatever it was, online transacting is here to stay and without doubt, will transform the automotive wholesale and retail marketplace.