As a commodity, data defies traditional economic analysis. Data volumes have exploded over recent years and so too has the value of that data. The challenge for businesses today is to harness the power of all that data flowing through their computer systems to create insights which can be put to work for commercial advantage.
By so doing, businesses can potentially transform themselves into data-driven operations. The consensus emerging is that business decisions can be made faster and more consistently accurately, if guided by analysis of data rather than just human instinct. One market where this data-driven phenomenon seems to be gaining credence is the vehicle auction world.
For a look into the future of the automotive market as a whole, it’s worth taking a closer look at what some of the leaders in the UK car auction world are using data for. There is no doubt that the likes of BCA (British Car Auctions) and Cox Automotive are adopting this data-driven philosophy with gusto. It’s also becoming clear that this thinking is helping drive growth and to some extent consolidation in the vehicle auction world on both sides of the Atlantic.
As these businesses grow, both organically and through acquisition, they are also collecting and analysing more vehicle data, more quickly, and using the resulting insights to drive profits up by increasing re-marketing speeds. This enables them to hold more auctions at each site, pushing more vehicles through each site, and making sure a higher percentage of vehicles are being sold at optimum prices.
To do all this number crunching these auction houses have built teams of data scientists who focus on constantly improving the number and quality of vehicle data sources. The two key data sets they are plumbing are Build Data on vehicles (basically covering the information on specific vehicles which comes from the factory itself) and Transactional Data which essentially collects a large pool of like-spec vehicles recently sold to create an aggregated Recommended Retail Price.
It is this large pool of transactional data which is helping to turn auction pricing into an objective science rather than one based on a highly subjective, personal judgement on what the auction can afford to sell it at to avoid losing money.
Cox Automotive owns RMS Automotive which brings together disparate data sources to suggest which cars should be sent to auction sooner than scheduled given certain market variables and historical data of how that vehicle is performing after doing X number of miles, over Y numbers of years and Z blemishes to its service, maintenance or repair records, which together gives Cox vehicle valuations in a much tighter range than would have been possible a few years ago.
This sort of intelligence and expertise can be put to work to expand horizontally, beefing up value added services such as de-fleeting which car auction businesses offer to get fleet owners’ vehicles ready for auctioning with a view to optimising sales prices on behalf of fleet managers. They are also pushing to expand their re-conditioning operations with a view to managing their vehicle supply chain more tightly.
The other battle is all about re-marketing accuracy and speed. How quickly can that used vehicle be inspected, recommended remedial works be completed, valeted, photographed, priced, advertised online and moved to the nearest auction site for sale?
US auction house KAR is using data science to assess vehicles’ condition more accurately ahead of sale. It’s use of VIN-level decision support is key, it says. Huey Antley, VP of Data Science Solutions at KAR sums it up well:
“Consolidation (in car auction market) does allow for more data to be aggregated and brought to bear. I’m sure that, to some degree,..is…the motivation for consolidation.”
Consolidation is also happening in auction sites as well. There is a view that running less, but larger, sites make sense if each site can be made more efficient, processing more sales at the optimum price. Manheim decided to consolidate its English truck, trailer and plant auction sales last year into a massive new facility in Coventry offering the UK’s ‘first and only’ weekly truck and trailer auction.
The idea is to give both sellers and buyers the best possible experience. However, these mega-sites also work because an increasing number of the buyers are dialling into the auction through an online auction service like Manheim’s Simulcast service which shows the auction in action in real-time and gives bidders the opportunity to click to bid rather than raising their arm in the bidding area. Put simply the increased stock lists for each auction are being matched by the increased number of bidders participating via the internet.
Online auctions work for an increasing number of dealerships and private individuals who might not want to spend an entire day travelling to and from an auction site and waiting for multiple vehicles to come up. The other advantage is that whatever the buyer is seeking, there are likely to be several vehicles matching their requirements with starting prices which tend to be closer to final sales prices.
There may well be lessons to learn from the auction market for dealerships. At the very least it makes sense for Heads of Business to be looking at what data they are collecting and how they are using it to dynamically adjust pricing and, more generally, serve the customer better.
This article originally appeared in Car Dealer Magazine