By Ben Caffee, Senior Director, Offsite Solutions at Manheim

Pressure is mounting on auto dealers’ retail margins. As vehicles last longer (the average life of a car is now a record of 11.8 years) new-car sales have plateaued. Dealers now have to look at all departments to determine how to create significant efficiencies in their businesses and drive growth for their companies. All of this, combined with the explosion of digital technologies, has led to the most competitive retail market in years.

Wholesale has not traditionally been viewed as a revenue driver for dealerships, but all of that is changing with the rapid evolution of digital tools in the wholesale marketplace. Truly, the digitization of wholesale is not just coming—it’s already here—and dealers who look to this area of their business for profits and implement the right strategies have seen great results.

Take a large franchise dealer in California, for example. Prior to equipping their business with a digital strategy, they were spending 50 hours a week on their wholesale needs. That number shrunk to just 15 hours per week, valuable time that they can now spend at the dealership. Further, digital wholesale channels enabled them to find better inventory that needed less reconditioning, which shrunk their time to the frontline and sped up their turn. They’re now doing double the volume they did before turning to digital wholesale.

Word is definitely getting out about the profit opportunities that exist in wholesale. In 2018, per Cox Automotive data, digital transactions were up 20% compared to the previous year, and Manheim’s digital channels received 78.2 million visits. Furthermore, in 2019 so far, 47% of all vehicles sold through Manheim were to digital buyers – a figure that could rise to 50% by the end of 2019.

Driving this ever-increasing adoption is the fact that digital wholesale tools have solved many of the challenges that previously came with physical lane auctions, sealed bid sales and dealer trade networks. These new solutions increase the convenience of buying and selling wholesale inventory for dealers, as they are now able to purchase and list vehicles on an app or digital platform directly from their lots. Not only are these tools more convenient, but they allow dealers to spend more time at their dealerships, and turn their inventory faster.

Consider this: every day a vehicle remains unsold, dealers lose money. Industry estimates show that dealers lose approximately $50 per day in holding costs while a vehicle remains on their lot. If the vehicle isn’t moved at retail or through wholesale after thirty days, that’s $1,500 in holding costs that dealers could have avoided per car, per month. However, better acquisition strategies reduce these costs, especially on the trade-in front.

If equipped with the right wholesale digital solutions, dealers can be more informed on what that vehicle will actually command at auction, before they even agree to on a trade-in price. Even better, they can list that vehicle for wholesale immediately instead of leaving that vehicle to sit on their lot until sale day. These two steps are critical to increasing profits and are both fueled by today’s new technologies in wholesale.

There shouldn’t be a question in the minds of dealers when considering whether to invest in these digital wholesale technologies. The only question should be: what do I look for in deciding which digital solution to use? There’s not just one thing; Solutions that offer a powerful combination of guarantees, full service, longer buying times, vehicle selection, and audience are the best bets for increasing profits.

In particular, dealers should look for the digital platform that has the largest inventory selection and greatest audience size. The larger the selection, the better chance a dealer has of finding the right inventory.

The best digital solutions will arm dealers with the maximum amount of condition information to fuel confident purchases without them kicking the tires. Information like detailed condition reports, enhanced disclosures, and 360-degree imaging technology—which helps bring digital buying closer than ever to a live interaction, help buyers to become more knowledgeable about the vehicles they’re purchasing. That knowledge fuels trust between buyers and sellers and ultimately turns into stronger profits.

It’s clear that digital technologies are here to stay. Don’t wait any longer to join this digital revolution. Your competition surely won’t.

Learn more about “Why Dealers are Turning to Digital Wholesalers” by attending Ben Caffee’s session at Digital Dealer 27 Conference& Expo (Aug. 19-21, Las Vegas, NV).

About the Author

As Senior Director of Digital Solutions at Manheim, Ben Caffee leads field services for the Manheim Digital Marketplace, specifically focused on growing the nearly 150-person strong Concierge force for the company’s Manheim Express app. Under his leadership, this team of highly trained specialists provide white glove wholesale listing services using the latest digital tools. Caffee joined Cox Automotive, the parent company of Manheim, in 2015 as part of the Strategic Planning team, where he was responsible for highlighting key global economic and industry trends and helping craft the strategy to help Cox Automotive lead the industry through the next wave of disruption.


Author: Contributing Writer

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