|At a Glance|
Some changes in the public vehicle auction space include:
No doubt technology has changed the way many governments function and perform services. Fleet vehicle remarketing is no exception. Government agencies have been trading in retired vehicles, using sealed bids, hiring auctioneers for on-site auctions, or sending out vehicles to local auction companies, but online auctions have emerged in the last decade that offer an additional remarketing method.
Remarketing providers and auctioneers provide a range of services for governments that allow sellers to determine how much or little of a role they want to play in the process. Company representatives and fleet managers talked to Government Fleet about their remarketing tactics and services, as well as the evolution of government fleet remarketing.
A Changing Industry
As government fleets have evolved with the economic downturn, so too has public fleet remarketing. Gene Govoreau, general manager of Ken Porter Auctions, a Carson, Calif.-based company handling both on-site and online auctions, said he’s seen a rise in older vehicles sent to auction, paralleling the trend of governments keeping their vehicles longer. “Five years ago, [governments] were disposing vehicles at 100,000 miles; now it might be 150,000 miles,” he said. “Resale value on them is going down” as a result.
Buyers, however, don’t have to despair over not finding a newer vehicle. In addition to the trend to sell older vehicles, a small number of fleets are doing the exact opposite. That’s according to Joe Lane, vice president of national sales at Property Room, an online remarketing company headquartered in Fredrick, Md. Lane said, “We’ve seen some fleets that have decided to reduce fleet size overall and have sold relatively newer vehicles.”
Govoreau added that the biggest change he’s seen in the past 20 years is the increasing prevalence of online auctions.
This is demonstrated in the emergence of online auction services surrounding the turn of the century. Entrepreneurs saw a need in the public surplus sector, and the emergence of technology led them to create what they thought was a better remarketing system — an online option that promised larger audiences and better returns.
eBay was founded in 1995, and it entered into vehicle sales by launching eBay Motors in 2000. Montgomery, Ala.-based online auction company GovDeals started in 1999 and had its first auction in 2001. According to Roger Gravley, VP, client services and marketing, nobody was remarketing government vehicles via online auctions when the company first started.
Property Room started out in 2001 offering online auctions for police and sheriff’s offices, eventually branching out to fleet as a request from clients, Lane said. Greg Berry, a former borough councilman in Pennsylvania, founded Philadelphia-based online remarketing company Municibid in 2006. He is now its CEO.
While numerous companies now offer online sales of government surplus items, Nick Peluso, senior vice president, customer management with Manheim, says the move to online vehicle sales has been slower on the government side. “The movement to online is slower than the other segments we do business with, non-government,” he said. Manheim, an Atlanta-based vehicle remarketing services provider selling vehicles mostly to dealers, was on the federal General Services Administration (GSA) contract for years before deciding to exit the space. Peluso credits the slow move to online with the fact that government vehicles tend to be older, and dealers are hesitant to purchase these older units without first inspecting them.
However, it’s not just dealers who are buying vehicles now. The types of buyers have also changed. Since Municibid’s formation, Berry has seen a shift in buyers, from strictly professional buyers, such as parts dealers and resellers, to more of the general public.
“We’ll have parents buying vehicles for their kids, for their first car,” he explained.
And, as a consequence of the times, the method in which buyers purchase vehicles are evolving. According to eBay Motors’ Senior Manager of Dealer Training Clayton Stanfield, eBay Motors buyers are going mobile. On eBay Motors, public agencies can create online stores for their used vehicles and equipment. Stanfield said the Motors category is seeing approximately 9,200 vehicle purchases a week closing on mobile devices, up from 2,800 only one year ago. This move to mobile devices means sellers must adjust the way they interact with buyers.
The increasing number of mobile users “shows a different audience,” Stanfield said. “I think to really succeed, you go full in.” He explained that when a buyer purchases from his or her phone, he or she is not as likely to wait two days for a response to a question. To get more bidders, sellers need to be quicker to respond than ever before.
The On-Site & Local Auctions
For fleets conducting on-site auctions, the skill of the auctioneer can be essential to running a remarketing operation, according to Jim Davis, director of maintenance services at the City of Corpus Christi, Texas. The City has used the same auctioneer for more than a decade.
“I have a very skilled auctioneer. He has been very successful over the years for us. When he runs a combination auction [both on-site and online], he gets the most value for us,” Davis said.
The City conducts annual on-site auctions, with the addition of a simultaneous online component approximately five years ago. The auctioneer brings a staff of about eight to 10 people, and one or two fleet staff members assist for the day. Davis said all the vehicles sell, all the time.
Ken Porter Auctions provides a full remarketing service, from towing and storage of the vehicle to sale. It conducts live auctions every two weeks at its auction house while simultaneously conducting an auction online. The company boasts more than 200 government clients and although it’s a local auction company, buyers from as far away as Mexico and Canada.
According to Govoreau, a live auction company “reduces the use of human resources for the municipality once the vehicles are consigned and picked up” by the company. This means the government agency doesn’t have to maintain staff for inspection, pickup, payment, and to resolve any problems that arise.
Expanding Online Options
Online vehicle auctions, however, have their own benefits, according to company representatives. These include ease of use, convenience for the buyer, scalable services, an international audience, and consequently, higher selling prices.
Berry added that an online auction eliminates the intimidation factor that a live auction might cause for non-professionals. “With the general public being involved more and more, not a lot of them will try to compete at a live auction. They’re not sure. But with online, they can see exactly what’s going on. It’s not rushed,” he explained. “Auctions can be for two weeks. They’re not scrambling or having to make a rash decision, but the competitive nature is still there.”
From the do-it-yourselfer to the fleet manager who just wants the check, online remarketing providers offer a range of services designed for all fleet types. With eBay, a fleet or surplus manager can create a storefront and list agency vehicles with little assistance. Municibid and GovDeals both provide customer service support and handle marketing, and optionally, taking photos, posting the item, and handling payment transaction. Property Room offers similar services, but through its partnership with Copart, the company offers full service pick-up and storage option as well.
Paul Condran, equipment maintenance/fleet manager for the City of Culver City, Calif., said he’s been happy with the results of moving from traditional live auctions to online auctions.
Condran did a comparison of returns for three suppliers (one on-site and two online) for 20 transit buses in similar condition. The average return to the City on each of the buses via online auction proved to be higher — $3,625 via an auction company and approximately $4,500 via online sales.
He also appreciates that he can watch the online auction while it’s in progress. “I would have no ability to watch the auction, the bidding process, or anything similar to this,” Condran said of his previous service.
Keith Leech, fleet manager for the City of Sacramento, Calif., stated that although fees are higher for his current online remarketing services with Property Room, “we have much higher return in terms of net proceeds.”
He added that the remarketing company’s online monitoring tools are robust, which not only allow the fleet staff to view how the auction is going, but allow the technician previously tasked with recordkeeping to focus on other tasks.
A Sliding Scale of Services
Service fees are more or less inversely related to how much time a fleet manager can devote to the sales. eBay Motors charges the following flat fees for all high-volume listings: $50 per listing, an additional $7 to set a reserve price, and $2 for the “Buy It Now” feature. The rest of the services mentioned in this article charge percentages. GovDeals charges between 7-12.5% of the selling price; Municibid charges between 5-8%; and Property Room 5-12.5%. Ken Porter Auctions charges on average 5-10%. The City of Corpus Christi’s auctioneer charges 6%.
The variance depends, of course, on how much work a fleet manager puts in. For example, selling on eBay is essentially selling it yourself, hence the small fee. Contracting with an auctioneer means the auctioneer does much of the work, but the vehicles stay on the agency’s lot. GovDeals provides training and best practices information to sellers, while Municibid has an option where a company representative will come out to the fleet’s facility, take pictures, and gather information for the online post; in these cases, the vehicles stay at the fleet facility. Joe Lane said one of Property Room’s services includes prompt towing and storage, cleaning, photographing, marketing, inspection, storage, sale, and paperwork. Ken Porter Auctions’s services also encompass everything from pickup to sale.
eBay charges the seller and Municibid the buyer. Others allow the seller to determine who will pay the fee — the buyer, the seller, or a split between the two — depending on the contract.
Who Are the Buyers?
Since online surplus sale services are able to target a larger audience, they claim they’re able to get a higher bid. And since the buyer pays the shipping fee if there is one, it’s in the best interest for governments to sell the vehicles to the broadest audience possible — so say proponents of online sales. But who are these international buyers driving up the demand (and price) for surplus government vehicles?
According to Lane, about 28% of all buyers that have purchased vehicles on Property Room are outside the United States, while 24% are from outside the state where the sale originated. That amounts to 52% of all sales reaching a non-regional market. Since all sales are as is (assuming the seller is honest about the description of the vehicle), fleet managers don’t have to worry about returns, Lane said.
Gravley said for heavy equipment on GovDeals, about 10-15% of units sold are leaving the country. Many units are going to South America, Mexico, and the Middle East, especially Dubai, he said. The number of vehicles sold internationally is lower, except for school busses. He also noted that with California’s strict emissions regulations, oftentimes, diesel engines on trucks and heavy equipment that have not been retrofitted can’t be sold in California. The online auction platform allows fleet managers to easily sell these units to out-of-state buyers.
What Sets You Apart?
If reevaluating a remarketing strategy, how does a fleet manager decide what type of service or company is better for his fleet?
For Ken Porter Auctions, it’s the best of both worlds, online and live sales. It’s also convenience, time savings for those who don’t have the administrative staff to handle photography and postings, and for those who want the surplus vehicles off the lot. It’s ideal for the fleet managers looking to completely outsource remarketing — just wait for the check in the mail.
According to Govoreau, one of the main advantages of an auction company is that it takes liability out of the selling agency’s hands. “Live auction companies in California must be licensed used motor vehicle dealers,” he said. “When a consignment is picked up by the live auction company, the responsibility and liability are passed on from the municipality to the live auction company.”
In the event that vehicle histories or operational problems are not fully disclosed, a municipality would be held liable, which could result in repairs, refunds, or damages. A live auction company would, according to Govoreau, resolve these issues, protecting the public agency from this liability.
Another liability that Govoreau pointed out appears when a buyer picks up a vehicle, in case he or she slips and is injured. By moving the vehicle and having pickup off the fleet lot, a government agency can prevent this problem.
Municibid’s Greg Berry said it’s his company’s marketing tactics and the website’s buyer engagement features that contribute to high net results. The amount of marketing his company does on various platforms, including toward the general public, helps drive significant traffic to the site. The second aspect lies in Municibid’s website features that keep users engaged.
“We have ‘Morning Reminders,’ so if you had a bid placed in an auction, the day it ends, you get an e-mail in the morning reminding you that you had a bid placed on this auction and you might want to look at it,” he explained. “We also have an ‘Auction Alert’ system, where the bidder can put in key words and when an auction item comes up matching those key words, the system will automatically notify them.”
GovDeals’ Gravley said specialized marketing and a large bidding base set its company apart. GovDeals has its own marketing department that focuses on getting the word out about auctions, and the company will post vehicles on sites such as AutoTrader at its own expense in order to get better returns for its clients. Gravley added that the company’s bidding base is 350,000 strong, and it also has access to 2.5 million bidders across its sister companies, which include Government Liquidation and Liquidation.com.
eBay’s massive number of active users — 108 million worldwide — is impressive. And while they’re not all going to the Motors site, global gross merchandise volume for eBay Motors for the third quarter of 2012 alone totaled $3.7 billion. Additionally, the company offers financing on its site, opening up the government resale space to another group of potential buyers.
For Property Room, Lane said the company’s strength lies in its “totality of services.” Through the company’s partnership with Copart, fleets wanting a full remarketing service can get their vehicle off their lot almost immediately. However, fleet managers can also choose to do more of the remarketing work and keep the vehicle on their lot — for a lower fee.
Is it Time to Reconsider Your Remarketing Strategy?
Is it time to reconsider your fleet’s remarketing strategy? Perhaps. Berry from Municibid claims remarketing via sealed bid with only a small marketing effort (which he sees fairly frequently) might result in two to three lowball bids, leaving the public agency to choose the highest of these. According to Lane, fleets doing their own auctions once or twice a year are stockpiling assets that drop in value every day.
Manehim’s Peluso advises fleet managers to try new methods. “Don’t be afraid to put your toes in the water and try a couple of new methods out there.”
Still not sure? Try online remarketing risk-free, said Berry. Take a trade-in for example. “See what the trade offer is, list it [for free online], set the reserve as the trade quote and if you beat it, great. If not, no problem.
Selling a vehicle online? Check out the 9 Steps to Online Remarketing Success.
- Mike Ahern, special projects manager, Town of Mansfield, Mass.
- Greg Berry, founder & CEO, Municibid
- Paul Condran, equipment maintenance/fleet manager, City of Culver City, Calif.
- Jim Davis, director of maintenance services, City of Corpus Christi, Texas
- Gene Govoreau, general manager, Ken Porter Auctions
- Roger Gravley, vice president, client services and marketing, GovDeals
- Joe Lane, vice president, national sales, Property Room
- Keith Leech, fleet manager, City of Sacramento, Calif.
- Rick Longobart, facilities, fleet, and central stores manager, City of Santa Ana, Calif.
- Nick Peluso, senior vice president, customer management, Manheim
- Clayton Stanfield, senior manager of dealer training, eBay Motors