I’m convinced that Bruce Thompson, founder of aaXchange and lanelogic, is an evil mastermind bent on changing the auto industry as we know it. I first heard about him a few years ago while “consulting” for DrivenXChange (an online bid/ask marketplace for wholesale cars) and researching into potential competitors, aaXchange was loosely a competitor.
aaXchange, for those of you not familiar with the company, helps dealers optimize their profits by analyzing what cars sell the best, and then recommends those cars to the dealer. I’ve heard they also take into account outside data, potentially from AutoCount or other services. From the time line I’ve been able to reconstruct, aaXchange started in ’05 and sold out in ’06. But, the genius behind aaXchange, and what Thompson did with it, was not the quick exit, but what he set himself up for.
I’m not sure if it was a precondition of the sale, or just some good negotiation later on, but for his next venture he made the data primary part of the business – that company is lanelogic. lanelogic is the first market maker in the wholesale industry that actively trades cars between dealers, bringing liquidity the market, improving how efficiently cars are distributed among dealers, and bringing an industry first – the “Put Bid”.
lanelogic is easy to use:
- Sign up as a dealer and let them know how many cars you sell a month
- As a precondition of using their service, you allow them to purchase inventory on your behalf, up to 30% of your total inventory
- lanelogic has a 45 “Put Bid” on the car, that is basically a european put option, allowing the dealer to sell the car back after 45 days at a given price
- When a customer wants to trade in a car, the dealer can “launch” it to their trading deks, where the dealer receives a guaranteed buy bid within about five minutes
lanelogic has built a great system for dealers, and for themselves. Dealers can now take almost any in car in on trade, and know at what price they have a guaranteed buyer. Trade-in values are important to most buyers, and an objection to overcome during the sales process. Plus, the inventory that lanelogic does purchase for the dealership will usually be high quality inventory, and if not, lanelogic will take it back. The real beauty is what Bruce has built up.
I’ve read that lanelogic makes about $200 a trade, essentially moving cars between groups of buyers and sellers that are forced to take the vehicles, but, with the aaXchange data, the traders know what cars the dealers can sell. This limits the risk that a dealer will exercise their ‘Put Bid’. More than just a single smart move, Bruce has built up an ecosystem around lanelogic that enables dealers to buy cars, and turns the company into a comprehensive application. Partners include: Copart (a salvage auction company), Cross Country (a vehicle transport provider), SGS (Inspections), DSC (dealer floorplans), and Great American Insurance Co. (I think the company that provides the Put Bid).
All of these companies together work to improve the buy and sell process for dealers. If a dealer is forced to buy a car, they need a line of credit with which to buy – DSC. Once they buy a car, they need to be able to transport it – Cross Country, and before lanelogic ever takes possession of car, they need to verify the condition – SGS. And, in those instances where LaneLogic is unable to dispose of a car, they can use Copart’s Virtual Bidding 2 platform to auction off the car to the highest bidder. Bruce’s vision?
“At some point, we go to the consumer.” Pure. Evil. Genius.