How To Open Up Your Markets

The auto industry has grown up around proprietary processes, technologies, and closed networks. Auto Auctions only served licensed car dealers. Franchised dealers have access to closed auctions, and auto auction companies view remarketing as a zero sum game. If Manheim signs a client that means Adesa loses one.

Consequently, web companies, or web platforms, in the auto industry tend to be closed. Very few auto companies have web services that other companies can access, and the ones that do, charge. KBB and NADA provide access to their valuations through APIs, AutoCheck to view vehicle history reports, and LaneLogic to display cars. Few auto companies have the free API access as compared to web companies.

Google has a new strategy to compete with Facebook – be even more open the Facebook. Google, Facebook, Oodle, Twitter and Flickr are just a few of the large, fast growing web companies with API access that allow developers to build new tools and functionality with the access or the data.

Auto auctions could benefit significantly by allowing dealers to access information directly and then consume it in a method of their choice. Dealers could better gauge the value of their inventory, the best places to buy, to sell, and the inherent variability of prices. This would smooth out more of the market inefficiencies, prices would converge, and auto auctions would sell more cars.

Dealers would be able to see where the supply of cars was high or low and redistribute cars accordingly. Overpriced cars would see their value fall as supply increased, but sales would increase, making more money for auctions. Underpriced cars would see supply diminish in those areas, prices would increase, and would more likely meet the if price.

The scary part for auto auctions is that this would change the nature of competition. Auctions compete first on cars (consignors) and then on liquidity (dealers). If dealers and consignors met in a larger, more liquid marketplace, competition would shift to additional, supplied services. These might include: availability of marshaling facilities, web product development or data analytics services. Smart companies would adapt and dealers would benefit.

Note: my weird picture is from the lolcats meme, just about the weirdest thing I’ve seen.

2 responses to “How To Open Up Your Markets

  1. Amen, brother! And pass the offering plate.

    The scenario you describe would certainly benefit the auctions and the associated services (e.g., transportation and reconditioning). It would also help dealers be more responsive to consumer expectations that are strongly influenced by the consumer brand promise of AutoTrader.com, for example.

    The car you want, when you want it.

    A more liquid (and transparent) marketplace will help that happen. The losers? Automotive wholesalers. These are essentially brokers who profit by the lack of transparency in the market. They must adapt – as illustrated by LaneLogic – or die.

  2. Gre8 comment. I like this kind of post! thanks. Let them come

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