Auction school for dealers

ADESA teaches retailers how to buy used vehicles online

Shoppers bid on vehicles during an ADESA auction. As more of ADESA's business shifts online, the size of the company's physical auctions could shrink, says the CEO of ADESA's parent company.

ADESA Inc. has mobilized as many as 300 employees to teach dealers, in some cases one-on-one, how to buy used vehicles on its online platform, the top executive at ADESA's parent company says.

Jim Hallett, CEO of KAR Auction Services Inc., said the effort will help the nation's second-largest auto auction company in its quest this year to create more online auctions that are open to all dealers.

That, in turn, will increase ADESA's online buyer base and its revenue per vehicle sold, Hallett said.

ADESA has 250 to 300 employees who regularly call on dealers and dealership buyers at its physical auctions, he said.

"The biggest thing is getting out to the dealers one-on-one and getting them familiar with the platform, marketing the platform, and in some cases sitting down and demonstrating to them how to use the technology," Hallett told analysts during the company's quarterly conference call in February.

"We've put compensation programs in place for our general managers and many of our commercial managers at our physical auction sites to focus on online buyers," he said.

KAR Auction acquired Openlane Inc., an online only remarketing company, in October 2011. It finished integrating the and platforms about a year ago.

ADESA sold 410,000 vehicles in its online-only sales last year, up from 310,000 in 2012. Those sales generated an average of $118 revenue per vehicle sold, down from $126 in 2012. At ADESA's physical auction sites, the average revenue per vehicle sold last year was $651, up from $644 in 2012.

KAR Auction Services CEO Jim Hallett: "The biggest thing is getting out to the dealers one-on-one and getting them familiar with the platform."

ADESA operates about 90 percent of the industry's private-label online auctions, ones that are open only to franchised dealers representing specific makes.

But the business model of those private-label online auctions limits participants to roughly 2,000 to 3,000. Moreover, many participants' dealerships are beyond the 500-mile radius where it makes sense to buy and ship vehicles, Hallett said.

Online auctions that are open to all dealers can draw from the nation's roughly 18,000 franchised new-car dealers and about 37,000 independent used-car dealers.

Hallett said physical auctions are here to stay, but acknowledged that as more ADESA business shifts online, the size of its individual sites could shrink.

KAR Auction is studying ways to use its excess land, such as moving its salvage auto auction sales to ADESA sites or using them for auctions of vehicles other than cars and light trucks, such as RVs and heavy-duty equipment.

"I don't believe brick and mortar is going away, but I believe that as we look forward, we may determine that we may need less of it," Hallett said. "Where we may have gone out to a market and looked at, as an example, a 100-acre site, maybe that site becomes something more like 50 acres."

Hallett said KAR Auction this year will invest in enhancing services at its physical auctions, but also plans to devote more than half of its capital spending to technology projects for its businesses. In 2013, the company invested $50 million in software and hardware.

In 2013, KAR Auction's net income fell 26 percent to $67.7 million, on higher costs and taxes, as revenue rose 11 percent to $2.17 billion.

KAR Auction also owns Insurance Auto Auctions Inc., a salvage auto-auction company, and Automotive Finance Corp., a floorplan finance provider to independent used-car dealers.

You can reach Arlena Sawyers at

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