Auto Auctioneer Manheim Quick to Make Digital Switch

Manheim spent years and millions of dollars, before anyone ever heard of COVID-19, to get ready for this moment.

Nevertheless, Grace Huang, Manheim president, recalls it was a bit of a shock one day last March, when she had to decide right then and there, whether to cancel in-person auctions scheduled in the next couple of days because of the emerging coronavirus pandemic.

She did. The giant wholesale auction firm switched to Manheim’s all-digital Simulcast system almost literally overnight. From doing about 50% of its sales remotely, Manheim went to 100% digital at all auction locations.

Starting last summer, Manheim allowed dealers to attend a limited number of auctions in person, with a live auctioneer. But even then, they had to observe social distancing and bid on vehicles displayed on a screen. Starting in November, Manheim started running dealer-sourced cars down physical lanes.

However, with no set time frame, Huang (below, left) says the company still aspires to go back to 100% digital in the future.

To facilitate that, parent company Cox Automotive announced in January it would acquire Fyusion, a computer vision company producing detailed, high-resolution images that are a key ingredient in high-tech condition reports, to be shared with remote bidders.

WardsAuto interviewed Huang recently. The following are edited excerpts.

Wards: How would you describe the shift to digital sales?

Huang: We’ve been making lot of investments behind the scenes, knowing we needed to modernize a lot of the underlying systems. All completed, it was hundreds of millions of dollars by the time we were re-platformed.

Last year, it all paid off. Thank goodness we made those huge investments. It allowed us to turn our completely physical lanes to digital overnight.

Wards: Do you mean, literally overnight?

Huang: Yeah, actually, at least for Manheim Pennsylvania.

I was on the phone about all this, and I had to pull over on the highway, thinking, “Gosh, I have to make this decision right now, right here!” I was sitting on the side of I-75, on my way back to Atlanta after visiting Manheim Nashville, after the Nashville tornado last year.

Manheim Pennsylvania had an auction the next day… I decided we had to move all our auctions to online. Thankfully, we were able to do it. We crossed our fingers, and Pennsylvania did go to Simulcast-only sales. It’s coming up on a year now.

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Huang: Since then, we’ve learned a lot. What do our clients really need to thrive in a digital environment? Over the months, we realized we could sell 100% online on a permanent basis.

Wards: That’s a huge cultural change for dealers and for Manheim. What’s the timing for going 100% digital?

Huang: There’s no specific timeline. It’s really an aspiration. We’re listening to our dealers.

Wards: Does that mean some dealers have to be sold on the idea?

Huang: A lot of clients were fine with it, but there are still clients who needed more confidence. So, starting in July, we allowed clients to come in to some physical locations. And in November, we had some dealer-sourced vehicles physically in the lanes, and repossessions.

Wards: How do clients get more confidence in digital?

Huang: We launched additional images, more high-resolution images, in the late summer. We began piloting undercarriage images in the fall. That’s been enormously popular. Then we announced the acquisition of Fyusion.

We’re making the next big push, to prepare to go 100% digital. COVID taught us we could do it, but it also taught us not everybody was ready for it.

Wards: Were you already doing a majority of your sales digitally, before COVID?

Huang: Prior to COVID, about 50% of cars were sold digitally. When we shut the physical locations down to in-lane buying, it was 100% digital. Now that we’ve opened it up to some cars, it’s probably about 80% digital.

Wards: Are younger dealers OK with digital, and older ones less so?

Huang: I don’t know that age, or the generation of buyers and sellers, really enters into it. The people who felt uncomfortable were all different generations. A lot of it, I think, has to do with the class of vehicles. That’s why, when we opted to bring some people back, it was with dealer vehicles, the ones we source from dealers, and repos.

Wards: Is that because there’s more variation from one individual unit to another?

Huang: Right. If you prepare a condition report, even with the best condition report writer, if you have three different writers, they’re going to come back with three different scores. The condition, a lot of it, is still a judgment call.

Consistency is No.1 and accuracy is No.2 in our research with our customers. That’s what the investment in Fyusion is all about. Fyusion provides high-resolution, 360-degree images.

Wards: Do you see yourselves going back to the way things were, pre-COVID?

Huang: McKinsey said in a study everyone advanced five years in three months, and that’s what it feels like. We’ve all taken a huge leap. I don’t see that we’d ever go back to 50% physical auctions. We’ve done this long enough to figure out how much more efficient digital is. For the dealers, there’s no traveling, they can buy from multiple locations all at once. The people who have figured it out set up multiple terminals, like stock-trading desks.

There’s been a lot of adoption, but there’s a segment there that’s still not completely comfortable with it. Our job in the coming years is to make sure our tools engender that same trust as the physical auctions.