Why Don’t Online Auction Proxy Bids Work Better For Dealers?

February 4, 2012


I’ve been asking that question lately as I hear two recurring complaints from dealers about their ability to buy vehicles via online auction proxy bids:

1. The success rate with proxy bidding is too low. Dealers say they may acquire one out of every 10 vehicles they try to obtain with proxy bids—a 10 percent close rate many find unacceptable. I’m told some of the savviest proxy bidding-stores may achieve a 20 percent close rate but even they say it could be better.

2. Dealers set maximum bid amounts below what they know to be an acceptable wholesale acquisition price for a vehicle. This frequently occurs as dealers place multiple proxy bids and seek to mitigate the risk of winning every unit. The practice, of course, has the potential to make all of their bids less competitive and less likely to win any vehicles.

In light of this, I’ve been asking dealers, auction executives, and others the following questions:

Why don’t online vehicle auction proxy bids work better for dealers?

What’s the actual closing percentage of proxy bids?

What’s the spread between maximum proxy bid amounts and the price that won the vehicle at auction?

How many dealers actively use proxy bids?

What other factors might account for the dealers’ perception that proxy bids don’t work?

I’m delighted to note that auction executives are eager to help me answer these questions and provide real data. They, too, share my interest in helping dealers be more effective and efficient used vehicle retailers. In fact, I’m learning that my discussions are in line with their efforts to build more transparency and trust in their online bidding processes.

I believe these discussions, and the insights they will provide, are critical for our industry.

More and more dealers are relying on online auctions to acquire used vehicles. They’ve come to these markets after seeing dwindling returns at physical auctions. Many also lack the resources to devote a person to actively participate in time-consuming simulcast auctions. As a result, proxy bidding is the next logical step in their effort to become more efficient retailers.

Moving forward, I’ll share key take-aways from my inquiries and research with the goal of helping dealers maximize their effectiveness with online auctions and proxy bids. In the meantime, I welcome your experiences with proxy bidding and suggestions on what data and next steps might make this important sourcing medium a better resource for dealers.