An Encouraging Start for Cox Automotive’s Upside/Upside Direct Wholesale Experience
This past Monday marked the end of the first Upside Direct auction in Atlanta.
The digital sale, which started Friday and ended Monday, was notable on several fronts:
Keen buyer interest. “We saw 270 bids in the first five minutes,” says Derek Hansen, vice president of wholesale for Cox Automotive. “Historically we haven’t seen dealer bids that strong so early in a sale.” The inaugural sale featured almost 90 vehicles, which saw an average of 23 bids/vehicle—more than three times the number of bids the average vehicle earns in more established auction settings.
Through the course of the sale, more than 8,000 dealers logged into Upside Direct to view cars. A sizable number submitted a single bid—ostensibly to see if the sale itself was for real. My take: Such interest flows from two factors—Upside Direct is new and buyers appreciate that Upside Direct starts vehicles for sale at 50 percent of their Manheim Market Report (MMR) values.
Solid profits for sellers. When dealers use Upside to put cars for sale in Upside Direct, they are guaranteed a minimum profit, plus the lion’s share of the upside a vehicle earns above the guarantee when a vehicle sells. The end result for sellers: Upside’s minimum guarantee and the lion’s share of the upside from sales meant that dealer sellers averaged about $1,500 in wholesale returns in the first Upside Direct sale. The figure compares favorably to wholesale profits public retailers like CarMax and Carvana reported in their latest earnings reports.
Independent dealer Jeremiah Mowry of Atlanta Auto Brokers sold four cars in the sale. He also plans to put more in future Upside Direct sales. “We sold our cars and made really good money,” he says. “I’m super-satisfied with the results.”
Proof of the Rule of 200: In my latest book, “Whole Truth: A Fresh Money-Making Method to Wholesale, the Most Misunderstood Side of Your Business,” I share the Rule of 200, a strategy smart dealers use to measure how well their wholesale vehicles perform at auction. The Rule of 200 dictates that a dealer’s wholesale vehicles should achieve 100 percent of MMR in total, and 100 percent first run sales efficiency (meaning the cars sold the first time they ran). Dealers who use the strategy add the two strategic goals together to see if the sum of their performance equals 200.
The Upside Direct sale met those critical performance benchmarks: Overall, the vehicles achieved nearly 100 percent of MMR when they sold. Some cars sold for more than MMR (a pick-up went for 122 percent of MMR), and some sold for less. But the cumulative total of the vehicle sales met the first leg of the Rule of 200.
Only six of the nearly 90 vehicles available for sale did not receive bids – in these cases, the dealer will be paid the full Upside Guarantee and Upside bears responsibility for reselling the cars. In this regard, the Upside Direct sale came close to achieving the second leg of the Rule of 200. I view the performance as a solid start that will only get better as Upside Direct brings in more buyers and vehicles
A good mix of vehicles. The first sale featured a varied mix of vehicles. The average age of the vehicles was nine years, with some older than 21 years. The average mileage was 117,000; some cars had less than 10,000 miles and some had more than 200,000 miles. Across the vehicles, MMR values ranged from less than $5,000 to more than $50,000. The take-away: Upside Direct’s first sale offered vehicles that would appeal across the full spectrum of potential buyers.
As one might expect, the initial sale also offered some lessons learned the Upside teams will apply going forward. All in all, however, the debut of Upside and Upside Direct, Cox Automotive’s new wholesale experience for buyers and sellers, stands out as a winner for both.