Remarketing Comes of Age Online
Automotive remarketing was born in 1938. Since then, it has evolved with the times.
First came the fax machine in the 1980s. Not long after, remarketing moved from the analog to the digital age.
It was an inauspicious, but significant beginning to an industry. Inspired by a cattle auction he attended in Columbia, S.C., J.M. “Martin” Rawls held the first automotive auction in 1938 in the lobby of a two-story theatre building in downtown Leesville, S.C.
The rest, as they say, is history. Automotive remarketing was born and has changed with the times from a decentralized, regional business to a highly technological, professional, national profession.
After Rawls held this first successful auction of 12 to 15 cars, other local auctions sprang up in South Carolina. By 1940, on the eve of the U.S.’ entry into World War II, an estimated 10,000 vehicles had been sold at auction.
But, while this was a good start, it wasn’t until after the war with the scramble for short-in-supply passenger vehicles that remarketing would really take off.
Frank Grochal, retired vice president/used vehicle sales for ARI, recalled that fleet remarketing, as we know it, was a byproduct of the emerging rental market. “Several auto dealerships started rental companies after World War II by supplying new cars and trucks to commercial companies. Ford Motor Company approached my company’s owner, Steward Holman, about opening a rental agency associated with his dealership — Rice and Holman Ford in Merchantville, N.J. He did so, and in 1948 ARI, then known as Automotive Rentals, Inc., was born and we started supplying cars, trucks, and equipment to our customers,” he said.
When the vehicles ended their rental or leasing period, ARI needed a way to resell them.
Vehicles were switched out by “tow-bar” drivers who would transport the new automobiles and trucks to customers across the country from Detroit, Kansas City, Chicago, Atlanta, or places in between. The company drivers had the first option of buying the vehicles or offering them to family members, friends, or associates. If no deal was closed, the tow-bar driver would pick up the older vehicles and offer them to dealers along the route back to the home office, with a $10 bonus paid to them if a sale was made.
“Developing a way to sell used cars and trucks in areas away from the home office was paramount and the challenge,” Grochal said. “Our tow-bar drivers were the ones we initially had develop relationships with new- and used-car and truck dealers that were able to sell the used iron.”
This one-on-one approach was necessary because the auctions were still in their infancy, according to Grochal who joined ARI out of high school in 1953. “ARI got in on the ground floor under the leadership of James Deasy, Arno Neuber, Harry Barr, Harry Smith, and then me working with the auctions,” Grochal said. “Condition reports were a very important document for us and the customers to have along with proper titles and a good rapport with those we were dealing with. Trust was a big factor in the beginning and a good amount of business was done with just a handshake.”
Auctions began ramping up their volume during this period. In 1950, an estimated 100,000 vehicles were sold at auction with 5 percent of these sold by lease companies.
The Auctioning 1960s
By 1960, auction volume had increased threefold to 350,000 units per year. Bill Cieslak of PHH Arval noted that, in the 1960s, there was a trend to separate remarketing from the vehicle acquisition/dealer function. Remarketing networks designed to support the industry began to be formed during this time, as did the development of courtesy delivery functions.
When remarketing became a separate function for fleet management companies (FMCs) during this period, there was a rise in other channels outside of the dealers to sell vehicles.
“It was selling either to an independent remarketing dealer, selling through an auction, or selling it to the customer,” Cieslak said. “The period of the 1960s and 1970s was when the whole fleet vehicle remarketing became a defined, independent function within the organization. It was visible outside the FMC to the customer, as well as to the individual dealers and franchise dealers.”
What characterized the auctions during this period was decentralized data that led to niche markets. “There was a tremendous amount of aggregated data and market data that I only knew,” Cieslak said. “Back then, I could identify a niche market and enjoy the lift from them for months.”
In the 1970s, according to Bob Graham, VP of remarketing for ARI, FMCs typically dealt directly with auction owners, who handled vehicle pricing and selling for their fleet management clients. Benchmarking also began to be used to justify why a particular auction was being used.
There were other challenges during this period, including the lack of titles, odometer information, and consistency in general. Fraud was not uncommon, and it took federal legislation such as the Truth in Mileage Act (TIMA) to combat this widespread fraud.
Passed in 1986, TIMA required sellers to provide actual, truthful odometer readings and disclose any known inaccuracies. Unfortunately, odometer tampering was very prevalent in the 1960s-1970s, especially with out-of-service fleet vehicles. TIMA made odometer fraud a felony. Failure to disclose that an odometer had been changed or repaired (altered in any way) and/or falsifying mileage documentation would result in fines and/or imprisonment. If mileage was unknown, the vehicle would be labeled true miles unknown (TMU). In addition, the shift to digital odometers sought to curtail “clocking,” but succeeded only temporarily. Ultimately, harsh prison sentences were the best deterrent.
One consequence of the legislation was that it was the beginning of the professional conditions that are remarketing’s hallmark today.
“Through those periods, a lot of that legislation, helped bring a structure that the industry really needed, but didn’t have at that point. And, that helped identify the good guys from the bad guys and even the good guys from the mediocre guys. And, that’s when the value of a quality seller could be quantified,” Cieslak said.