Invest in Your BuyersFebruary 27, 2017
I’m going to cut right to the chase here – overpriced cars don’t sell. As a seller, it doesn’t matter what you own the car for, because buyers really don’t care about your problems. Buyers are bidding based on two factors only – what they determine the car is worth, and the extra money required to be the last man standing. It is value + competition that sets the market price, not the seller’s cost of ownership. The sooner sellers fully understand this, the more efficient and profitable a wholesale operation can run.
I see the same situation at auctions all the time: a seller knows in his gut a particular car is worth say $5,000, but he runs it trying to get $6,500 with the hope of offsetting another loss or trying to create a payday. What happens next is that the car brings about $5,000, and the seller passes on it, subsequently pissing off that high bidder. Next time the car runs, the seller may be willing to come down to reality, but now the car is tainted. The car is now damaged goods in the eyes of bidders and it will now be harder to get the same money that it brought the first time it was available.
Cars in auctions have a short shelf life. Dealers want to buy “fresh” inventory. If a car is no-saled, it becomes stale very quickly after the first run. There are two thoughts that go through a buyer’s head when he sees a rerun: “the seller is a jerk and should have taken the money the first time,” and, “there might be something wrong with the car I missed, so I should stay away.” Oh, and remember the previous high bidder? He is thinking the same two things and is either bidding more conservatively to prove a point or not bidding at all because he has moved on. Every less potential buyer means less bids and therefore a lower strike price each time.
The old sayings, “the first loss is the best loss” and “the first bath is the warmest” couldn’t be truer. The best policy for long term success with selling wholesale is simple – take your wins and losses and keep the metal moving! Remember – wholesale cars are depreciating assets. The longer you hold on to them, the more you stand to lose.
Recently, I had a great conversation with a seller who I have the utmost respect for. I used to buy in the lanes from him and if I was the high bidder, he sold me the car. Sometimes he was making a shot. Other times, I knew it was painful for him to cut the vehicle loose to me. What he understood was paramount, though: as a seller, you have to invest in your buyers. Week after week, I spent the majority of my auction day hovering in or near his lane, and so did a lot of other buyers, as he had a great reputation as well as 90% sell rate. He accomplished this by investing in his buyer base and creating a loyal following. I would bid-to-own as opposed to bid-to-haggle. I knew that when the hammer fell, I would own the car if I was the high bidder, and that confidence keep me in the dog fight bidding hundreds more than I might have otherwise been willing to do if it were a different seller.
From time to time, that seller would have to invest in me to make sure I wouldn’t wander astray. I know he didn’t like to blow money and sell a car to me at a loss, but he would, and therefore I’d stay in his lane and proceed to buy three more cars that day. The math worked. He would average out the day ahead and I would stock my retail lot with the units I needed. It was truly a WIN-WIN.
The sellers investing in the buyers is something that happens in lane, yet is unfortunately lost in many online auction experiences. Without facetime, sellers commonly feel that there is no downside or harm done by overpricing their inventory or haggling endlessly over a few hundred dollars – but believe me when I tell you that buyers don’t have any more patience for this behavior when bidding online than they do bidding in-lane. Buyers learn very quickly and are slow to forget when they feel they are being abused. Their response to this is simple: the next time that seller lists a unit, they’ll just choose to bid lighter or ignore it altogether.
Sellers, if you want to really succeed in wholesale, invest in your buyers and throw them a bone. With each sold unit, you strengthen your brand and elevate the bidder’s confidence. Stronger bidding results in higher transaction prices and higher sale percentages. A rising tide lifts all ships. Now that you know the formula, go invest in the future of your wholesale operation and be rewarded with success.