Hammer Time: Transaction Costs
I used to travel over 40,000 miles a year . . . and enjoyed it. No offices. No cubicles. Only me and the radio on the way to auctions in three different states. Heck, I didn’t even have a cell phone at the time. So long as I showed up at the auctions thirty minutes before the start nobody really cared. I read books. Wrote articles. Saw the rural south, and probably met about 2,000 people in my travels. But these days my priorities have changed . . . I hate losing all this time. And I’m not the only one.
Now that I mule trade (buy and sell) more than I bid call, I need to dedicate more time to finding cars. A lot more. Believe it or not, though, that’s not the hard part for me. The difficulty comes from simply wasting time. The time I drive to and from the auctions. The time I handle mechanical and transport issues. The time I dedicate to the crisis of the day. The time I research cars on the internet and the hours upon hours I spend on the phone. I miss the days when I only dealt with cash customers and really miss the days when I could just go to the auctions, get my check, and go home. I love cars and I love people. But there are days when both seem to be an enormous waste of time.
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1. I was going to write the same comments re. core and down-stream value capture (minus the stop+go, and disintermediation comments) but BS beat me to it ... BS spoke of Goodwrench and Stop+Go, but don't forget Ford's Nasser trying to move horizontally across the market w/ Quik-Fit, recycling yards, etc. before retrenching... 2. I know nothing of the auction industry, but suspect that regionally concentrated pools of used metal, will still be preferred by those buying (or selecting from) bulk offerings (this is due to the "rip-off - see it in person = profit" equation), so I'd think consolidation rather than elimination here. (p.s. Re. pt. 2, perhaps I don't see something here, like the metal still collects regionally, but bidding is more like eBay, than a guy in a straw hat holding a mike, under this scenario, several cars could be sold simultaneously, and the guy in the hat - who far as I know, sells only one at a time - could get squeezed.) (Steve, I hope before your vacation ends, you find some perspective to your dilemma. Good luck.)
This is where the internet is making inroads AND eliminating the auctioneer: 1) Lemmings : Many of the manufacturers don't need help from the auction or auctioneer when selling some of this inventory. Right now there is rampant oversupply which is helping the auctions keep decent margins. But about half of these vehicles are being sold over the internet and many of the manufacturers have their own web sites and intranets dedicated to remarketing their own vehicles. 2) Salvage : This is a huge portion of the market. The decline of the dollar and consolidation of the salvage auction business has made internet sales the norm. Copart, the largest salvage auction outfit in the nation, already sells all their units through the internet. Most auction companies offer sales that provide live auctions as well as the internet. Then there are the impound lot auctions which require the sales to be done on site. Right now there's a lot of them to go around, and I've been focusing on that side of the auction market for the last six years. I can literally do two impound sales and get paid more than the large auction outfits. There are also auctioneers going to the larger dealerships and performing the auctions on site. This eliminates the costs of transport, high sale fees, and the lesser demand you can get from being a small fish in a large auction. Ironically, the larger outfits are having far big problems with marketing this service than the small scale auctioneer because of the last two issues.
This is exactly why TTAC makes great reading; people share their thoughts in such a way that I feel I get to know the most profiled contributors! I have thought thoughts very similar to Steven's in my setting; Excel training and consulting. My ponderings have been: what happens the day all "resource management systems" (or accounting systems as they used to be called before the acronymers renamed them) are able to grind and chew the numbers exactly the way the users want? Will companies and organizations stop using Excel? So far, my worries have been unjustified. The more advanced the accounting systems become, the more people seem to use Excel to chew their numbers! So, Steven, I believe the automakers' ambitions to control more of (or the whole) value chain is slightly challenged by their abilities. But, you can be sure that more of the auction business will move over to the internet, so if I were you, I would do some serious brain storming on how to position myself in that part of the market! Best of luck!
Yeah, great article. Tsofting: perhaps you should give a look to Linux (see Mint Linux KDE) and OpenOffice. Both are totally free and making inroads at the local university with faculty and students alike. Neither serve all the needs of advanced users but both could serve the needs of most users. Wikipedia has details. I used to buy and sell on the side but that was when cars were more simple (carburetor era). Interesting how America is changing on so many "fronts". The old businesses are being undermined by new ideas and rendered obsolete. I have a friend who buys from Copart auctions often. I'll likely buy my next car that way through him - a minor wrecked vehicle.