24 Jun 15

Jonathan Holland (Adesa): "Upstream remarketing becomes key part of defleeting strategy”

First there was the handshake, then there was the fax machine, and now we have the internet: technology has radically changed how we sell and re-sell goods. That change is still ongoing. In vehicle remarketing, technological progress is driving a change from downstream to upstream, says Jonathan Holland. VP Business Development at vehicle auctioneer Adesa in the UK.

For the sake of those not yet familiar with the concept, can you offer a definition of upstream remarketing?
“Quite simply, if reselling an end-of-lease vehicle after its contract is downstream remarketing, then arranging a sale before that contract is over is called upstream remarketing (UR). The advantage is one of cost and convenience: you can resell used cars without having to move them to auction lots, saving you time and money. For the sake of completeness, let me also mention midstream, which in this case describes the phase between a vehicle's end of contract and its movement to storage or auction lots”.

Why is UR important today – and tomorrow?
“It used to be so that this type of sale was mostly reserved for sales to drivers, but technology has enabled us to broaden the scope, for example allowing dealers to buy upstream in significant numbers. This kind of pre-selling allows lease companies to be more pro-active with their vehicle stocks”.
“UR is also increasingly relevant for OEMs: it not only allows them to maximise the value of their stock, but also to increase brand retention with their customers”.
“In the United States, UR has already caused a huge shift in the attitude of franchised dealers; it used to be that they concentrated almost exclusively on selling new vehicles."

How can UR impact the corporate car fleet business?
“Upstream remarketing will gain in importance because it helps to reduce both the direct and the indirect costs traditionally associated with defleeting and remarketing vehicles. This makes UR a very relevant element of the residual value of a vehicle. When it comes to cost, all elements are relevant. By consistently helping to drive down those costs, UR can become an essential part of the defleeting strategy for many fleet owners”.

What are the main lessons for fleet suppliers and fleet customers to take away from the concept of UR?
“UR is attractive because it generates higher sales prices than downstream remarketing. But one should not think of it as a standalone solution, or as a one-size-fits-all solution. In most cases, UR works best as an additional channel to the existing remarketing channels.”
“In North America, we saw fleet owners turn to UR in order to maintain prices in times of volume drought. It turns out that they were eager to keep using the UR solution, even when volumes recovered, because it provided them with an additional means to control their defleeting and remarketing activities”.

Which other trends do you think will impact the Remarketing business in Europe with regard to corporate fleets?
“I think we will see a big increase in cross-border trade of used vehicles. Again, technology is at the basis of this trend, by providing online tools that will reduce the risks involved in distance-buying vehicles. Cross-border trade will also increase because there is an increase per se of used vehicles entering the market.  In these circumstances, we think it is good that a Europe-wide Car Remarketing Association (CARA) is now being set up [one of the sponsors of CARA is Nexus Communication, the publisher of Fleet Europe, red.] By encouraging the establishment of a regulative framework across Europe, the Association will generate further growth, especially in cross-border trade”.

A recent article in U.S. trade magazine suggests North American remarketers are investing more and more energy in discovery of intent – finding out whether drivers will want to buy their company vehicles once they're ex-fleet. How important is this in Europe – and how important should it be?
“Finding out whether your driver wants to buy the car has always been an important remarketing channel. For if the answer is yes, this is the easiest option of all – the car can stay with the original driver. As with many other aspects of UR, the advances of technology will make this process easier and more transparent. It will, indeed, become a critical part of the UR process. Also in Europe”.

Talking about Europe and America – with your knowledge and experience on both sides of the Atlantic, can you explain some of the differences in remarketing culture between both regions?
“In essence, remarketing is about controlling the return of an asset and maximising its value. That is true on either side of the Atlantic. Having said that, there are local differences. For example, in Europe it's always been the norm for defleeted cars to be moved into controlled storage, while in North America but also the UK they have always been defleeted directly into physical auctions. These different pathways generate different defleeting prices. But UR is of course a different pathway altogether”.

Finally, how do you foresee the growth of remarketing for the foreseeable future?
“As mentioned earlier, I think upstream sales to drivers will become more widely understood and appreciated, also thanks to the evolution of technology, which will support the transparency and reliability of the entire UR process. And in general, I predict that corporate fleets will adapt to change faster, and will integrate UR more firmly into their remarketing strategy. Again, new options available through fast-evolving technology are the key driver in this evolution”.

Authored by: Frank Jacobs