Core Functions of Auto Auctions

Auto auctions have a long history and have been refined over time to include numerous unique features. Among these, three distinctive functions can be identified as the core functions of auto auctions. Let's explore these functions in detail.

Auction System

Many auto auctions have their own auction systems, which are highly sophisticated and developed to ensure fairness in handling bids from remote and multiple buyers. The auction system recognizes bids with precision up to a thousandth of a second and strictly manages the timing to ensure fair processing. In pursuit of making it easier for buyers to participate, auctions have enabled bidding from laptops outside the venue, leading to an increase in the number of buyers. However, this also led to an increase in simultaneous bids, posing a challenge in ensuring fair operation. In cases where multiple buyers bid the same amount, the buyer who presses the bid button even a thousandth of a second earlier is given priority. Therefore, all bid logs are constantly monitored over time to ensure trouble-free management. System downtime is a critical issue that can shake the auto auction business, so auctions always maintain a backup system from the start to the end of the auction day. Additionally, every few years, auto auctions invest significant amounts to update their systems, as the auction system is the backbone of operations for handling a large number of vehicles.

Inspection

Many auto auctions offer inspection as a standard service. All listed vehicles undergo inspection and photo documentation, which is made available for buyers to view before the auction, stimulating their purchasing interest. The inspection covers interior, exterior, structure, and mechanics, and is primarily a visual inspection without diagnosis. Each vehicle is inspected by a skilled inspector in approximately seven minutes. With around 150,000 vehicles listed every week, efficient handling of the volume is necessary, so the inspection does not involve moving the vehicles or lifting them. Despite this, over 60% of buyers have purchased vehicles without physically inspecting them based on the inspection report. The introduction of inspections has significantly expanded the reach to buyers, as there is a substantial demand for remote vehicle purchases. However, maintaining the quality of inspections is a major challenge for auction companies, as inspection staff require a skill set that includes identifying minor abnormalities on the vehicle's surface and discerning accident history. The introduction of digitalization and systematization of inspections is being pursued by various companies, with the use of technology such as cameras and AI to assist inspectors.

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On-site Benefits

To enhance the convenience for buyers, auto auction companies have expanded their services to allow vehicle purchases from external sources. As a result, 60% of vehicles are purchased through bids from external sources. Simultaneously, auto auctions offer various on-site benefits and events to encourage visits to the auction venue. For instance, some auctions used to provide free sushi to visitors. By offering free meals and organizing events, auction companies aim to increase the frequency of visits, contributing to customer retention.

Encouraging on-site visits serves two main purposes. Firstly, it allows the auction to focus buyers' attention on their own listed vehicles, potentially increasing the likelihood of successful transactions. Secondly, on-site visitors tend to place higher bids compared to remote participants. Although the inspection reports provided by auto auctions are trusted, there are limitations to the coverage, and there is still some subjectivity involved. By physically inspecting the vehicles, buyers can accurately estimate any additional repair costs, enabling them to place more confident and aggressive bids. Additionally, face-to-face communication provides opportunities to assess customers' current business situations and understand the latest market trends, which can be reflected in sales strategies and enable more targeted marketing.

Summary

In summary, the three core functions of auto auction companies are auction systems, inspections, and on-site benefits. While these functions are complex and multifaceted, the overall description provides a comprehensive understanding of the operations of auto auctions.