A Quick Introduction to DealerClub, Your Latest Option in Online Inventory Sourcing

A few months ago, a new online purchasing platform was brought to our attention. We recently reached out to Joe Neiman, the catalyst behind this new inventory solution, for his insight as to why DealerClub has seen such positive feedback already and what he believes will be key to their continued success.

Hi Joe! Thanks for taking a few minutes to discuss your new online platform, DealerClub, with us today! Hi Kathy, thank you for the opportunity to discuss DealerClub! I'll apologize in advance, as I am not very good at brevity.

My first question, as I’m sure is everyone’s, what makes DealerClub different from the other existing online inventory sourcing solutions? DealerClub is the only reputation-based online wholesale marketplace. We are focused on creating a platform where likeminded dealers can do quality business between each other, and where the focus is on quality of transactions instead of sheer volume. There are many excellent options for dealers to use when it comes to wholesale, but we see an opportunity for dealers who want to incorporate their personal brands and reputations into the selling experience, and allow them to represent their vehicles the way they see best, instead of the traditional rules and regulations that despite all the efforts, still create loopholes and pain points for buyers and sellers alike.

The social media hype and announcements have been flying fast and furious over the last few months – I had taken notice right away of the number of people jumping on board as your core team at DealerClub from other automotive industry leaders. How would you describe the breadth of experience of your staff? What value do you believe this will translate to for your clients? We actually have a small and agile team at DealerClub. We have put an incredible amount of mental effort and energy into rethinking and resolving the challenges our industry faces with wholesale, and believe we have created the perfect mousetrap with the right structure and incentives to drive the desired outcomes of a healthy and vibrant marketplace. That being said, our team has an incredible amount of wholesale, auction, dealership, and technology experience. Many of us have also had the pleasure of working together in the past, whether at dealerships or auctions, As a bit of an organizational culture nerd, the strength, efficiency, and effectiveness of a highly aligned team cannot be understated. Our operational and executional excellence provides our dealer partners with fast service and simple solutions. At DealerClub, there is no corporate bureaucracy to navigate. The platform is designed to selfgovern and minimize edge case situations. When they do occur, we have all the tools and autonomy we need to resolve them quickly.

Would you say that DealerClub’s business model includes addressing buyers’ and sellers’ pain points experienced in the past and aims to provide solutions in advance of experiencing those issues? Absolutely. The entire premise of DealerClub is to eliminate problems before they even enter our ecosystem. Our primary focus is built around the seller earning and cultivating a favorable reputation by doing quality business on our platform. Sellers have a choice, and they are already used to making these choices. I literally got a text yesterday from a principle of a large dealer group and he said "I send my nice wholesale units to XXX auction and my not nice stuff goes on XXX." Certain auctions have become ubiquitous for being 'dumping grounds' for problem cars, while other auctions maintain an elevated experience in which the sellers value their reputations. This adverse selection is healthy so long as you are on the right side of it. Every aspect of DealerClub is designed to encourage a seller to do the right thing, disclose their car properly, and be incentivized to do quality business on the platform.

In our earlier conversation, you described DealerClub as a “Reputation Platform” rather than another online auction platform, could you explain what you feel is the difference and how your team plans to hold all parties accountable for their part in the transaction? At DealerClub, we believe there are two equally important components to establishing the value of a wholesale car. One is the car itself, and the other is the seller who is representing it. Used cars are not commodities. They are the aggregate of current condition and the reputation of the dealership and person bringing that particular car to market. With DealerClub, the selling dealership and the person who inspected the vehicle are shown front and center. In our opinion, this is just as important as the car itself. Both the dealership and the inspector are rated and reviewed. Their monthly sales volume, sell through rate, title compliance, and inspection accuracy are all shown for everyone to see. A seller who has a strong reputation will get more money for the same exact car than a seller with a tarnished reputation. While others are focused on what the 'data' says the car is worth, we believe the biggest opportunity to add value to each unit sold is by attaching a great seller reputation to each transaction. Buyer confidence yields more bids and a better sales result, every time.

Dealers have become accustomed to the manner in which other online auction platforms conduct business – including arbitration complaints and the handling of title documents – what does DealerClub do to minimize these concerns for online buyers and sellers? Wholesale can be a messy business whether online or in lane. In our opinion, the origin of the majority of the problems comes from sellers who are either intentionally or unintentionally absent from owning their wholesale process. If a marketplace allows or incentivizes sellers to not be present and engaged with their selling activities, the buyers suffer. Most of the industry has shifted toward a narrative that says "wholesale is a problem" and their value proposition is that they are the easy-button solution and will make those "problems" disappear. At DealerClub, we believe "wholesale is a massive area of opportunity" and we promote sellers to have "skin in the game" with their wholesale process. Yes, this means it is more work, but the results are less problems and more profit. Arbitration and title problems are the result of sellers either not knowing their cars, or intentionally hiding issues, and finding all the loopholes they can within arbitration policies. DealerClub's approach is to manage our dealer-base like a club, and if someone's behavior proves that they are not a good fit, they are removed from the club. That is a worst case scenario, but when you have that as your policy, it is amazing how most everyone falls in line and operates with a higher moral and ethical code. Our platform allows for buyer and seller to resolve condition disputes between themselves, and we are here to oversee as necessary. We also have several unique and unconventional advantages when it comes to titles that allow us to resolve problems faster and more efficiently than other auctions. Despite being new, we have already witnessed how these strategies are working and resulting in favorable outcomes for both buyer and seller.

Do you see DealerClub’s relationship centric approach to inventory sourcing potentially changing the landscape of online buying and selling? DealerClub will be another tool in a dealer's tool chest. While we do have some users really leaning in and embracing the platform already, I don't foresee DealerClub displacing all other auctions. There are somewhere around 20,000,000 wholesale transactions annually, and that mix is made up of wholesalers who sell via phone calls and text messages, multiple online options that offer different formats such as buy-it-now for upstream, down to no reserve options when it's truly time to cut the car loose, and of course hundreds of physical auctions. That being said, we know reputation matters, and we believe that an online platform that focuses on reputation will be a differentiator and offer a unique value proposition to our industry.

A few of the dealers that have sold through DealerClub so far are already surprised by your sell fee sliding scale, could you explain your approach and how sellers can capitalize on building their reputation to control costs? Simply put, the better a seller performs on our platform, the more we incentivize them. The sell fees range from paying $200 per unit, down to DealerClub paying the seller $200 per unit. A high volume, high sell through seller who has satisfied buyers gets paid to sell. We are able to offer this unique advantage to every potential seller, not just major auto groups. We believe DealerClub can become a platform that dealers build and expand their businesses on. The difference between shipping a car to a physical auction and then paying a sell fee, versus selling it on DealerClub and getting paid to sell could be several hundred dollars per unit. If you sold 20 wholesale cars per month and the spread was $400 per car, that is $8000 per month, which is $96,000 per year. That is only the fees, not taking into account any appreciation in car value from your reputation.

Could you walk us through an example of how easy it is to list a unit as a seller? Listing a vehicle on DealerClub is extremely straightforward and flexible. Dealers are figuring it out and the feedback has been all very positive. You can create a listing on the app on a mobile device, or using a desktop. You can take new photos or upload pictures and video, write your own description, and guarantee as few or as many unique attributes of the vehicle that you are comfortable with. As an example, you can guarantee that the engine and transmission are good, and that the car functioned as it should during a 10 minute test drive. If you know it has prior paintwork, then you disclose that and explain the cosmetic condition accordingly. Our condition report embraces subjectivity because the truth is every car is different. But if the seller is honest, then the buyers are happy. In my past I was an independent dealer and I would regularly buy from wholesalers who I trusted based on a phone call or text and often, no pictures. In all of those transactions, we never had big issues to work through because the seller was being honest and reputable. It cannot be understated how important that is in the grand scheme of things.

Now, say I’m bidding on a unit on DealerClub – do I have to worry about call-backs and post-auction haggling, or is my transaction clean and simple? DealerClub transactions are about as straightforward as wholesale can be. Every step of our process is designed to create a seamless transaction. We handle the back office payments and floorplanning, titles, and transportation. Because we require the seller to be engaged in their selling activities, the trains stay on the tracks and arrive at the station on time.

What recourse does a buyer have if something is not as it was represented? On the flip side, what protections are in place for sellers not to be victimized by habitual arbitrators just trying to see if they can knit pick themselves into a lower price point? Let me start out by saying that so much of the pain and frustration that surrounds arbitration are the result of unintended consequences. When sellers are allowed or encouraged to buy protection that removes them from having any responsibility or exposure to misrepresenting the cars they sell, it is inevitable that some percentage of sellers will abuse this privilege. On the flip side, there are countless buyers who have studied the arbitration policies inside and out, and know exactly how to pin the auction against the wall in an effort to exploit refunds that they are not entitled to. This is the equivalent of insurance fraud, and it is a big problem in our industry. While on a car by car basis, some dealers will cheat and make a profit they are not entitled to, every marketplace participant pays for these sins because the auctions have to charge bigger fees to offset their losses, they write less friendly policies to help protect against fraud, and the broader lack of trust in the ecosystem suppresses bidder confidence, resulting in lower prices paid. The only way to correct this is with a healthy balance of incentives and penalties, and that is where DealerClub shines. The solution is not to add more paragraphs to an arbitration policy. The solution is to hold sellers and buyers accountable to being step too far out of line, they will be removed. Sellers are financially incentivized and rewarded for quality transactions on our platform. They literally get paid for doing good business. So many times, a good dealer will tell me that if the buyer has a legitimate problem, they'll just buy the car back. But all of the auction rules and policies have clouded this buyer and seller connection, which we believe is paramount to achieving long lasting marketplace health. There is also a responsibility on the buyers to conduct themselves as professionals. If a seller finds a buyer to be unreasonable with their requests in the event of a condition dispute, that seller can block that bidder from engaging in their future auctions. DealerClub monitors the frequency of this, and buyers who are repeatedly blocked will risk removal from the platform. With all that as the backdrop, in the event of a buyer receiving what they believe to be a misrepresented vehicle, they can open a 'condition dispute' between themselves and the seller. The buyer and seller can work to resolve the issue in a public setting right on the page of the actual auction listing, so everyone else on DealerClub can witness how they conduct themselves. Buyer and seller can comment back and forth, share pictures and video, and work toward an agreeable resolution. If after three days, they have not been able to reach a solution, either party can escalate to DealerClub and we will make the best decision possible given the facts submitted. There is a strong incentive for the buyer and seller to work collaboratively because the decision by DealerClub will be binding and final. We have already seen this process work effectively to get to the right outcome, and the straightforward nature of trustworthy, decent dealers working together is absolutely within all of their capabilities.

If there is one thing you’d like every independent dealer in the country to know about DealerClub, what would it be? The mission of DealerClub is to make auctions great again. I remember how much I loved going to the auctions each week to source cars for my independent dealership. I knew who I could trust and who I couldn't. I learned those lessons on the fly and adjusted in real time. The rules were straightforward, and you had to conduct yourself like a responsible human being, because your actions were seen by your peers, and your reputation and character really mattered, and ultimately determined your success in the lanes. As our industry has transitioned to a digital world, much of this tribal knowledge and texture has been omitted from the buying and selling experience. DealerClub is blending together the very best attributes of the physical and online auction experience, while focused on eliminating the pain points.

How do dealerships sign up for access to DealerClub – either as a buyer or seller? Signing up is simple and easy. Visit DealerClub.com and click JOIN TODAY. It is a formal auction sign up process so you will need to submit your dealer license, tax forms, payment information, and personal ID so we can verify everyone who is joining the club.

Is there anything else you’d like to hit on? Our goal is to help dealers large and small. We value buyers and sellers equally, and believe in building a truly great marketplace for the road ahead. We all know that the path to increased profitability and operational efficiency is never achieved by cutting corners and taking shortcuts. DealerClub is the platform for dealers who want to do business the right way, and capitalize on their great reputations.

Thanks so much for your time, Joe! We hope that our conversation will help give dealers a glimpse into your new platform and how it might benefit them in either wholesale purchasing or liquidation. Thank you for allowing me to share DealerClub with your audience. It has been a pleasure.

Tom and I spoke with Joe for almost two additional hours on how the automotive industry is absolutely based on integrity, relationships and reputation. We firmly believe that DealerClub’s unique, honest approach will turn the tide of online inventory sourcing back toward the days of trusting the seller on the block.

Visit www.DealerClub.com and give them a try! You won’t regret it!