Remarketing by ARI (3 rd Party) Business Case

Transcription

1 Remarketing by ARI (3 rd Party) Business Case Project Name LOB Director LOB Manager Project Lead Product Manager Date Remarketing by ARI (3 rd Party Remarketing) Partha Ghosh Chris Clarke Nelly Rodrigues Scott Whittal Version V 9.0 FT # LOB VR Geo Locations USA EXECUTIVE SUMMARY Opportunity. Establish a new remarketing program: Remarketing by ARI (3 rd Party Remarketing) in order to increase revenue and tap into an existing market segment. This is available to non ARI clients and allows users to leverage ARI s scale and size to obtain higher returns for their vehicles. ARI will offer a product to non-fleet clients to sell their vehicles in the prime ARI branded auction timeslots and virtual market. These companies will be able to leverage ARI s strong brand recognition to obtain higher remarketing returns than if they were to sell their vehicles independently. ARI will recognize additional revenue through two primary sources: (1) per vehicle fee charged to Remarketing by ARI clients and (2) auction rebates resulting from the sale of these units within the ARI volumes with auction partners. This product will target wholesale dealers and non-fleet companies (i.e. banks/credit unions). Independent auction partners have committed to support the launch of this program in year 1 by providing volume to the program, based on the understanding ARI will provide additional volume to the supporting auctions and there will be ongoing growth of this program (see volume estimates on ROI). ARI will need to focus sales efforts to ensure this program grows outside the volumes provided by the auctions. ARI and Steward Financial are in discussions and the expectation is the Steward volume would provide the basis for the program in the initial phases while the program is developing. 1 P age

2 ARI Sales (RDR) are expected to sell this program to dealerships, moderately sized dealership groups, corporate clients such as credit unions. OR ARI will hire a dedicated sales person to focus solely on this program. The dedicated sales resource will focus on generating new customers and volumes for the program. The sale resource will generate the strategy and execute to obtain the volume targets outlined in the ROI. Benefits This project aligns with ARI s strategic views of adding revenue. The expectation is to develop manual processes initially to support the early stages of the program and develop an external facing software solution which will facilitate communication and status. Eventually the vision is to evolve this into a selfserve solution. Risks ARI is late entry to the market with this solution. The risk ARI enters the market and realizes a lower than expected adoption rate, ARI s brand is not as big a draw as expected. The advertising and marketing of the product capitalizing on the ARI Brand will be critical. (Low) The risk that the ARI Sourced volume will be lower than projected. The risk of the RDR team or dedicated sales person not being able to sell this service as expected. (Medium) ARI is not able to offer an elevated sell price, compared to the fair market value, we might lose recurring businesses (Medium) ARI does not differentiate Remarketing by ARI units from the ARI Remarketing units at the auction and ARI brand is diminished adversely impacting our following and ultimately our returns for our ARI clients and ARI units. This will need to be monitored. (Low) The addition of too many dealer vehicles to the ARI lanes at the auction will erode ARI s brand at the auction. This will need to monitored and controlled closely by ARI. (Low) Auctions modify their pricing/rebate agreements to exclude Remarketing by ARI units which will impact ARI s rebate, the ROI would be impacted accordingly (Low). Existing providers in the market target ARI through aggressive advertising and pricing, resulting in a lower adoption rate and lower volumes than expected. (Low) 2 P age

3 Solution ARI enters the market focusing on developing the dealer focused business through clearly defined manual processes that leverages pre-existing systems, processes, auction and vendor relationships to support this initiative where the focus is to build the Remarketing by ARI brand in the lanes to promote growth directly at the auction. ARI will work with auction partners to gain supporting volume for this program from existing auction clients interested in leveraging the ARI brand at the auction for higher returns. The RDR sales team or dedicated sale person will focus on generating sales, expand the advertising and selling credit unions and small lenders. ARI will utilize the Steward Financial repossessed units as the foundation for the corporate Financial client business. ARI will develop an external facing application (Enhanced portal): client facing website which provides a mechanism for clients to issue disposals, obtain pick-up status, manage recon, CR viewing, pricing communication and refined sales settlement and reporting. MARKET ANALYSIS / CURRENT ALTERNATIVES Market Overview The current market is serviced by a number of national players and some smaller regional players. Competitors are well established in the market and have been building their brand and processes for some time. This is mature concept and the perception from several sources (Steve Albanese, Robert Maul Cox) there is an opportunity to leverage our brand and fill gap in the market for the midsized dealership players. ARI will be a late entry as a large FMC into this market, however the expectation is that ARI s brand and best-in-class processes will drive growth. Current Alternatives: Element 12 - this service was offered by GE and Element continued to offer this service Element projects to deliver 105% of market value (MMR) Element projects increased returns to customers of > $300 per unit According to Cox Automotive Element is the largest player in this space at their auction locations. Other FMC s such as Wheels, Donlan, Emkay, Leaseplan do not currently offer this service. TD Bank is a small to medium niche player in the market with a focus on the independent dealer market 1 Program s website 2 Pricing sheet 3 P age

4 Adcock is a small to medium player focused on the dealer business. OneMain was a medium sized player in the small to medium dealer focused space, however they went out of business in Fees: The competitor fees include: Management fees range between $100 and $150 (i.e Adcock $125 per car) Recon range ($40 to $185) + $35 oversized units + $50 Extreme Detail Units (Adcock) De-identification $45/hr (Adcock) Adcock Recon Rates.pdf Adcock Proposal to Holman.pdf ACTION ITEMS / MILESTONES Phase 1 Manual Pilot Auctions and Dealerships Steward Financial Phase 1: Manual Pilot Auctions & Dealerships, Steward Financial The initial phase of the program will take the form of a manual process driven initiative focused on building this program initially at the auction level through advertising and effective marketing targeting independent dealers and dealer groups currently wholesaling at the auctions and looking for higher returns. The initial kick-off of Steward Financial will be included in this Phase and will managed manually. Dealerships, the expectation is the dealers will coordinate their own transport, recon. ARI will communicate with dealer on pricing and flexibility to pricing and auctions will settle the final sale to the dealer directly less the ARI fee. The expectation is that this phase will serve to begin building the brand at select auctions. A secondary benefit includes gathering information during this phase will be used to fine tune the portal requirements for Stage 2. The VR team will define: Strategy with Marketing is to promote this service at the auction level Manually manage client communication, Define the recon, flooring process Vehicle sale and settlement in the VRIMS system. Define the communication and reporting Define the manual process with VR, sales, implementation and finance 4 P age

5 Minor VRIMS modifications will be required to delineate between ARI owned and Remarketing-by-ARI vehicles. Revenue in Stage 1 will be primarily Remarketing-by-ARI fee revenue. Vehicles not currently utilizing the auction and represent new inventory to the auction will eligible for auction rebates, however this is expected to be limited volume in Stage 1. Stage 2 Enhanced Portal Phase 2: Enhanced Portal Creation of an Enhanced portal: client facing website which provides a mechanism for clients to issue disposals, obtain pick-up status, manage recon, CR viewing, pricing communication and refined sales settlement and reporting o Vehicle disposal loading capabilities directly into VRIMS o Bulk upload capabilities directly into VRIMS o Mobile App capabilities o Active status tracking utilizing AutoIMS o CR viewing and recon recommendation and approval process o Pricing management capabilities (including approval) o Historical line item sale settlement info Integration of this portal to the VRIMS system will enable ARI to leverage existing AutoIMS interface capabilities currently in place and use this information to populate the portal with various transport, vehicle condition, pricing and sale status information. This stage will have a larger IT commitment, continue to require manual support; however, the expectation is the enhancements will reduce the cost-to-serve component. The Enhanced Portal will be a requirement for financial institution clients and corporate clients. Success would include continued growth of the program and increased revenue and reduced cost-toserve compared to phase 1. Legal: Remarketing and legal to work closely together to create a MSA for Remarketing by ARI and can be used as a template going forward Marketing: Determine the final name and brand for this product, collaborative effort between Remarketing and Marketing. 5 P age

6 Determine how the brand will be managed at the auctions including advertising plans, signage and specific promotions. o Buyers should be able to recognize the difference between ARI Remarketing and Remarketing by ARI units based on branding differentiation but still associate the program back to ARI. (reoccurring surveys with buyers/auctions) o Sellers satisfaction based on customer service levels and expertise (reoccurring survey and repeat customers) o Effectively communicate what the program includes, differentiators and opportunities Create an external marketing and advertising strategy in collaboration with sales targeting financial institutions (small credit unions) and local companies selling vehicles. Support internal documentation for sales teams Remarketing (VR): Pricing is targeted to be an ARI sell fee of $135 to leverage the ARI brand and lane placement. Identify the target SDO s to ensure we have sufficient national coverage. Define the role of the dedicated remarketer o Remarketer will meet with clients and walkthrough their expectations on pick-up, recon, pricing and settlement and they will create a profile that will be utilized when selling vehicles for the client. Expectation is there will be limited travel and most of the interaction will be electronic. Milestone A primarily manual communication Milestone B automated and as program grows automation will provide additional scale o Remarketers will utilize the VR IMS system and all available pricing tools and interfaces to manage the sale of the vehicles o Remarketer will have access to their peers and will be encouraged to reach out for support when required. o Communication with Sales (RDR) coordinate discussions and training on the product, target customers and an overview of the process o Communication with Client relations to ensure they are aware of the product and potential clients o Monitoring of volume, timing and meeting any SLA o Support transportation, recon recommendations, pricing and sale reporting for clients o Represent these vehicles at auction and manage the sale of the vehicles o Support for sales (RDR) selling this service Dedicated ARI Remarketer interaction with Steward Financial and Financial Institutions: o Client s will forward vehicle disposal information to ARI: Milestone A manual process and ARI will load into VR IMS Milestone B Client facing portal and automated (directionally self-serve ) 6 P age

7 o Disposals will be managed through the VR IMS system where ARI will assign the vehicle to a specific SDO and the units will be identified as Remarketing by ARI units. o CR information from the auctions will be used as the basis to determine the recon required. ARI will provide clients access to vehicle info and CR: Milestone A CR info to clients Milestone B - portal will provide access to sale information o ARI will coordinate the recon on the vehicle with the client o ARI will coordinate receipt of the title prior to sale and will ensure the vehicle titled properly to ensure it can be sold with minimal impact o ARI will price the vehicle based on the CR and AutoGrade o Dedicated remarketer will remote rep the vehicles at the auctions, following the selling guidelines identified when the client joined ARI o Once the vehicle is sold the client will be notified: Milestone A manually by Milestone B Portal and system generated o The auctions will complete the sale of the vehicle and forward the proceeds less expenses (including the Remarketing by ARI fee). The auctions will forward the fee directly to ARI. o ARI will provide a detailed sale settlement to the client including an itemized list of expenses and fees. The proceeds will be provided to the client less all expenses and fees Self-Serve o Throughout this process the end goal is to identify opportunities and requirements to eventually evolve this product into a self-serve solution where clients can assign vehicles, price, sell and settle automatically IT: This product needs to be differentiated within VR IMS and AutoIMS so that reporting on volumes, revenue and clients is separated. The ability to utilize AutoIMS capabilities to communicate and coordinate payment of the vehicle between ARI and auctions. Clients will need to be implemented in in ARI systems (VR IMS, billing, implementation) Creation of client facing landing page to support vehicle assignment, CR, Recon approval, Pricing approval, sale status and sale summary. The expectation is this will replace the milestone A solution using Insights since the Remarketing by ARI customers will not be fleet customers with different needs. Creation of a library of standard reports for the performance, and sales Finance/Implementation: Work with Finance to setup income accounts to ensure we can track these sales separately from our current products VR and Billing to determine how to settle these track these transactions within ARI systems 7 P age

8 Sales: RDR or Dedicated Sale Rep will sell this program to Financial Institutions including smaller credit unions. RDR or Dedicated Sale Rep will make direct contact with the dealer groups, and independent dealers soliciting vehicle for this program Program Launch: Identify initial pilot auctions and dealer groups Identify initial corporate pilot clients such as Steward Financial Determine the pilot dates and subsequent full launch date Determine communication plan with selected auctions and when they can promote on ARI s behalf RESOURCE REQUIREMENTS People: A single remarketer will be required to manage the process and client relations. We estimate that currently a remarketer can typically handle 1,500 to 2,000 sales per year so we estimate that the program could be supported by one remarketer in the first 5 years. The investment in technology will provide scalability to the product and eliminate the need for additional people as the program grows. There may be a requirement to add a dedicated salesperson for this program. Technology: IT support will be required to create a communication medium for clients to assign vehicles, participate in the pricing and reconditioning decisions. The expectation is the VR IMS system will be utilized to manage communication, pricing and settlement steps with the auctions through the AutoIMS interface. The expectation includes significant reporting requirements by the financial institution clients and this will need to be created. ARI Departments: Implementation: setup of these clients Finance and Billing: setting up income 198 accounts Legal and Contracts: ongoing support as new clients are added to this program Marketing: support in setting up the branding of this product at the auctions and external marketing 8 P age

9 FINANCIAL ANALYSIS Estimated 5-year program volumes: 9 P age Annual Volume Forecast Source Advanced Commitment First Year New Business Development Financial Institutions Steward TBD Reposession Partners TBD Auction Partners America's ABC DAA Accelerate BSC Manheim TBD Adesa TBD Independents South Bay Clients Ensign TBD TBD Dealerships TBD TBD Total Original Forecast Mix of committed vs new business development 84% 16% Green are already confirmed with Auction Partners Red are estimates waiting on confirmation. *** The RDR or Dedicated Sale Rep will need to develop more than 200 in year one in order to maintain or drive volumes in year 2+.

10 Auctions are supplying volume based on the ARI commitment to grow volume through 3rd party. Provided data: December 29, Chris Clarke Assumptions: Steward Financial is expecting repossessions per month In lane advertising and RDR contact with Dealerships will contribute to the volume under Dealership Units - (ARI Sourced) Other Units represents Non-standard clients (smaller companies or clients looking for a higher level of control) - (ARI RDR Sourced) Dealer Units - Auction Sourced represents 25% of the ARI sourced volume. Auction will recommend to existing clients to use the ARI program for higher returns. (Auction Sourced) Financial Institution ARI sourced (RDR sales) Estimated 5-year program Revenue: Channel Year 1 Year 2 Year 3 Year 4 Year 5 Program $135 $168,750 $185,625 $253,125 $340,875 $426,600 Auction $107 (avg) $85,600 $107,000 $141,775 $195,275 $241,820 Total $254,350 $292,625 $394,900 $536,150 $668,420 Assumptions: ARI sourced vehicles eligible for program fee ($135) + auction rebate ($107) Auction sourced vehicles only eligible for program fee ($135) IT Estimate: Year 1 IT estimate assuming Phase 1 and 2 are completed Phase Hours Design 27 Development 216 Testing Time 32 Project Management Time 45 UAT 23 Contingency (Risk) 83 Total 425 Less UAT 23 IT Hours P age

11 Year 2 and 3 IT estimate assuming there will be modifications required to meet unexpected requirements See ROI models: 1) Remarketing by ARI Program ROI v9.0 no Sales Rep (program sold by RDR s) 2) Remarketing by ARI Program ROI v9.0 w_sales Rep (dedicated sales rep for program) CONCLUSION The underlying value for the Remarketing by ARI (3 rd Party Remarketing) program is to offer non-ari sellers at the auctions the opportunity to leverage ARI s brand and run vehicles in the prime ARI timeslots and lanes to obtain higher returns. The Remarketing by ARI (3 rd Party Remarketing) program is expected to generate revenue through a fee and increased auction rebates. There are essentially two target groups dealerships and non-fleet companies who sell vehicles at auction and can benefit from higher returns. PROJECT AUTHORIZATION ROLE DATE Chris Clarke/ Brian Garner <embed authorizing s> Partha Ghosh Scott Whittal <embed authorizing s> <embed authorizing s> APPENDIX 11 P age