Auction House Drama, NPR’s ‘stealership’ Coverage, Nordstrom Heading Upstream

August 31, 2022
Welcome to Wednesday as we cover ACV’s recent lawsuit filed against major and minor auction houses, a recent story on NPR covering the so-called ‘stealership’ phenomenon, as well as retailer Nordstrom’s strategy to move product offerings upmarket.
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ACV has filed an antitrust lawsuit against many physical auctions including giants Manheim, Carvana owned Adessa, and many others whom it claims conspired to deny them access to AutoIMS, an industry standard platform in the auto remarketing industry

  • The platform is provided by a joint venture of those four companies, Auto Auction Services Corp who is also named in the suit
  • The suit states, AutoIMS inconsistently enforced its physical auction requirement to “preclude membership to certain digital-only platforms like ACV, which pose an existential competitive threat to NAAA’s controlling members.”
  • ACV points to the fact that many other auction houses now offer exclusive digital auction services
  • ACV also cites the loss of customers such as Hyundai Capital and Santander since they did not have access to AutoIMS and those companies had workflows that depend on them
  • ACV is seeking injunctive relief, monetary damages, and legal fees

  • NPR releases a story titled “Inside the rise of 'stealerships' and the shady economics of car buying” which began as the writer, Greg Rolansky’s journey to find a new truck to replace his stolen one
  • The article gives an efficient overview of the franchise system and covers the pros and cons of the current system with a factual and common sense approach
  • The benefits of having a local dealer network to serve customers, let them see product, service vehicles, have recalls taken care of, and of course, all those jobs
  • He also covers the lobbying power that comes along with the economic leverage and questions whether or not stopping OEMs from having a monopoly on pricing is really effective reasoning for a Dealer network
  • He then chronicles his truck buying experience and cites ‘stealerships’ charging as much as $20k over sticker to those who would charge MSRP, but he’d have to wait up to 6 months
  • Finally, he settled on a truck he found 400 miles away for $2k over sticker negotiated down from $5k
  • This untitled 2014 Toyota FJ Cruiser is one of approximately 2,500 Trail Teams Ultimate Edition examples built for the model year, and it was acquired by the selling dealer in 2014.
  • This Rivian RT1 Adventure Edition has 47 miles and is currently at $100k
  • In retail news, Nordstrom Rack’s sales remain steady, is making a move to push more premium products into its stores to cater to the higher economic profile of its consumers according to CEO Erik Nordstrom
  • Sales up 6% in Q2 but started to wane.
  • They had brought in lower priced merchandise to gain entry point consumers and found that Rack’s shoppers were looking for deals on the same goods sold in Nordstrom’s department stores. 90% of the brands sold in Nordstrom’s full price locations are found in Rack stores
  • They are working to expand next day pickup features across the store’s network

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Kyle Mountsier, Paul, Paul Daly

Paul Daly  00:22

Welcome to Wednesday, makers. We got a lot of trouble talking about oxygen, Rama and PR story on stealer ships and Nordstrom heading upstream and a little bit of bring a trailer to the people really want to know a little bit of a trailer.

Kyle Mountsier  00:39

There's a lot of people that don't know what bring a trailer so we're gonna have to introduce it and then and then roll down what what's really happening over there there's

Paul Daly  00:46

nothing more cargo cargo than bringing a trailer. I promise we will we will addict you to your next drip email and help you to spend time you didn't have looking vehicles you're not going to buy. So that's pretty much my summary of breakage. That's exciting time. I don't have to look at vehicles I'm not going to buy. That shouldn't be their tagline. But they sell a lot of vehicles. A lot a lot a lot of vehicles. Oh man. If you haven't been listening, the auto collapse podcast is in full effect being two episodes releasing every day. You may ask how we record so many podcasts? We don't have an answer for that. But Mike Darrow and Aaron Aaron sparks getting getting like down with the people in the buildings in dealerships, especially with Aaron sparks. She's just in between operations and marketing and sales and all that stuff. Like the Stretch Armstrong doll. Remember those?

Kyle Mountsier  01:44

Every single said every single market or ever right?

Paul Daly  01:50

Got the arms and the legs. So have a smile on their face. Let's get

Kyle Mountsier  01:56

heads wobbling

Paul Daly  01:59

fresher. Oh, that's pretty good summary of a marketing director in an automotive Cooper automotive store.

Kyle Mountsier  02:04

It's just the way it is just there we go. Hey, we got a lot to cover today. And I feel like we're gonna go bet there's gonna be some commentary like it might hit it might hit the comment section you and I might get sideways. I don't know. We got to.

Paul Daly  02:18

We got to go. Okay. Okay, so we can we got to start we gotta start. Okay, so ACB the auction company Digital auction company has filed an anti trust lawsuit against many physical auctions, including the Giants Mannheim and Carvana. Owned ADESA It must be nice to buy a business and then get sued immediately from it. And many others who make claims conspired to deny them access to auto IMS, which is an industry standard platform and auto remarketing. So I guess it's a platform where cars transact you know, inventory feeds are pulled from all that. It's provided actually that platform by a joint venture of the four big auction companies and they all come together and formed auto auction services corporation who is also named in the lawsuit and the lawsuit states auto IMS has inconsistently enforced its physical auction requirement to preclude membership to certain digital only platforms like ACV which by the way, they mentioned pose an existential competitive threat to national What is it not an a national auction, national auto auction services court controlling members they point to the fact that many other auction houses now also offer digital only products and solutions to wholesale vehicles. And they also ism this is this is the final punch. Like they're like, well why we're doing this is because we lost customers like Hyundai capital little little customer there, and Santander little customer, their customer since since ACV didn't have access to auto IMS. And the workflows of those other two companies were built around that platform because it is the industry standard platform. And so they're seeking injunctive relief, monetary damages and of course,

Kyle Mountsier  04:00

legal fees, man Okay, so here's the thing. The the kicker on this one is the fact that I know many dealerships that never stepped foot in physical locations of auctions, yet still rely on auctions for inventory, places like DESA and Mannheim. And all of those, you know, people include it in companies included in in in this new space. It takes me back to reading the innovation stack by Jim McKelvey. If you don't know what that book is, check it out also come to a soda con because Jim McAfee there,

Paul Daly  04:37

but he was actually on our zoom call yesterday.

Kyle Mountsier  04:39

He was on a zoom call. It was amazing. We didn't talk about that speakers. I know. We'll talk about that in a minute. But it takes me back to this story of a little company called southwest going up against a few big companies namely delta American United back when they came on the scene. There's some there's some There's some things that stay at play here that are not allowing new competitors to come into the ecosystem and brought and more broadly served. Here's the innovation stifling. There's two things to happen one stifles innovation to like you, like is there are you so guarded as a company or as companies and this is where I think franchise retail has a lot of learned a lot to learn from this discussion, are you so guarded and, like, feel the pressure and weight of new entrants, because most likely, you've lost your competitive edge is is typically the reason why you're guarding against something so deeply. And so I'm just gonna like I'm gonna turn this straight into franchise retail conversations, are we so guarded and so worried about our ability to serve customers that we have to turn to legal alone to protect our own devices?

Paul Daly  05:59

Yeah, that's, that's pull a pin roll grenade in the room and see what little bit of a flashlight

Kyle Mountsier  06:06

I got. I got a whole belt of them this morning. So you've been watching

Paul  06:10

strapped up today, I mean, cost efficiency, solving actual consumer problems, you know, kind of with with a holistic view or like an atheistic view on like, you know, what you're going to hold true to what you need to preserve, because it's a legacy thing. It always finds the light of day, it always finds and sometimes that's through innovation, the pattern usually goes everyone who's got a vested interest in keeping things the way they were, are going to band together to try to keep it out. And then eventually, it's going to see the light of day right now the litigation here that we'll see what happens with this one. It's obviously slowing it down. But we are saying ACB came to market with, you know, with a solution that tons of dealers use in a manner that tons of the auction houses actually deploy as well. And this is this is so it's a little family drama. It feels like Oh, right. Like, like, yeah, like, like the franchise auto dealer. Carvana like that's not family drama like auctions and auctions. It feels it feels like this is like Thanksgiving Day drama.

Kyle Mountsier  07:13

Speaking of drama, oh boy.

Paul Daly  07:20

I'm getting pretty quick on that trigger pad. I literally didn't even look to the left. I pushed the slider. I'm

Kyle Mountsier  07:25

like, damn, I got it. I got. So NPR released a story titled, inside the rise of stealer ships, which is basically

Paul Daly  07:36

Oh, you didn't read the title? You didn't read the whole title? It gets worse.

Kyle Mountsier  07:41

Oh, and the shady economics of car buying? Yeah, that's the whole title there. Yeah. Yeah. Which both of those both both sides of that is basically the punch line. And you can kind of take the route of knowing where this is probably going to head but it storied the writers journey, Greg Roelandts. Ski to find a new truck to replace his stolen one. And, man, I'm gonna let you kind of read through the bullet points of this. But if if I'm a car dealer, if I'm an industry partner, I'm leaning in really close not because this is like the story of every dealership or every every person across the country. But at NPR is putting news stories out about this about franchise retail dealers. leaning in and understanding what consumer perception of the retail environment is right now is extremely important to the way that we do business on a daily basis.

Paul Daly  08:39

You know, NPR tends to be give it give it give it to you kind of dry? Right? And which is why NPR is NPR they kind of like hear the facts. Right? And, and the author of the article actually just was compelled to write this article out of his own personal experience. It wasn't something he was researching or following. He had this experience, he started digging a little bit and he was like, Hey, let's this needs to be talked about more. So, you know, I think the article gives a really efficient overview of the franchise system, which is cool, because he does a great job to educate people. This is the franchise system. This is where it came from. These are the pros and cons. And he went through I thought a substantial list of pros. It's actually a list of pros that we hear our dealers and us saying on the regular basis, like having a lot of places where consumers can go ask questions about product, check, you know, test drive product, have the product service, if there's a recall or something happened with the vehicle or from an OEM level, the franchise dealer is the one that's there in the community, to solve it, to fix it to be accountable for it responsible for it and not to mention all the jobs local dealers create. I don't think you mentioned how much they give back to the community, but I would add that one as well. And so you know, he's like, there are a lot of benefits to having this dealer network. I was like, This guy has given this

Kyle Mountsier  09:52

article a really fair shake. He's got all sides, right. Yeah. But then

Paul Daly  09:56

he also covers you know, he covered a little bit the lobbying power, the NADA that come comes along with such economic leverage, right? And he questions like whether or not that's always going to be in the best interest in consumers, or, you know, the over trillion dollar industry that actually has power to just keep things the way they want it in Washington. And then he starts to chronicle his truck buying experience. But first he does question he's like, you know, one of the main arguments is that the dealer network, the dealer network, helps keep OEMs from having a monopoly on pricing. But he's like, well, well, they really have a monopoly on pricing, because there seems to be a lot of OEM competition. Right. I was like, that's a pretty fair point, right? Yeah. I have a Silverado on an F 150. Right. If Chevy prices at less than 40. That's called price competition, right? It's like exactly, you don't usually see price competition within the same manufacturer. You know what I mean? Like there's no price competition for iPhones. I mean, I guess for some Android devices, you could see some other But although he goes in such a critical his truck buying experience, and saying he just went like four or five 600 miles away from his place of right from I think he's in LA, which explains the stolen trunk, right. So he goes like five 600 miles away to find his a little little one. And so and he what he says is that he found dealers that were charging up to 10, sometimes 20,000 over sticker, he did find dealerships that would allow him to buy an MSRP. But then we all know he'd have to wait to get it ordered. And then finally he settled on a truck 400 miles away, that was listed at five grand over sticker he had negotiated down to $2,000 actually had a sister negotiate for him because he didn't like negotiating. Right and so so she took care of it for him, right. But it is the whole thing.

Kyle Mountsier  11:42

Someone else helped, like,

Paul Daly  11:46

because she was a lawyer is actually what the story is. She was a lawyer, and he was like, Oh, shoot. So we've got it down to $2,000, which he said, you know, in typical times would be you know, he feels like he got ripped off. But in this case, he feels like okay, well, like that's kind of the best I'm going to be able to do. And he actually cites Michelle Michelle Krebs from Cox automotive, she's are leading research and executive analyst. She said for the first time in her career, and it's been a long career she seen most dealerships charging list price are over. And simply because there's high demand and low inventory. And they can do it. She said, so.

Kyle Mountsier  12:18

We'll talk about this from like, you're, you're buying something. And you feel so estranged as an intelligent human that has the capacity to write for NPR, that you have to leave your local ecosystem of retail travel, which there's

Paul Daly  12:33

quite a few. We're not talking about, you know, like,

Kyle Mountsier  12:38

we're talking about Idaho dealerships, right, you have to travel 400 miles away, leaving your retail ecosystem to purchase an item that then you have to involve a relative because you feel the lawyer uncomfortable and equipped to be able to purchase in a retail environment, like what would happen if someone was like, man, really want McDonald's today. Close to McDonald's, that's not going to cut it. I'm gonna have to travel five more miles. And not just that, but I don't feel comfortable enough going through the drive thru and ordering. I've got to have my sister come in and order that thing for me. So I feel comfortable getting my McDonald's. Now I know, large purchase totally different retail ecosystem. But you have to put yourself in the consumers shoes at this point. Like, there's nothing that that sounds or feels good about that situation. Right?

Paul  13:36

I mean, the Real Talk is, is that there definitely is a reckoning happening right now. in pop culture. There's a reckoning happening in media, when over MSRP see MSRP pricing started, right big conversation. Um, should we do it? Should we not do it? There are great dealers on both sides of that argument. The reality is, though, this is becoming more and more a part of public discourse. In a time, when it's the last thing we need to be in public discourse, and may be a little short sighted. There's one thing if you're charging over MSRP, but you have such a great experience, that it's okay, right? There's another thing if people just feel worked, right? If people feel worked, we're losing, right? We talked about yesterday that Carvana is like Carvanha is like 103% market pricing, right? Like Carvanha is not cheaper, right? Carvanha is more expensive grant that's use cars. The Real Talk is this.

Kyle Mountsier  14:34

It's not time to do this, cover your ears and cover your eyes and be like well get through it. It's not the time for that because at times reading articles like this, literally everybody it's it's we don't have to go far to find automotive articles outside of the automotive ecosystem. It is everywhere and everybody's talking about it. So we are top of mind as an industry for everyone. I mean, How many people do walk into and they're like, oh, man, I was shopping for a car those prices, you know, like that conversation happens to everybody everywhere. Why wouldn't we be aware of that as a general, like retail ecosystem understanding that we are in and amongst pop culture? I mean, it's, it's just it's not lost on me that places like NPR or subreddits, or Reddit threads are littered with this type of communication. And we just have to be aware of that as an industry. shrew.

Paul Daly  15:31

Speaking of being aware of ridiculous prices, segue. Yeah, why not? Why not? We talked about this at the very beginning of the show, bring a is, I don't even know what to call it. It's like a retail site that talks about, you know, sells unique vehicles or criteria. If you're going to list on bring a trailer and they send out a dealer, a daily email that probably millions of people, I mean, there's hundreds of 1000s At least they get these every day, right. They highlight unique vehicles. And then some dealers that we know, this was put pushed to us by our friend Todd Caputo. You can just see some unique vehicles or at least get a feel for what the retail market is doing on vehicles. So there's a 2014 F j cruiser remember those and it's one of it's a trail teams Ultimate Edition. So it's a little bit of a rarer one. The dealer who bought it originally just sold it to 2014 it has like, I don't know, like 250 miles on it. And the MSRP was 39 753 and they just sold it for like $100,000

Kyle Mountsier  16:39

I'm telling you what, that's impressive. Look, here's the thing, in contrast to the prior conversation, yeah, this is different. This is the market drives pricing based on the demand of a vehicle and people want this 2014 FJ Cruiser.

Paul Daly  16:57

Honestly, I looked at it. I did we put it on the screen, right? It's pretty ugly in my opinion.

Kyle Mountsier  17:02

It's real ugly, like it doesn't even have a screen y'all. glossy

Paul Daly  17:11

screen. We went ahead and there's another one as well. So there is a actually that sold for 103,000 that that auction is closed. Another rivian RT one adventure edition only has 47 miles on it. The original owner just took delivery of it in July. They bought it for 76,000 bidding is currently at 100,000. So Holy, it's hard to get those

Kyle Mountsier  17:36

I mean that's, that's that's legit. You know, but that car looks that's an

Paul Daly  17:41

that's that has a couple screens and it's got screen interior interior that was got screens, got screens. Alright, speaking of retail segue closing out with a little retail news Nordstrom Rack their sales remain steady and q2 actually up 6% And they're making a move to push more premium products into their stores to cater to the higher economic profile of its consumers. According to CEO Eric Nordstrom, so sales went up q2 Nordstrom Rack if you're not familiar with it, so you everyone knows Nordstrom right epic customer experience expensive. You get what you pay for department store mentality. Nordstrom Rack is like I don't know if Nordstrom had a Marshalls. Right? Yeah, that would be Nordstrom Rack. I

Kyle Mountsier  18:27

think it's more elevated than that. It's essentially their outlet store.

Paul Daly  18:30

They put a lot of like their their Marshalls is like if the Adidas store had a Marshalls Nordstrom Rack is like if Nordstrom had a mark, like it's an elevated Mark.

Kyle Mountsier  18:39

Yeah, that's fair. That's fair. They put a lot of like their, their their last year stuff, you know, or Overstock, Overstock. Yeah, they have some unique element items that go in the Nordstrom Rack. But it's just interesting that they're they're looking to push more premium products, even into those stores, recognizing that the brand of Nordstrom is so attached to quality and premium, that they can even afford to push a higher quality higher higher price product into the rack stores. That's pretty wild to me that

Paul  19:15

well initially, well initially, they tried to get a broaden their consumer base. So they actually introduced some some brands that they don't sell in Nordstrom, into the Nordstrom Rack stores to get a lower price point and try to grow the consumer base. And now they're like, actually, that's not helping us in this economic environment. We people want deals on the same premium quality stuff. They just want that stuff, you know, in a different format. And so they're doing that and they're working to also do some things like expand their next day pickup that they've piloted and now we're rolling out in general. And so the bottom line is just another economic indicator of what's going on across economic status or you know, economic

Kyle Mountsier  19:55

I don't know status. Well, ya know, it's like we've we've been talking about this that that Luxury buyers are are out in droves still like the luxury economy. You know, we talked about I can't remember who we're talking about too, but just with interest rates driving down it's not because interest rates are driving down it's because premium buyers and high credit to your buyers are out more than lower credit lower tier buyers. So this is just another influence of that. And I think it helps us gain a retail perspective and automotive it as well for what what buyers are out and what what brand does to a buyer persona for any any sort of retailer.

Paul Daly  20:34

No doubt and no John Roper, I did not say Nordstrom Rack is Marshall said if Nordstrom Rack had him if Nordstrom had a Marshalls, it would be too much to check, you know, whatever, whatever it is you're doing today, we hope that you take some of this stuff really seriously in the heart as you go into the day. You know, our goal is that it affects your thinking and we do indeed need your best thinking to solve this problem.

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