Used car performance – reasons or excuses?

I'm just kicking off a new workstream as part of the ICDP research programme focused on used cars and in particular looking at why some dealers can regularly outperform others even when the basic principles of how to be a great used car dealer are well known.  Within that statement I recognise that I'm already making some assumptions.  I think I know what makes a great used car dealer and I even have some evidence to back up my opinions, but have we and other like-minded people spread that word far enough and loud enough?  There may be other sources of advice and expertise who are more trusted or more influential.  If your dad has been a used car dealer for thirty years, then why should you pay any attention to ICDP or any other so-called expert?

The basics of marketing also apply to used cars - product, price, promotion, place and people.  Whilst the marketing 5Ps have been around for over half a century, what they mean in terms of used cars has evolved over that time.  It feels like selling a used Renault 4CV in the post-war years must have been easier than trying to sell a Renault Zoe today, and the transformation in all the other areas has been no less dramatic.  However expectations change and possibly the 4CV buyer was just as demanding in their own way as the Zoe buyer would be today, and it was just as difficult for the dealer to make money consistently on that trade.

Sourcing product has been particularly challenging in the last couple years, and doing so at the right price even more so.  This has led Peter Vardy, a respected UK group, to announce the closure of their used car superstore operation because they can’t source the volume of stock at the quality level needed to support the business case of the large sites they have created.  In those circumstances it is easy to see how other dealers would worry less about having the right stock than they would about having any stock, but the risk is that you become a busy fool, ending up with product that has high preparation costs, doesn't sell and is exposed over an extended period to fluctuations in market value as well as normal depreciation.  It must surely be better to stick to the stock profile that works for your business and location and focus on moving that stock through quickly before the market potentially turns against you?  I also don’t believe that this is a temporary challenge.  Growth of agency, leasing and OEM used car programmes will limit the availability outside the OEM networks of good used cars under 10 years old in the future in my view.

As many dealers have discovered, particularly with BEVs recently, values are not a constant nor is it possible to anticipate all of the factors that might influence market pricing.  Selling at the right price is about responsiveness because what was right before Tesla dropped their prices was no longer right the next day.  Over the years we have come across dealers who have had a fixed selling price in mind, and held on for months – in some cases actually achieving their target, but having tied up the capital and the space for far longer than they would have done if they had priced realistically in the first place.  That is a missed opportunity to have sold four or five cars in the time that it took to sell one, having five trade-in opportunities, five aftersales customers and five hopefully positive customer advocates.  I had one German dealer group proudly explain to me their policies for handling aged stock – which included a step at 12 months where the car would be offered to other dealerships in the group at a discounted price…  No!  Just get rid of it.

Promotion, place and people have become intertwined in the omni-channel world that we are now in.  You should no longer be thinking about the local market opportunity, particularly if a car is a slightly unusual, but desirable specification.  We have seen customers travelling hundreds of kilometres to buy a car that meets their specific needs, so promotion (in the sense of where to list each used car) should be tailored to the car – unique car, promote widely and price high, plain vanilla, minimum promotion and price competitively.  However in either case, the quality of the listing should be to a level that allows a remote buyer to have confidence, to buy online or to travel an extra hour.  Similarly the personable sales person who makes a good impression and gets good results face to face, needs to adapt to establishing a similar rapport by phone or email, or you need to organise in a way that supports both channel, typically through a dedicated business development centre.  Those who have responsibility for buying and pricing, need to be more data driven, not simply relying on their feel for the market, but constantly looking at the available data, and then evaluating that with an experienced eye.

What I think we will find in the research is that the dealers who underperform in used cars have become stuck in a particular operating model that has not adapted to the new realities.  They are used car traders, rather than used car businessmen.  This permanently restricts their opportunities, and increases their exposure to the fluctuations in the market.  There are reasons for their failure to adapt, but if the solutions are available, do these not then become excuses?