James McComb
Nov 11, 20203 min
Another in our series from around the world, this time we move away from lockdown UK and shift focus to the USA. I think it's fair to consider our market conditions to be more aligned with the US at present due to the lockdown conditions the UK is in.
Stock is hard to come by... everywhere! And the MEGA Centre used sale yards are finding it really hard! BUT with the right approach and professionalism around the total customer experience, they appear to be doubling down on this strategy right now.
Have you got access to DealerHub? It's something you may want to consider if sourcing stock is important to you.
If you are RMVT certified and need stock Click Here and get ready for the launch of DealerHub.
Written by Bryant Gibby on 11/02/2020
While it’s no secret that the used vehicle market is continuing to become a primary driver of profitability for franchise dealerships, other used vehicle retailers are already ahead of the curve in terms of inventory sourcing and honing their acquisition strategies.
We’ve watched auto retailing titans like AutoNation continue to focus on used vehicle operations as part of their business plan and CarMax continues to dominate the market with their multitude of locations and large inventories. Carvana, a relatively new player, has entered the space and expanded rapidly over the past two years.
It’s not a surprise as new vehicle prices continue to rise, and customers hold on to their vehicles for longer than at any time in history. When we put into perspective sales numbers for automotive retail, new vehicle sales totaled 16 million in 2019 with used vehicles far outpacing that coming in at 40 million vehicles sold. The challenge a strong used vehicle market presents for all automotive retailers is inventory sourcing.
Auctions purchases are more competitive than before with the aforementioned used vehicle
retailers scrambling to replenish their inventories. Trade ins are a great source of inventory but less predictable in terms of acquiring the fast moving, high return vehicles. What many dealers have overlooked or are just beginning to capitalize on are “buying cars from customers” what has traditionally been referred to as buying vehicles at the “curb”.
An advantage that large scale used vehicle operations like CarMax and more recently Carvana have is that they are buying vehicles directly from customers wherever and whenever it is possible. This acquisition strategy makes a lot of sense in terms of both acquisition cost, building the brand experience and providing customers with another reason to interact and conduct their business with these automotive retailers.
In a recent quarterly earnings conference call the CEO of Carvana, Ernie Garcia, has repeatedly stated that Carvana is focused on buying cars from customers as their main source of used vehicle inventory. In fact, Carvana has grown this acquisition strategy over 300% in the past year. A recent Automotive News article wrote the following.
As Carvana grows rapidly in size and scope, the number of vehicles the online used-car retailer buys from consumers has skyrocketed — and CEO Ernie Garcia expects that growth to continue. “Whereas traditional trade-ins are restricted to the number of customers
buying from Carvana who also have a vehicle to sell, buying from consumers in general,
regardless of whether they intend to purchase, is an almost limitless proposition”.
Logically, there's no natural ceiling on how big it can be, Garcia said in September at an investor conference in New York.