As a half-full glass kind of person, I believe there are opportunities for franchised dealerships to thrive in the days ahead. Yet as a realist, I know those who succeed will need to employ growth strategies and stay ahead of the tech curve.
These imperatives are being driven by the current state of dealership sales and profitability. Data paints a complex picture with conflicting scenarios. Although the auto industry is still gaining, the overall market is declining and margins continue to deteriorate. Forecasts also suggest there will be expansion in the used vehicle category but no growth in the new automobile sector. At the same time, the wholesale market composition is changing in response to a high volume of off-lease vehicles and opportunities with certified pre-owned units.
This landscape presents positive and negative news for dealers. And, I believe that success may depend on how you align your business goals and resources to address such an environment.
Perhaps, a good place to start is to recognize that efficient and speedy wholesale activities can protect profitability. Ironically, only 52 percent of dealers report being satisfied with their process. That means there is lots of room for improvement.
From my vantage point, improvements may be as simple as 1, 2, 3. Consider embracing 1) enhanced technology, 2) digital marketplaces and 3) wholesale events hosted from your lot.
Let’s dig deeper:
#1: Reap Rewards of Appraisal, Acquisition and Disposal Tools
Today’s new and improved technology can enhance both your retail and wholesale operations. For example, research suggests that two thirds of consumers have a vehicle to trade and think of this factor as a key part of their price negotiation. By leveraging third-party data, you can better facilitate transactional conversations and minimize contentious exchanges about the true market value of a customer’s car. This approach may enhance the shopper’s experience with your dealership and lead to increased customer service index scores.
Advanced acquisition tools can improve overall wholesale margins by limiting inventory purchases to a price point that adequately allows for reconditioning and marketing / advertising investments needed to successfully retail the vehicles.
Further, upgraded disposal tools offer a built-in exist strategy if needed. They can provide an option to ground a vehicle and liquidate it through a variety of auction formats or resell the unit on the lot. This approach may increase sell-for-cash and trade-in vehicles coming into the dealership and improve your ability to acquire high-demand used vehicles to place in inventory.
#2: Get Benefits Generated by Digital Marketplaces
It is a fact. Online inventory channels can help you develop more cost-effective wholesale operations, reach broader audiences and increase their satisfaction with transactions. More and more dealers are embracing this way to do business, recognizing they can move inventory faster online with 24/7 access to buyers and sellers. In fact, last year Manheim experienced significant digital acquisition growth with transactions up 22 percent year over year, reflecting 18M total visits and 413K vehicles sold through digital channels.
#3: Capitalize on Auction Experience by Hosting Wholesale Events from Your Lot
Have you considered bringing the auction experience to your lot? Do it! Mobile events deliver an improved wholesale conversion rate based on an increased radius of buyers, higher engagement and retention rates with a captured audience, better returns, savings on transportation and sale management costs, and more. To further strengthen your position, sell vehicles with a condition report knowing that buyers are three times more likely to bid and four times more likely to purchase such a unit.
All that said, when you evaluate profit-generating business strategies to strengthen your future bottom-line, remember that your wholesale operation may hold the key to your success.
Don’t miss Derek Hansen’s DD25 session on Tuesday, October 16, 2018. This session will explore how you can utilize digital tools to gain confidence in how you price wholesale inventory and then seamlessly list and sell that inventory across digital marketplaces.
About the Author
Derek Hansen is vice president of offsite solutions for Manheim. All digital and mobile offsite solutions are organized under the vision of one leader aligning OVE, Bid Lot and Mobile offerings plus the Manheim Express mobile app and further strengthening Manheim’s dealer offsite and omni-channel strategies.
