We talk with some industry experts about the trends and opportunities in the used vehicle market
Here we go again: another year coming to a close and I have the irresistible desire to look back, fondly or otherwise, on what has transpired over the past several months. Well, almost irresistible. I have managed to stretch beyond the most immediate subject matter for this article and have instead decided to call on some industry leaders for their insights. These are folks who are working with dealers every day and striving to help them tackle some of the challenges in their business.
To prepare this submission, I spoke with Greg Connor, chairman of Boost Motor Group, a company focused on helping dealers more effectively capture their used car data and leverage leading technology to sell more cars through better online merchandising. I also obtained insight from Scott Neil, head of Kijiji Autos, a relatively new but certainly quite significant online automobile classified advertising platform. Finally, Bill Xinaris, national sales director for DealerTrack Inventory, provided his comments based on his experience working with dealers on a comprehensive end-to-end vehicle
inventory management solution.
Challenges looming
There are a few common themes running through my contributors’ comments on the used car business, showing that there is most definitely some level of alignment in our industry. With respect to general market conditions, all three feel that there is some cautious optimism in the market and reasons to be positive, but there are still challenges looming for dealers.
Neil notes that dealers have concerns about margin erosion on their used vehicle transactions as a result of strong prices which have been sustained due to some inventory scarcity. He is quick to point out, however, that this supply constraint is variable. For example, he states that highline dealers have not been challenged to the same extent as mainstream vehicle dealers. Neil attributes this to the fact that luxury manufacturers were able to lease right through the economic downturn and continue to have off-lease volumes returning to market for their franchise dealer body.
A result of the used car sales margin erosion that Neil identifies, is that dealers are trying new things to bolster this very important aspect of their business. As an example, working to get quicker turns on the inventory can offset some margin pressure. DealerTrack’s Xinaris shares this opinion, noting that many dealers are holding fewer used vehicles at one time and working harder to see those units turn more quickly. To do this they are focused on getting the right vehicles in and using metrics to assist decision-making related to those vehicles.
Managing the inventory effectively to maximize the ROI on used sales is critical to most dealerships and, according to Xinaris, requires a deep understanding of the market and their own operations, both of which can be easily accessed with the proper inventory management solution.
Technology plays key role
Using technology to improve insight into their business is certainly not new to dealers. Connor notes that Boost customers are growing increasingly sophisticated about the tools that are available to help them respond to challenges in the marketplace. As an example, he points to the evolution in merchandising, noting that his customers are increasingly relying less on traditional media channels to advertise their used vehicle inventory and instead experimenting more and more with other forms of digital media. This shift has moved far beyond basic email marketing — for example, dealers are now using video and real-time chat on their websites.
Much has been written about how dealers are using social media and Connor notes that we are still at the very earliest stages of this movement. He thinks that there are still many mistakes being made as dealers experiment with the various social platforms, but he is pleased to see that fewer dealers are attempting to win consumer business by posting their inventory on Facebook, an early tactic that has proven to be ineffective and potentially damaging to a dealer’s online reputation.
Kijiji’s Neil sees the merchandising options continuing to grow for his customers. Picking up on the concept of quicker turns, Neil notes that dealers are stressing their need for quality leads and that multiple channels can be used concurrently to maximize this. According to Neil, effective online merchandising will require that dealers and their service providers evolve the consumer experience to ensure that retail traffic stays engaged and ultimately generates the leads that dealers require for their business.
Looking ahead, these experts are quite bullish on the opportunities for their customers. Xinaris is excited about the increasing numbers of dealers that are embracing the types of tools that will ultimately help them to make good sourcing, appraisal, pricing, merchandising and sales decisions. He notes that dealer behaviour has been impacted by how consumers find used cars and that dealers must be ready to interact with these consumers on their own terms. Xinaris uses the example of DealerTrack’s price-to-market functionality that allows participating dealers to reflect actual transaction values in their own online advertising, thus providing the consumer with a truly relevant experience.
Neil extends this line of thinking with his belief that the consumer experience will be the key driver in how dealers evolve in their use of media and advertising. He credits Kijiji’s consumer-centric approach to the growth in this area and thinks that the mobile platform provides the next great opportunity for dealers to refine how they interact with customers. He notes that there are mobile tools already in the market handling inventory management for dealers and providing consumers with access to available used vehicles and pricing.
Connor sees the dealers and their service providers continuing to work diligently to help data move more seamlessly between platforms and providers so that ultimately everyone benefits. He points south of the border and notes that both dealers and consumers have more tools available to them and Connor expects to see Canadian industry participants follow suit. He says he can even see a future state in which a dealer’s digital media and online presence combine to create a complete end-to-end vehicle sale transaction with the retail consumer. This is an intriguing thought, and one that may someday be the subject of an article all by itself.
