Be prepared – used cars in an omnichannel world

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Steve Young 
Managing Director of ICDP

Used cars should be the cornerstone of any franchised dealer business. In practice though, their performance varies widely within and between markets. It provides the opportunity for dealers to drive significant turnover and profit, independently of the influence of the manufacturers with whom they work and create new customers for their aftersales business. However, the business is changing in several ways and a dealer who is performing well today still needs to take action to prepare for the changed environment that we are now entering.

Traditionally, a dealer sources their used cars from customers with one to sell and tops this source up with vehicles bought from manufacturers or from their captive finance organisation when de-fleeted. Businesses were managed at dealership level and cars would often be traded out if they didn't fit the local need. Both trade-in values and selling prices were set with reference to trade price guides or were based on the wisdom of the dealership's used car manager. Preparation would be done in the dealership workshop, largely at the discretion of the aftersales manager and fitted in alongside other work. The saleable stock would be displayed outside the dealership and sold locally.

"The experience of high performers in the used car business is that stock bought directly from private owners is the most profitable of all sources."

Steve Young, Managing Director of ICDP

The world moves on

Although elements of the above description would still fit some dealers today, the world has moved on as the result of digitalisation and the development of centrally managed dealer groups. The used car buyer now does significant online research, not only to focus their search on make and model but also to identify suitable cars for sale. There are increasing numbers of car-buying services, some set up by dealers, where they can get a range of offers on their existing car in minutes as well as offers of finance and insurance products from the comfort of their home. The vast majority, more than 80%, want to combine these online steps in the buying journey with steps taken at a physical retail outlet. But not all buyers share the same view as to which stages they favour for online and which for face-to-face. Providing that flexibility in a truly seamless way, avoiding the need to repeat steps and/or provide the same data twice and have the next purchase step influenced by what they have already done is definitive omnichannel retailing. That is the area that dealers – both franchised and independent – need to focus on to be competitive in the used car business of tomorrow.

Although omnichannel includes your own used car website and the use of third-party platforms to promote stock more widely, this is only one element of an omnichannel offer. The customer also needs to have the tools that allow them to carry out almost every part of their buying journey online, including continuing from steps that they may have already completed online or in-store. That involves a personalised section of the website where they can save their progress and access it at any time or, indeed, authorise someone else in a contact centre or dealership to access it on their behalf. There are technology providers who offer these types of platforms, so, to some extent, this is a “chequebook solution”, but simply writing the cheque doesn’t mean that your used car performance will immediately improve. One dealer group CEO that we’ve spoken to sees these just as the 'entry ticket'.

Right place, right time

Omnichannel applies as much to the selling process as the buying. If existing used car owners are considering selling their vehicles online, they can no longer simply rely on trade-ins and OEMs de-fleeting their stock. You must be where potential customers are, meaning being active in the online space to identify and buy stock. That can include a car buying' type offer but also searching the used car platforms for cars on offer that meet your stock needs. On a small scale, that is the job for your used car buyer. But at scale, it involves a specialist team using data tools that 'scrape' the data from used car e-commerce sites and flag any that meet pre-determined criteria. An observation made by the CEO of AAA/Driverama, during our research, is that the aim is to get that car back off sale as quickly as possible, potentially within hours of it first being listed. Their experience, and that of other high performers in the used car business, is that stock bought directly from private owners is the most profitable of all sources.

Omnichannel sales also do not relate to purely physical and digital. It must embrace all physical and digital channels. Stock cannot be 'owned' at the dealership level in a group but must be on offer anywhere and, in some cases, may be held centrally or regionally to avoid wasteful logistics costs. There are still challenges in minimising the risk of two customers in two channels focusing on the same car simultaneously, only for one to be disappointed. However, short reservation periods and “more stock like this” prompts help. Used car preparation should not be a fill-in job for aftersales at the expense of the used car department. It should ideally be a disciplined operation that works to a specific standard and cost for each car and should be measured on that performance afterwards. One dealer we spoke to said that their process was 'forensic' in this regard.

Survival of the fittest

Staff also need to be “omnichannel fit."­ A sales executive who is effective face-to-face may not perform as well when working on a remote sale if they are unable to establish a rapport with customers via email or chat. Those responsible for setting buying-in and selling prices need to rely on data rather than their experience but should still know when to intervene, such as with the recent volatility in used car pricing of battery electric vehicles. Reward systems need to be aligned so that there is no incentive for an employee in a dealership or contact centre to steer customers in a specific way simply to boost their earnings. A win for the business should be a win for all involved, regardless of the channel within which they are employed.

Only those dealers who get the tools, stock, data and people operating together smoothly within their own business will be able to offer a seamless buying experience for the customer. If there are barriers internally, they will be encountered as disconnects and frustrations in the customer journey. Consequently, they may instead seek out a retailer who can do a better job.