COMMENTARY: Innovative remarketing strategies for dealers and wholesalers
How can the multi-channel remarketing innovations that commercial remarketers have been migrating towards and that we’ve all been reading about help the dealer and wholesaler community?
While the remarketing industry is one that contains a diverse base of sellers, an increasingly innovative and multi-channel set of remarketing options and an increasingly diverse group of buyers, most of the attention in remarketing is dedicated to commercial and fleet remarketers, not franchised dealers, independent dealers and wholesalers that also remarket millions of cars a year.
With new online wholesaling and consignment-to-retail alternatives growing nationwide, dealers and wholesalers are increasingly getting into the remarketing innovation game and seeing dramatic increases in profits.
Stick to your lot plan and boost your bottom line
A clear lot plan is critical to the success of most independent dealers. From mileage to cost to brand, you know what your typical customer wants — and how to find the vehicles that fit their needs and your bottom line.
But what happens when a curveball car comes your way? This unsuitable vehicle could end up wasting time and pulling down profits. Imagine:
- A small, rural dealership that focuses on sub-$5,000 used cars and trucks has someone trade in a $30,000 Land Rover.
- A luxury lot that specializes in low-mileage BMWs receives a 15-year-old Honda as a trade-in.
- A dealer finds a car at auction that is just too good to pass up, even if the vehicle would stick out like a sore thumb on their lot.
In the old days, each of these dealers would be stuck with vehicles that would sell well on someone else’s retail lot but have nothing to do with their specific lot plans.
They’d probably end up unloading the mismatched vehicle at a physical auction and generating too little money.
Recently, independent dealers and wholesalers have been utilizing the benefits of third-party consignment dealers to attract attention to some of their vehicles that otherwise aren’t or wouldn’t sell well on their own lots.
Dealers know that selling a vehicle at retail brings more proceeds than selling at wholesale — that’s why they’re in business — but previously the only retail option had been their own facilities. Now with the advent of reputable third-party consignment dealers, independent dealers and wholesalers are able to attract the attention of a new, more diverse base of retail buyers.
Example: Small independent lot in Hampton Roads, Va.
A great example of an independent dealer utilizing a consignment model to maximize proceeds is a relatively small, off-strip lot in eastern Virginia that began consigning to retail nearly a year ago.
The dealer specializes in $5,000, nicely reconditioned vehicles intended for cash buyers. The dealer has its own service operations, has developed a terrific knack for buying low-priced, high-quality inventory and has built a solid reputation amongst the buyer base for inexpensive cash cars in the Hampton Roads area.
The dealer, though, finds itself on the receiving end of high-end trade-ins, specialty off-street purchases and auction buy opportunities that are too good to pass up but that don’t fit its lot plan. By consigning to retail, the dealer has been able to focus on its core business while utilizing on-strip, customer friendly dealership facilities to move higher-end inventory that requires financing, warranty protection and the attraction of a wealthier demographic buyer base.
This dealer has sold dozens of vehicles at retail in recent months that may never have moved on its own lot, while pocketing nearly $100,000 in additional proceeds over what those vehicles would have brought at auction.
The beauty of a consignment lot, however, is that it works in both directions. There are high-end dealers that consign lower-priced vehicles that otherwise wouldn’t sell on high-line or higher-end franchised lots. A Mercedes Benz dealership, for example, typically doesn’t get enough off-street traffic to move a $4,500, 15-year old Honda Accord that may have come in on trade.
That Mercedes dealer would have to settle for auction proceeds of $2,000 on its own, but with a consignment dealer, can sell at retail for $4,500, netting $3,500 after fees and pocket an additional $1,500 over wholesale simply by taking it to a consignment dealer instead of a wholesale outlet.
Why it works: Leveraging the consignment model
Consignment dealers don’t choose their inventory, so they need to be prepared to move anything that comes its way.
Consignment dealer sales professionals are trained to and have experience working with buyers looking for $3,000 vehicles and those looking for $75,000 vehicles; buyers paying cash, buyers needing traditional financing, and buyers requiring specialty finance options; buyers who have a vehicle to trade, who are looking for warranties, and who need vehicles shipped to them from all over the country.
Critical to the structure of a consignment dealership is that the sales professionals and the management are compensated the same, no matter how expensive or inexpensive the car. The incentives are equal to sell everything on the lot.
With the retail consignment model for dealers and wholesalers, cars that don’t fit your lot plan and customer base never have to stay on your lot in the first place. Instead of having a few random vehicles that take forever to sell, you can send them to a retailer that always has a varied inventory.
And their business model’s consignment structure means they don’t focus on any one type, style, size or price of vehicle. At any time, they could have everything from an F-150 work truck to a nearly new Mercedes.
So, the vehicle that sticks out on your lot would be just another one of their varied offerings. Independent dealers and wholesalers who use consignment dealerships as part of their remarketing strategy are finding that it saves them time and makes them more money. They don’t have to worry about selling a mismatched car on their lot or hoping for the best outcome at an auction.
Take advantage of new strategies
The consignment model can be so effective that some dealerships have given up their lots altogether in favor of using consignment dealers to retail. Rather than look for a very specific type of car at auctions, they now just look for the best deals. Rather than dealing with the regulatory headache, consumer complaints, mandatory retail hours, and the endless paperwork consistent with operating a retail operation, these dealers outsource all the headache to a consignment dealer and focus on what they do best: finding great deals on used cars in the wholesale marketplace, buying low and selling high.
Of course, taking advantage of the consignment model doesn’t mean you have to upend your entire business strategy. Instead, these retail channels can provide a way to unload vehicles that don’t fit your lot plan — while increasing the earning potential those mismatched cars provide.