Why does it make a difference to sell used cars? Prof. Dr. Susanne Royer Uwe Stratmann Questions to address today ) Used car retailing in Europe – Sizes, structures and evolution ) Challenges for the franchised used car channel ) New approaches in used car retailing Different lifecycles of a car 100 - Various players take part at competition New Cars Nearly New Ex Demo Short cycle 50 - Used Cars 25 - Price Index 0 1 2 3 4 5 6 Age of car 1 Stagnant EU used car markets 9 8 7 Millions 6 5 4 3 2 1 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 France Germany Italy Spain UK Poland Source: National sources EU is still a heterogeneous market New and used cars and used to new ratios 2007 2.3 12 3.2 2.0 10 2.7 Millions 8 1.3 6 2.3 4 1.1 8.9 3.6 1.4 2 0 UK D F I AUS ES New PL NL BE Used Source: National sources (2006 Belgium) Used car market design Available used cars on the market – 9.4m* No trade-on 2.2m Private VMs 3.0m Fleet 0.6m 0.2m IMTs Franchised 2.5m 0.9m Export 0.8m Import 0.2m Private 3.0m Franchised 2.4m Direct Fleet+VM 0.1m IMTs 1.3m End-customer market – 6.7m Source: ICDP Germany *Data for 2006 2 Private versus dealer channel Private market is strong competitor The lemon problem! How to realize the added value delivered by dealer service in the market? P2P is setting lower price standards. % of used car registrations 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 56% 59% 2001 2007 80% 65% 53% 58% 43% 2001 2007 2001 2007 41% 41% 2001 2006 Private 50% 2006 2006 Professional Source: National sources Proportion of Used Car Sales Increasing specialisation by focus on own franchises 100% 90% 80% 70% And in focus creasing used on young c a rs 60% 50% 40% 30% 20% 10% 0% 1998 2003 2007 Source: ICDP (UK 2007 ICDP estimate) Stock profile in dealerships Customers looking for a real used car are not well served by franchised networks 100% 80% 60% 40% 20% 0% Brand A Brand Supermarket B Brand Crange depends Brand D 0-12 months 37-48 months 13-24 months 49-60 months Car on its focus Supermarket 25-36 months >60 months Source: Eurotaxglasses/Autotrader, March 2008 3 The imbalance in supply 30% 25% % 20% 15% 10% 5% 0% 2000 2001 2002 2003 2004 2005 2006 2007 Year of manufacturer Supply Demand Data: Cars advertised and detail page viewings on Autotrader, March 2008 Source: EurotaxGlasses Little improvement in stock turn Average of physical and financial Dealers' used car stock turn index 9 8 7 7,9 6,7 5,7 4,9 6 5 4 3 2 1 0 1998 2003 France 2007 Germany Italy UK Source: ICDP (UK 2007 ICDP estimate) Dealer performance and profit Used car profits remain low except in the UK 23 UK France 9 Italy 8 Netherlands 7 Spain 7 Germany 6 0% 38 UK is 27 benc h deale mark 17 in r perfo 51 rman ce 34 30 6 18 24 3 69 24 Used 5 3 20 32 24 20% 15 33 39 40% New 26 60% Service 5 80% Parts 100% Other Source: ICDP and national sources (Spain “other” includes service and parts) 4 The quality approach: Manufacturer used car programmes Source: ICDP UC programme analysis Dealer activity in used cars Their main entrepreneurial resort? Market T/O €m Used sales New sales Used car activities AVAG Holding Intern. 1.070 25.000 31.500 UC brand ‘G6’ Auto Dello Germany 400 11.500 13.800 UC brand ‘Auto-Mega’ Neubauer France 510 9.300 13.600 Dedicated site in Paris area Fassina Italy 345 12.500 13.500 Sophisticated UC site Spazio Italy 300 11.700 9.800 Sophisticated UC site Source: ICDP dealer group surveys Fassina with ‘Car Village’ 5 Spazio with ‘Spazio Gallery’ Scale retail specialists - car supermarkets ) Large choice and outlets – Price, choice, numbers of cars ) Simple retail process NSC, UK Benefits of scale – Fast stock turn – Lower profits per car – Based on volume ) Service provider, UK “Serious competition to dealer network” – Low price, basic service ) “Only real growth and change in the market” “Our focus groups told us that customers don’t like to buy the car in that way, and often the experience wasn’t pleasant. But they beat us on price, and good choice of cars, sheer numbers of cars” Price competition with quality channels Specialist NSC, UK Largest super retailer - CarMax ) ) ) ) 89 locations in Feb 2008 57 ‘production’: < 10 ha 32 ‘nonproduction’: < 4 ha 45 markets in 25 states ) Used car focus ) No haggle pricing ) Wide selection ) Quality vehicles – 6 new car operations – Separate trade-in valuation – 25000 national stock – Multi brand, <6 years old, <60,000 miles ) Customer friendly sales process – 95% recommendation State with CarMax location 6 KPIs for car supermarkets Operating margin % 9% 5 Outlets 30,000 units 1463 employees 10 Outlets 32,000 units 1434 employees 92 Outlets 392,000 units 15,637 employees 10 9 8% 8 7% 7 6% 6 5% 5 4% 4 3% 3 2% 2 1% 1 0% Stock turn 10% 0 2005 2006 2007 Motorpoint 2005 2006 2007 2005 CarCraft 2006 2007 CarMax Source: Company accounts and ICDP Other emerging players E.g. Auctions Registered dealers Auktion & Markt AutoAuktionenEuropa.de Autorola.de BCA eBay-Motors Euro Car Auction Network Cars sold 2006 Cars on offer, i.e.: Costs for dealers Online Open for private cust. 65,000 Leasing, Trade-In, insolvency, VM registrations 2%, min 170€ (Buyer), 120€ (Seller) Yes 900 80% insolvency, 10% leasing, 10% accidents 150€-250€ Yes To sell 10,000 UC (all ages), accidents 100€ (Sell) 160€250€ (Buy) Yes To sell 41,000 106,000 Young UC, leasing, fleet, rental, etc. 2%, min 200€ Yes No registr. needed 175,200 All sorts 50€ (Seller only) Yes 13,500 Leasing, overproduction, insolvency 200€ (Buyer only) Yes 20,000 2,040 17,000 4,000 To buy/sell Source: ICDP Germany, Brachat 2007 Used cars: what role, what future? ) Spectrum of offers and channels for customers – Across a range of ages and values of cars – More reliable, lower real cost, lower risk – Multiple information sources ) Franchises struggle to keep up with market – Focused players achieve high KPIs and so RoI – Basic practices still not uniformly established – Standards approach is high cost, less valued ) But used cars still critical to market – Loyalty, conquest, after-sales … 7
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