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