MAX Systems: Is the Internet Pressuring Gross Profits?

            



   MAX Systems: Is the Internet Pressuring Gross Profits?       
February 21, 2012 | CHICAGO By Jacob Solotaroff                    
In a pre-NADA convention survey of dealers nationally, more than two thirds indicated that they are concerned about the Internet pressuring their Gross Profits. Are you one of them?
According to the survey, 67 percent of dealers are concerned about the Internet putting pressure on their gross profits.
Many in the industry feel that the explosion of online car listings and research tools — and the strong adoption of them by car consumers — is commoditizing their inventory.
But there are ways to make the Internet work in your favor, and in order to maintain volume and gross profit, dealers have to get with the program.
To succeed in an online-driven world, dealers must differentiate their inventory; not only to drive traffic to their lot, but to prove the value they add and therefore justify the price.
Online listings must not only answer consumers’ most pressing questions, but also prove that claims about a car and dealership are true, with awards, expert reviews and ratings, book data, and dealership accolades.
This builds trust, which in turn has the power to increase profit margin. Despite these ongoing challenges, the future looks bright, and dealers are excited about the year ahead: 89 percent of respondents are optimistic, very optimistic or extremely optimistic about the impending performance of their dealership in 2012.
To see this column and others from the "Get Relevant or Die" blog from MAX Systems, visit here.


Printer-friendly version Comments Submitted by Anonymous (not verified) on February 22, 2012.
The Internet has essentially made consumers feel that they actually know what vehicle values are in the used market. It gives them information and a false sense of transparency. They are not looking at hundreds of vehicles per week, seeing the decrease in quality supply, spending 300% more in recon costs to maintain a quality used inventory in order to statnd behind that inventory for the maintenance of a 23 year reputation for honesty, quality and integrity. In my experience, some consumers are only beginning to realize that there is a shortage of low mile desirable units to chose from, particularly among small independent dealers servicing the middle class. Most consumers, not believe that they have valid knowledge about the value of the kind of vehicle that I sell. 23 years of repeat customers still trust us bu outsiders, now coming from greater distances, haven't seen the reviews or our website. They go directly to the third party sites like AutoTrader, Cars.com and Craig's list and then pick up the phone or come in and often tell us the car is over priced because they got their values from Kelly Blue Book rather than the NADA guide or they have no clue about what the wholesale market is doing. It's amazing how many people walk up to a frontline ready, 100% green light unit that's valued at $10,000, balk at the price and then say they were looking to spend three thousand. They then assume we have thoussands of dollars in the margin to negotiate, when in fact we have perhaps a few hundred if we take the free service contract off. Your article is spot on correct. We must adapt but the small independent is spending more time than ever trying to find and put out a unit that he is proud to put his name on plus, he's spendiing more time than ever trying secure financing for the credit challenged consumers, who are rapidly becoming the majority rather than the minority they once were. Two years ago, a dayspent shopping for inventory could yield 8-10 of our kind of inventory. It now takes four days to do the same thing and we have to go further to get them. The problem is that that the consumer thinks that they know more than the dealer. Not knowing the truth about the market and having a lack of experience in the market, while being armed with too much information that they cannot possible assimilate accurately, is making an already difficult business even harder. Those with deep enough pockets will survive but the future of the industry in my estimation, is one where the franchise dealer will control the consumer's future. They will be the used car dealer, with access to the best trades. The rest will be Buy-here-pay-here dealers to service the credit challenged population. I read that there are about 22,000 franchise dealers nationwide and 33,000 buy-here-pay-here dealers recently. I the end.....the consumer will have plenty of tools but fewer options. We are trying to adapt in all the ways you mention and the reasons you mention in other articles regarding our challenges are correct but yet there is so much more to adapt toward. Thanks, former senate aide, global circumnavigator, legal analyst, journalist, MPA turned independent car dealer.
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Mazda Partners With Latest Dr. Seuss Film

While some automakers kicked off advertising campaigns employing the help of comedians turned TV stars, 1980s rock legends and a cinematic icon known for his cowboy-like grittiness, Mazda has taken a different route.

It is turning to Dr. Seuss.

Mazda North American Operations has struck a deal with “Dr. Seuss’ The Lorax," which is the film adaption from Universal Pictures and Illumination Entertainment of Seuss’ famous book.

The automaker rolled out a co-branded spot Friday featuring the 2013 Mazda CX-5 that highlights the SKYACTIV TECHNOLOGY designed to boost fuel economy while maintaining performance. There is a 30- and 45-second version of the commercial.

In the ad, the small crossover explores the film’s “Truffula Valley” and encounters some of the film’s animals, including The Lorax himself.

As part of the partnership, on Monday, Mazda is donating $25 to the National Education Association for every test drive taken (up to $1 million) during a six-week span that began Monday. This will benefit NEA’s Read Across America Program.

Explaining more, NEA will tour the country during the “Read Across America Tour – Driven by Mazda” talking to students about the book. Mazda is providing SKYACTIV-equipped CX-5 and Mazda3 units that feature the program’s graphics.

“We’re proud to be working with so many talented individuals to bring to life this wonderful partnership with Universal Pictures and Illumination Entertainment's 'Dr. Seuss’ The Lorax' movie," said Don Romano, chief marketing officer at MNAO.

“We take a strategic approach when it comes to partnering with other companies and with the launch of our all-new, fuel-efficient, performance driven SKYACTIV TECHNOLOGY, this seemed to be a natural fit. The collaboration and integration that went into creating these custom-animated spots featuring the Mazda CX-5 with SKYACTIV TECHNOLOGY driving through 'Truffula Valley' is unprecedented,” he continued.

Illumination Entertainment founder and chief executive officer Chris Meledandri added: “The Lorax character's view of the environment fits in exactly with Mazda and SKYACTIV TECHNOLOGY, so the two were a perfect match for a commercial. By staying true to who the Lorax and other 'Truffula Valley' animals are we were able to create a fun and engaging spot.”

And when the film launches on March 2, theaters carrying PG movies will run the 30-second ad.

Additionally, there will be digital elements and social-media applications getting the word out about the film partnership, as well as the Read Across America Program.

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Manheim to Purchase Dealer Services Corp.

Auto Remarketing | Manheim to Purchase Dealer Services Corp.

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January 27, 2012 | ATLANTA By Auto Remarketing Staff Sandy Schwartz, Manheim

On Thursday afternoon, Manheim revealed it is purchasing Dealer Services Corp. of Indiana in an effort to “reinforce its commitment to provide inventory financing to independent dealers.”

The deal is designed to complement the lending Manheim already offers via its financial services arm — Manheim Financial Services.

“Manheim is always looking for ways to enhance its service offering to customers,” explained Sandy Schwartz, Manheim president. “The purchase of DSC presents a great opportunity for us to broaden our lending scope and customer base. In addition, we gain access to state-of-the-art technology and digital tools that will enhance our customers’ experience and improve the company’s efficiencies and opportunities for lending.

“We also gain a group of employees at DSC that have a strong culture of customer focus and service, adding to the high level of personalized service our MAFS employees deliver,” he continued.

Also chiming in was Brian Geitner, chief executive officer of DSC, “Our mission of empowering our customers with strategic products and services is only more enhanced by joining the Manheim group of companies. It’s easy to see how MAFS and DSC’s service platforms will complement each other and broaden Manheim’s ‘service reach’ across the country.

“We are proud to add the DSC brand to Manheim’s strong lineup of products, services and companies,” he continued.

Management explained that adding the DSC line to MAFS’ existing products will give dealers access to a broader offering of products and additional staff to help with their needs.

Moreover, technology will be garnered by Manheim as a part of this deal, making it easier for customers to get information via smartphones and desktops regarding their company lines of credit, officials said.

Barclays Capital acted as the financial adviser to Manheim, while William Blair & Co. acted as the financial adviser to DSC.

Pending regulatory approval, the transaction is slated to close within the first quarter.

Editor's Note: Stay tuned to Auto Remarketing for more insights into how this deal will impact dealers and the market.

Printer-friendly version Comments Submitted by rob (not verified) on January 27, 2012.

Manheim buys DSC

reply Submitted by Anonymous (not verified) on January 27, 2012.

If you are an independent dealer and are looking for Capital, go to www.carfinancial.com and let the professionals at CAR Financial help you work out a plan. They have both wholesale and retail options, from floorplans to BULK purchases and streams of payments to point of sale financing. WWW.CARFINANCIAL.COM

reply Submitted by Anonymous (not verified) on January 27, 2012.

What this means is that the independent used car dealers have ONE LESS floor plan company to go to. From the already limited number of available options that exist today, there will be one less choice for them when this deal closes which consequently may impact some independent used car dealers to the point of shutting their doors.

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Cars.com Cares Gives $100,000 Donation to SADD

Auto Remarketing | Cars.com Cares Gives $100,000 Donation to SADD

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February 21, 2012 | CHICAGO By Auto Remarketing Staff Students from Hingham, Algonquin Regional, Carver Middle and Marlborough High Schools in Massachusetts accept a $100,000 donation from Cars.com Cares on behalf of Students Against Destructive Decisions.

This week, Cars.com utilized its corporate giving initiative and leveraged voting through its social media platforms to award a $100,000 donation to Students Against Destructive Decisions (SADD).

Cars.com president Mitch Golub highlighted why SADD received these funds and also shared more background about Cars.com Cares.

“We launched Cars.com Cares this year to help fuel organizations that share our mission of building confidence,” Golub explained.

“SADD builds confidence in kids and young adults through the promotion of positive lifestyle choices. I’m thrilled they are receiving our $100,000 donation to continue their great work,” he continued.

Golub went on to mention voting for Cars.com Cares began on the site’s Facebook page on Jan. 26 and continued through Feb. 13. During that time, fans could vote for one of seven causes in the running for the site's grand donation.

Other participating causes included Adopt-A-Classroom, Alliance For a Healthier Generation, Cameras for Kids Foundation, Reading Is Fundamental, Scholarship America and VH1 Save The Music Foundation.

Cars.com pointed out that it also got Super Bowl viewers and Facebook fans involved in the program.

Every time someone tagged the site's Super Bowl ad using Shazam or shared their vote on Facebook, Cars.com added a $1 donation to the cause with the most votes, up to $100,000.

Officials indicated SADD brought in the largest number of votes from its national network to receive the full donation.

The site added each participating cause also received a donation from Cars.com Cares.

“We cannot thank Cars.com enough for including us in the Cars.com Cares program,” stated SADD executive director Penny Wells.

“This donation will help fund many of our prevention education programs in schools and communities across the country,” Wells emphasized. “SADD gives young people the confidence to stand up for their beliefs and the tools they need to help other teens make choices that are healthy and positive.”

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CFPB Proposes Rule to Supervise Larger Participants in Consumer Debt Collection and More

The Consumer Financial Protection Bureau recently announced a proposed rule to include debt collectors and consumer reporting agencies under its nonbank supervision program — marking the first time these consumer financial market participants are subject to federal supervision.

The Dodd-Frank Wall Street Reform and Consumer Protection Act, which created the CFPB, authorizes the CFPB to supervise nonbanks in the specific markets of residential mortgage, payday lending and private education lending.

In addition, for other nonbank markets for consumer financial products or services, officials noted the CFPB has the authority to supervise “larger participants.”

As directed by Dodd-Frank, the Bureau must define such “larger participants” by rule, and an initial such rule must be issued by July 21.

Last summer, the CFPB sought public comment about possible markets to include in the initial rule and available data sources the Bureau could use to define larger participants in nonbank markets.

“Debt collectors and consumer reporting agencies touch millions of American consumers,” stressed bureau officials, who estimated about 30 million Americans have debt under collection with the average amount being $1,400.

CFPB rattled off the three main kinds of debt collection firms that dominate the market:

—Firms that collect debt owned by another company in return for a fee.
—Firms that buy debt and collect the proceeds for themselves.
—Debt collection attorneys and law firms that collect through litigation.

The bureau also pointed out a single company may collect through any or all of these activities.

Under the proposed rule, officials explained debt collectors with more than $10 million in annual receipts from debt collection activities would be subject to supervision.

Based on available data, the CFPB estimated that the proposed rule would cover approximately 175 debt collection firms — or 4 percent of debt collection firms — and that these firms account for 63 percent of annual receipts from the debt collection market.

“The consumer reporting market plays a critical role in the consumer financial services marketplace and in consumers’ financial lives,” officials emphasized.

“It includes the largest credit bureaus selling comprehensive consumer reports, consumer report resellers, and specialty consumer reporting agencies,” they added.

According to the Consumer Data Industry Association, each year there are 36 billion updates to consumer files, and 3 billion reports are issued. The three largest consumer reporting agencies alone maintain information on 200 million American consumers.

CFPB reiterated that lenders use consumer reports, which are commonly called credit reports, when evaluating applications for credit cards, home mortgage loans, automobile loans and other types of credit. Specialty consumer reporting agencies collect and provide information used to make eligibility decisions for a variety of products, such as checking accounts.

Under the proposed rule, the Bureau explained consumer reporting agencies with more than $7 million in annual receipts from consumer reporting activities would be subject to supervision. This would include approximately 7 percent of consumer reporting agencies based on available data.

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Beggs Explains Why Average Units Are Triggering More Adjustments Than Clean Models

Instead of A Tale of Two Cities, Ricky Beggs and the Black Book team spotted “a tale of two markets,” when analyzing the current wholesale market, especially when it comes to the trends for average and clean vehicles.

In his most recent edition of “Beggs on the Used Car Market,” the Black Book managing editor acknowledged that when he gathered market activity and results for the last week it “was almost like two different markets.

“Many times when we say this, we are referencing the different trending between the cars and trucks or between small cars and big trucks,” Beggs explained. “But this past week the differences were noticed between the clean condition vehicles and the average condition units.”

Black Book discovered there were more average condition vehicles adjusted than clean within its daily adjustments. Specifically, editors modified 1,821 average units per day, compared to 1,454 clean units.

Editors also determined average condition unit adjustments resulted in more increases than clean models to the tune of 52 percent to 41 percent, respectively.

Furthermore, Black Book indicated the overall price change for clean condition vehicles was a decline of $31, while average models slipped by just $17.

“I see this trending where the extra clean car values have been so strong so an upward change was not necessary,” Beggs surmised.

“And along with the push of tax season buyers having to get additional inventory to meet the market demand the top of the line car was also in demand,” he added.

Overall, Black Book ended up with five of the 24 total vehicle segments increasing in price for the week. Another change in the trending patterns was with more car segments increasing than trucks.

Editors found entry level cars increased by $28, while compact cars increased by $7. Entry midsize cars climbed by $4.

They also mentioned trucks were positively led by midsize pickup trucks rising most at $39, with compact SUVs posting a solid $22 increase.

Changing gears, Beggs recapped how much he and other members of the Black Book team have been on the road recently.

“Over the past couple of weeks we have been around new and used car dealers at the NADA Convention and Expo in Las Vegas, and then a large group of motorcycle and powersports dealers at the Dealer Expo in Indianapolis,” Beggs shared.

“From within both industries it is very obvious about the enthusiasm toward the state of the market and how the dealers see the opportunities that are in front of them heading into the heart of 2012,” he continued.

“The dealers at both conventions were looking for the top tools to help them grow their business,” he added.

Beggs highlighted Black Book’s new Android app aimed to complement the previously released iPhone app that can provide most current and accurate motorcycle values.

“There were also many longtime auto market dealers at the Dealer Expo who were glad to now have a solid motorcycle app,” he interjected.

“Even though Scott Yarbrough and I were in Indy, the other Black Book editors were still covering the market for cars and the medium and heavy-duty trucks, as well as getting a close look at a couple of majorly updated 2013 new models that will soon be released for consumer purchase,” Beggs went on to say.

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CNW: Leap Year Bumps Up February Used Sales

It appears that the used-car market this month is getting a nice bump from 2012 being a leap year. Otherwise, CNW Research suggested February’s used sales would have been rather static this month.

Specifically, CNW is forecasting 1.95 million used sales for the month, an 8.1-percent hike from February 2011 on an unadjusted basis.

“Adjusted, however, sales would barely break even with last year,” noted CNW president Art Spinella.

Delving into more specifics, CNW believes franchised dealers will move 650,000 used units this month for a 5-percent year-over-year gain, while independents are projected to dip 4.2 percent with 640,000 used sales. The firm is predicting a 27.8-percent spike in private-party sales, which are forecasted at 658,000 units.

Breaking it down by segment, January showed larger segments grabbing more attention from consumers, CNW said. For instance, the market shares for small pickups (10.84 percent) and full-size pickups (13.06 percent) were either at or close behind the highest levels seen in two years.

Conversely, small car market share dropped dramatically.

But don’t count on these trends to last, Spinella said.

“Even under threat of higher fuel bills, consumers are still gravitating toward larger vehicles. Small cars, for example, took about 16 percent of the used market in January, down two full points from year ago and seven points lower than in September of last year,” he noted. “Expect that to change as gas prices move upward.”

He went on to point out: “This is a peculiar time of year for used-car sales, shifting to the warmer climates, which in turn, generates more larger-vehicle sales. The true test will be in April.”

Pent-Up Demand for Used Vehicles

While the leap year has brought seemingly stronger February sales, the number of buyers waiting in the wings to make a purchase has gone down.

CNW is anticipating pent-up demand in the used-car market will total approximately 83,500 shoppers. This compares to 94,000 used-car intenders in January and 92,000 in February 2011.

Put another way, pent-up demand this month is projected to be only 90.8 percent of its level a year ago. Meanwhile, in January, it was up 6.2 percent year-over-year.

“The average delay in making an acquisition among those who have postponed a purchase is around 2.4 months, statistically no different than it was in January but down from February 2011’s three months,” Spinella noted. The average delay in February 2011 was 3.01 months.

“And while it’s too early to make much of the data, the share of postponers who still plan to buy a used car has dipped to 94.9 percent, compared to 95.17 percent in January,” he added. “Much of that can be weather rather than economics at play, although the latter typically drives such intentions.”

Used Pricing

When it comes to the prices that used cars are fetching, conditions are much better than expected, Spinella noted.

For franchised dealers, February transactions prices are up 4.28 percent year-over-year at $11,090, which marks a 2.17-percent hike from January. Asking prices are up 3.21 percent year-over-year at $11,652. This represents at 1.19 percent sequential hike.

Independents have seen transaction prices average $9,784, which is up 10.93 percent year-over-year and 0.72 percent month-over-month.

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JMN Logistics Adds International Shipping Service

Auto Remarketing | JMN Logistics Adds International Shipping Service

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February 21, 2012 | ST. LOUIS By Auto Remarketing Staff Cindy Darnell, JMN Logistics

Because international vehicle shipping has become quite popular during the past decade, JMN Logistics expanded its transportation services on Monday to include international shipping.

When chief operating officer Cindy Darnell learned the company could make international shipping easier and less complicated for customers, she insisted that it became a top priority to gain partnership with quality affiliates all across the country and around the world.   
 
JMN owner Jon Nuckolls contends the company now offers fares reasonable enough to justify bringing a vehicle overseas.  

“People who have strong attachments to their vehicles can take comfort in knowing that if they need to move their vehicles to another country they can do so reasonably,” Nuckolls declared.

Darnell highlighted, "JMN ships to all 50 states so it only seemed natural that the next step would be to grow an international department as well.

“We will uphold the same standard for our international moves that we do for our domestic ones, which means all equipment and drivers are filtered through the most stringent standards in the industry. All our auto haulers are fully licensed and insured as required by FMCSA,” she continued.

Denise Jarvis, who is heading up JMN’s international shipping department, added, “JMN takes dedicated attitude to assigning drivers that are dependable, consistent and prompt. We do our best to price realistically, in an constantly changing market, to provide the most efficient service.”

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