In a recent panel discussion with Todd Somerville from Cox Automotive, and DrivingSales.com members Guy Campbell from Marketcheck, and Eric Miltsch from Dealer Teamwork, we talked at length about how increased competition is driving a need for better data and a focused marketing strategy.

The context of the conversation was around the used car business.

While discussing predictions over CPO sales for 2020, Somerville brought up that customers can shop around and compare used cars against new with precision and while they’re on the lot. The result is increased competition among dealers and finance companies to win the consumer’s attention and sale.

During this research process, consumers are engaging with dealers directly on Google My Business profiles. But if your GMB profile for the dealership isn't verified and optimized effectively, your dealership is likely missing out on opportunities, which of course benefits your competitors who are properly verified and optimized.

Eric Miltsch from Dealer Teamwork was quick to point out the benefit of making the most of Google My Business (GMB).

“GMB is more than just a listing through the Google search engine,” explains Miltsch. “It’s quickly becoming the way many people find and evaluate local businesses.”

The impact of GMB can be seen in 10 leading factors affecting SEO search results, a handy list that Eric and his team put together coming into the webcast.

Top 10 Local SEO Ranking Factors

Verified and Optimized Google My Business profile

Google My Business categories

Google My Business photos

Bing Places

Online directories (YP.com)

Review site listings (Yelp)

Velocity of positive reviews

Reviews with keywords & locations

Responses to negative reviews

Facebook business page

With three of the ten factors directly impacted by the GMB platform, it’s easy to see why it’s become increasingly important for businesses. Eric shared the overall strategy for improving the GMB related factors.

1. Verified and Optimized Google My Business Profile - Verifying the listing with GMB allows dealers to create the content and control the data displayed. Without verification, Google scrapes whatever information it can.
2. Google My Business Categories - When data scraping is allowed to autofill categories, dealers can be mixed up or mis-categorized, making it harder for you to come up in a general search.
3. Google My Business Photos - Fuzzy screen grabs from Google Maps or stock photos won’t do your dealership any favors. “Any profile with more than 100 gets exponentially more engagement and traction within the search results. Bottom line - more photos are better.”

An online presence has always been important and now the GMB platform is making a diverse presence just as important.

As Eric stated in the discussion, “About 61-62% of all car searches are starting on the phone. You're probably winding up with at least 40-45% of all dealership traffic in some way or shape interacting with that Google My Business profile. It’s the new doorway to the website.”

Are dealerships working on an outdated model of success when it comes to profit with used cars? What, if anything, is squeezing profitability from dealers with used cars? With so much talk about margin compression, you’d think the future for auto retailers would be bleak. But is it?

That depends not so much on who you ask, but what you ask.

Margins from new car sales have all but disappeared. This has forced franchise dealers to rely on bonuses and incentives from the OEMs. It has also caused savvy dealers to focus more intently on used car sales, and fixed ops.

In a recent conversation with DrivingSales Member Chip Dorman from Torque Analytics, Dorman poses some tough questions to auto makers:

“Why would a dealer want to pursue razor thin incentives with new cars when the used market is more lucrative? If dealers are going to be able to fully engage with customers and promote new cars in the way OEMs want, then OEMs need to make products people want to buy, and make them profitable for dealers to sell.”

Make [products] profitable for dealers to sell. That is the KEY CHALLENGE.

Today's buyer is savvy. He/She knows there’s more value – and more wiggle room – in buying a used vehicle. Dealerships know this too, and try to work both ends, often pushing the more lucrative sales of used cars while treading water and doing the bare minimum new car business to keep the OEM happy.

It’s a tough line to walk and it’s one that doesn’t always make sense. It leaves dealers wondering if they’ll ever get the help they actually need from OEMs.

Chip keeps it simple, stating…

“OEMs need to show some discipline and understand that without the dealers, they’re toast.”

3 Ways to Increase Profitability in Used Cars

Looking ahead to 2019, I asked Chip what are the top three things he thinks dealers should be thinking about this year. Specifically as it pertains to profitability in used cars. He said…

1. Buy right: Used Vehicle Acquisition
2. Time-to-Line – Under 72 Hours
3. Dynamic Inventory Ads on Facebook and Google

Essentially, it comes down to working smarter, not harder, and utilizing the tools and resources that exist. Dealerships willing to change the way they approach profit in used cars at both the Big Picture and Per Unit levels will find ways to cut losses and improve inventory.

Related Link...

• PODCAST: What is squeezing profits from auto retailers?
•  

Margin compression is more than a buzzword. It's a reality. Profits in new cars are effectively gone for good. And they have been for some time. Profits with used cars are compressing, as well.

But beyond the phrase margin compression, what can dealers do about it? You can’t make up for the difference simply by selling more cars. Dealers must optimize their process, and fine tune their strategy.

In this video, I talk with three progressive dealers who are tackling margin compression through where and how they source used vehicles, their disposition strategy, and by focusing on faster turn.

The video stems from a more in depth conversation, the complete version which you can find on my blog and podcast. 

Let's talk about it...

What are some ways you are combatting margin compression at your dealership?

If you’ve already gotten used to ordering everything from books to slippers on Am azon, then their next move might not surprise you that much. Recently the mega e-retailer announced its plans to begin selling cars online. While the news has been a surprise to many, the fact is, selling cars isn’t new to Amazon – and they aren’t the only ones looking into their online options.

Amazon has already been selling some cars to smaller markets in Europe. In Italy, Amazon offers a handful of Fiat models and the company is working to build a new company based in Brussels to expand the European market.

Volvo and other online car sales

In the States, Volvo has already experimented with online sales options. In some markets, Volvo, along with a few other companies, have worked with concierge online sales which allow people to go through the entire buying process online. The only contact they have with any dealership is when they meet to take delivery of the car.

It’s a service that has met with some success. Amazon hopes to build on this success by adding test-driving options that make online buying more attractive to reluctant customers.

Customer research by Amazon

Amazon has already launched a customer research portal designed to provide a foundation for its larger launch down the road. They have also been working with Mercedes-Benz and are reportedly exploring different ways to give online customers test drive options. The company is playing close to the vest with their next release and they have not released many details or a firm timeline.

Whatever happens, the public is already excited to see how Amazon will change the way we buy cars and how traditional dealerships will adjust to remain competitive.

Originally published on autoconversion.net.

While all dealers take in vehicle trades, more savvy dealers these days are proactively seeking vehicles from private sellers. At first look you might find that the average used car manager believes that buying cars from consumers is not worth the hassle, but after diving deeper into why dealers shy away from this more profitable approach to vehicle acquisition, I believe I've come across a less obvious factor - some used car managers love their auctions.

At a recent private dealer summit I attended for owners and operators deeply involved with the used car business of their dealerships, several attendees commented on the reality of how often they discover their wholesale buyers and used car managers being so attached to acquiring vehicles at auctions that they reject the idea of a more profitable approach that doesn’t involve going to the auction.

Many used car managers I speak with are preoccupied with brokering deals and moving metal. They don’t have time to be on a computer for vehicle listings from private sellers. They do however have a day or two dedicated each week for the auction.

Typically this involves leaving the dealership for an early lunch, getting themselves to and from the auction, often with fellow dealer cohorts, and working their way back to the dealership for an hour or so more. When I talk with those that frequent the auctions, their interest level in moving away from them is often low and seldom a priority.

Disrupt Old Practices

Used Car Operations expert Ed French was recently quoted as stating that, “Margin compression in used car operations means dealers must disrupt old practices that result in high vehicle acquisition costs and slow time-to-market speed.”

One way to improve acquisition volume and vehicle quality is to source inventory internally. This means not only sourcing trade-ins from existing customers and service lane customers, but also proactively buying cars from consumers.

Internally sourced units save auction fees and transportation costs, an average gross savings of $600 to $800. These vehicles are typically newer with mileage lower than auction candidates and they don’t need as much reconditioning so they’re frontline ready faster.

Simply put, buying from consumers is more profitable. This isn’t to say dealers shouldn’t use auctions, but if you’re attached to them for the wrong reasons and turning away from alternative ways to stock used vehicles then there’s a good chance you’re unnecessarily eating up your dealer profit.

Making a profit in the used car business is increasingly more challenging. With consumers becoming smarter and having access to more information, plus more options, it seems the only way for dealers to remain competitive and profitable is to change their mindset.

Used car managers understand that the faster you turn your inventory, the more profit there is to be made. When you design your profit strategy around this fact, you stop looking at profit on a per-vehicle basis, and instead realize the bigger picture.

Finding the vehicles you want and achieving a faster turn with a higher gross begins with acquisition, not liquidation. The more quickly you find the vehicles you know you can sell retail, and of course the less you pay for them is the first step towards greater profit. I think it goes without saying that dealer auctions don’t help achieve your profitable acquisition goals.

When you're trying to keep your pre-owned lot stocked with high-quality, in-demand vehicles, dealing with auctions can be a costly and time-consuming process. For one, you have to wade through a range of vehicles that don't meet your needs before finding the right model, in the right year, with the right options. You also risk having your price bid up by competing dealers.

Private party listings are today’s best alternatives to stocking your lot and reducing your expenses. As many dealers already agree, buying used cars from consumers is more profitable compared with auctions and even vehicle trades. By going straight to the source, you acquire vehicles directly from private sellers in your target market, and with lower acquisition costs.

Many dealers balk at the idea of negotiating an acquisition from a consumer not committed to buying from them. They find it difficult and often a waste of time. But this is an obstacle that can and needs to be overcome with proper training and coaching, because your profit lies on the other side of this hurdle.

There are numerous examples of dealers maximizing profit potential through used cars. Not just independent dealers but franchise dealers too, often creating satellite stores or buy centers that make it easier for consumers to sell their vehicles and more cost-effective for dealers to obtain metal.

By adapting to this mindset, dealers will realize a fundamental shift in their business models that leads to higher profits.

Questions...

What are you doing to acquire the vehicles you need? Do you have a buy center? Do you search for vehicles online listed by private sellers?

Do you evaluate used car profit on a per-unit basis or on your strategy as a whole?

Are you using online or physcial dealer auctions?