Tesco Cars is able to source 2,000 cars a week and can offer used car prices that are 9% cheaper on average than franchised dealers according to a report into its first six months of operation.
The figure of 2,000 cars a week is actually below Tesco Cars’ original estimation that it would be able to source 3,000 cars a week when it launched in April this year. The business intends to eventually increase the amount of cars it can source a week to 5,000.
Research company Bryan Consulting based its report on analysis of the Tesco Cars website over a seven day period at the start of October 2011.
It shows that Tesco Cars, essentially a rebranded Carsite which launched in 2006, is achieving the equivalent stock turn of at least once per week.
Report author Andrew Bryan said: “The stock turn provides a powerful incentive to customers to make a purchase rather than delay the decision in the knowledge that the car they like will not be there in a week’s time.
“Although it is not possible to say how many of the cars removed from the website are sales and how many are being removed to traditional remarketing channels due to lack of interest.”
Bryan believes the Tesco Cars model will succeed where Virgin Cars and Autoquake have failed due to the brand’s significant consumer appeal and the ability to mobilise 15 million loyalty card scheme members.
He said: “Tesco Cars is on track to be a success and this has implications for franchised dealers and remarketing organisations in the UK.
“The business has considerable scope to grow and may already be having an impact on the ability of dealers to source quality ex-fleet stock under five years old.
“The current 2,000 cars per week suggests they are sourcing the equivalent of at least 10% of the ex-fleet stock aged under five years old sold through UK dealers in 2010. The impact will increase as Tesco gets closer to their goal to source up to 5,000 cars per week and UK remarketing organisations are forced to respond, possibly with direct-to-consumer solutions of their own.”
Critics cite the inability to offer part-exchange and a lack of an appetite to purchase online as justification for minimising the potential of Tesco Cars.
Bryan believes Tesco’s activities combined with the predicted effects of the new Block Exemption Regulations from June 1, 2013 should prompt dealers to review their.
Bryan said: “Dealers should continue to pursue economies of scale to improve profitability; priority should be given to securing sources of used stock; and they should be proactive around developing partnerships with those manufacturers most likely to support their business model.
“Other recommendations include giving a greater emphasis to the dealer’s own branding and loyalty rather than priority to the manufacturers’ brands, particularly for those selling volume and economy marques.”
Tesco Cars managing director Douglas Rotberg would not reveal to AM how many cars it has actually sold but did say it was on track for to hit its five year forecast.
Tesco Cars launched in April 2011 after partnering up with Carsite to sell ex-fleet stock direct to consumers.