As the market gets increasingly competitive, so does the pressure for used car retailers to get internal processes to a state of maximum efficiency and profitability, starting with arguably the most important step of the operation: buying stock.
In recent years, it has become apparent to us that the whole industry would benefit from a more scientific, informed and data-driven approach to car buying instead of being left to rely on individual knowledge and experience.
In other words, we realised that, in order to survive and thrive in this competitive market, it was vital to completely remove emotion and subjectivity from car buying.
Imperial Cars took the first step towards this direction in 2015 by developing the
proprietary tool Buyer Assist, with the goal to provide reliable, up-to-the-minute live data to further support our experienced senior buyers team.
We wanted our buyers to have a tool where they could systematically go through auction catalogues and live stock feeds up to 7 days before auctions take place, review specs and damage reports. The tool would then work back from retail price to buying price, taking into consideration a series of factors such as reports by the auction site itself, internal costs and target chassis profit.
As for virtually any dealer in the country, it was extremely important for us to create more visibility and accountability throughout the buying process, especially considering we’re now buying in the region of 1,200-1,500 cars per month and hold £23 million worth of stock at any one time - numbers destined to rapidly increase as new dealerships open in 2018.
Visibility is achieved when every piece of data can be accessed and reviewed by chief buyers at the exact moment the cars are going through auction. At any point senior buyers should be able to remove cars from the catalogue if they don’t deem them as a good fit for the stock profile; add more vehicles; and increase or decrease bids.
Accountability kicks in when buyers are fully responsible for the stock they buy up to the moment it’s sold, and their remuneration is based on whether they can maintain a consistent level of stock, turn it within a set number of days and realise a certain amount of chassis profit.
We’re not foreseeing any significant challenges or supply downturn in the used car sector this year - it’s simply becoming increasingly competitive, as more and more players are fighting to secure the same stock.
It’s now more important than ever to stay ahead of the game, and this means buying as much, as quick and as efficiently as possible, while retaining good margins. In our opinion, as opposed to just a few years back, staying ahead of the game in the used car sector means building an operation that allows for the majority of buying to happen at online auctions. Ideally, dealers should have access to as many auctions (and auction data) as possible, not only to choose from a considerably wider pool of cars, but also to avoid relying on physically sending buyers to auctions to correctly assess vehicles.
Emotion-free, data-driven processes to improve the ability to both buy the right stock and increase overall profitability are, in summary, the future of car buying.
The question is, how quickly is your operation evolving in this direction?
Author: Neil Smith, operations director, Imperial Cars