Show and Sell

Tweet

Financing. HPR Automotive Superstore has relationships with eight banks in town. That allows it to offer ample choice and flexibility in rates and terms. As a result, Hamlin can arrange financing for 80% of his buyers, a very high penetration rate. The industry average is 65% for franchise dealers and less than 25% for independent used-car dealers.

Reconditioning. HPR Automotive Superstore puts an average of $200 into reconditioning each car it sells. An extensive checklist, pasted in the car window, details the work done by the service department and is signed by the mechanic responsible. If anything on that checklist goes wrong during the 30-day warranty period, the car comes back for repair to the mechanic who did the original work. When HPR Automotive Superstore sells a car, the customer meets the service manager, a custom more typical of new-car dealers.

Maintenance. Emphasizing service has paid off. HPR Automotive Superstore's service department opened in October 1994 and did $2,000 in sales that month. By June 1995 it had ramped up to $20,000 a month, and the company was projecting service sales of $400,000 for the year. Like most franchise dealers, HPR Automotive Superstore offers shuttle service and loaner cars to its service customers.

"The average used-car facility is not much more than a sales lot," Ron Dunkel concludes. "It doesn't have these other profit centers."

Dunkel himself is one of Hamlin's most valuable assets. With 34 years in the business, Dunkel knows most of the car dealers in and around Springfield. He buys about 50% of HPR Automotive Superstore's cars at local auctions and the other half from dealers looking to get rid of trade-ins they fear they can't move. He looks for one-owner cars with fewer than 15,000 miles per year on them. As he is not under a manufacturer's pressure to hit a monthly sales quota on new cars, Dunkel thinks he is less prone to overpay for trade-ins. Also, he can more freely tailor his inventory to changing seasonal demand and public tastes. "I can usually start buying particular cars before they get scarce and expensive," says Dunkel. "I get a jump on the market, and we can afford to hold a vehicle longer than other dealers."

Bill Hamlin figures he has to sweat the details in his business, because the kind of buyer he's after -- the kind who might otherwise be pricing new cars -- cares about the little things. HPR Automotive Superstore has a manager who supervises only detailing work, and two other employees who just wash the cars. The salespeople are neatly turned out in matching polo shirts and dark slacks. While the service department's eight bays are routinely full, the floor remains spotless. There's a playground for shoppers' kids. The cars are parked in precise rows, spaced so that one car's open door can't ding another. Hamlin groups his cars according to size and color, because a compact looks even smaller next to a big truck, and a brown sedan looks dull next to a red one.

By last January Hamlin's detail-sweating was getting him nowhere fast. The business had produced a cumulative loss of $150,000, and he was starting to wonder what he had wrought. "I was thinking to myself, 'Why did I put so much money into this sucker?" But with the new year, business began to pick up as the $200,000 HPR had spent in advertising over the previous six months kicked in. Sales for the first half of 1995 jumped to $4.6 million, with 260 cars sold and $215,000 in service revenues. The business turned a pretax profit of $286,000. By the end of June, HPR Automotive Superstore was averaging more used-car sales each month than at least 10 of the 16 new-car dealers in Springfield, most of whom had been in business for 10 years or more. For all of 1995, Hamlin projects sales of $9.9 million, with 520 cars sold, $400,000 in service revenues, and a pretax profit of $600,000.

Springfield, Hamlin says, is the right kind of market for his concept, because there is just one of each franchise dealer there, and without direct competition the dealers developed a complacency he intends to take advantage of.

But he'd better move fast, because competition is coming. "New-car dealers are now paying more attention to used cars," says Brown of Automotive News, "because on new cars the margins are so thin. The new-car business is growing slower than the economy."

And then there's Circuit City.

The electronics-retailing giant has also gone into the used-car business, through its subsidiary, Carmax, which so far has five locations -- two in Atlanta and one each in Orlando; Charlotte, N.C.; and Richmond, Va. Last year Carmax's Richmond store sold 4,050 cars at an average price of $13,664 to gross $55.3 million, according to the investment research firm Sanford Bernstein & Co. That's 30 times the sales of the average used-car dealer. Carmax turned over its inventory 8.4 times, more than twice the industry average. Furthermore, industry rumor has it that retailers such as Kmart and Sears Roebuck & Co. are now thinking of getting into the business.

 PREV  1 | 2 | 3 | 4 | 5  NEXT 

Read more:

Sign-up for our Sales and Marketing Newsletter

Email Address: