The landscape of used car retailing has changed dramatically in the last few years, with major, new, online entrants entering the battle for used car stocks alongside the traditional players. In this article, we’ll look at how these players have become so successful so quickly and how used car dealers are fighting back.
How did the new players become so big?
> Parent companies and partner relationships
The new players have signed partnership deals with dozens of national dealers, car supermarkets and other wholesale volume players, such as leasing and hire companies, both as sources of used stock and as routes for disposal.
While their operating models differ – some becoming the shopfront for existing retailers and others buying and selling stock themselves - these operations have tied up a huge volume of vehicles that would previously have been available to other traders.
Many are also part of larger automotive groups with retail and auction subsidiaries, delivering scale and shared resources.
> Marketing spend and buying power
The sums of money invested in traditional and online advertising have been staggering, including the shirt sponsorship of major domestic and international sports teams. This is a proven strategy for well-funded new market entrants in a bid to rapidly build customer awareness and credibility.
As the companies have grown and proven their ability to trade large volumes of vehicles, the price pressure they have been able to exert on partner businesses has increased, further distorting the market for the rest of the industry.
> The pandemic
The phrase, “it’s an ill wind that blows nobody any good”, comes to mind here. Those online companies coming to market in the lead-up to the pandemic were often able to continue trading throughout the restrictions, and were perfectly placed to cash in on the sales boom that followed the last lockdown.
Consumers also became far more comfortable with making large purchase decisions online, which has turbo-charged this growth.
Offering a good range of vehicle options for the private buyer, and even being able to source specific vehicles on demand, have never been more important in the battle to remain competitive.
> Importance of networks
To combat the strength of the very large players, independent dealers have begun to focus on the power that they can muster by forming closer relationships with other dealers.
Creating a close-knit group of trusted partnerships gives dealers greater confidence that they’ll be able to access the vehicles that their customers demand, either from stock they have already acquired or from the stock held by those in their network. It also creates a stronger channel for disposing of vehicles that don’t fit their requirements.
> Focus on being truly independent
From a wholesale perspective, independent traders like to deal with other independents, in the knowledge that they won’t come under the same price pressure that they would dealing with some of the larger groups.
Online wholesale trading enterprises are often part of much larger groups, which can be seen as a negative by smaller dealers wanting to control the sources of their stock and protect their margins.
> Digital solutions
Talk of building bigger and closer independent dealer networks is one thing, having the time and energy required to create and nurture these is something else. Used car dealers are busy individuals, so tools that can help fast-track this effort are becoming very popular.
Technologies, like MOTOM’s recently launched wholesale trading app, allow used car dealers to connect and grow their network in new ways:
Fostering stronger relationships with existing dealer contacts by increasing the volume and value of wholesale trades in both directions
Finding new, independent dealer connections with similar business models and vehicle specialisms
Being able to rate fellow traders to provide greater assurance for others seeking new partners
Controlling the scope of trades from a select few partners to an entire marketplace
Trading in real-time and around the clock
The fact that MOTOM, in particular, is entirely independent of any dealer group, auction house or manufacturer adds to the appeal for independent dealers.
The used car market has changed beyond recognition in recent years, and market power has certainly shifted to the larger players with their deep pockets and associated wholesale and retail businesses.
For independent dealers to compete, they are looking for new sources of used stock and new routes to market, both wholesale and retail. With well-established digital retail channels, the focus has switched to the wholesale side of the industry.
For dealers, the question now is, which digital platform, or platforms, are the best fit for their businesses.
If you’re interested in learning how MOTOM’s vehicle remarketing app can help your business thrive, click here to read more or download the free app.