Small stores unite for better vendor prices
Chuck Jacovina knows his dealership can get better prices from vendors.
Just 14 months ago, he worked for a different dealership group that once had 20 stores. He bought in volume from vendors and got low prices. But Jacovina's present employer, Gettel Automotive Group, has only 12 stores throughout Florida.
"I said to a vendor recently, 'Hey, I was paying $1,000 a month for this from you at the other store and now I'm paying $2,300 for it.'" says Jacovina, general manager of Gettel Acura in Sarasota, Fla. "The vendor told me he can't do that price for me now because I had 20 stores then. I have only seven using this particular product now."
Jacovina's experience is similar to many single-point stores or family-owned dealership groups. They don't get the same prices as the larger dealerships that buy in volume. That's why dealership co-op groups are seeing increased use of their services by smaller dealerships that want to buy goods in bulk. And conglomerates are forming to help level the playing field.
"Our whole purpose is to try to save them money," says John Hackman, president of Wisco Cooperative Association in Marshfield, Wis.
Wisco has been around since 1972. It has 548 dealer members. Its membership is not rising, but members are using it more often to buy vendor products at a lower rate, Hackman says.
"We're growing as a cooperative," Hackman says.
He adds that through October, Wisco's sales were up by 12.5 percent compared with the same period last year.
The best deal
Wholesale Auto Supply Co. Inc. is a cooperative founded in 1960. Based in South Hackensack, N.J., it serves dealers in New York, New Jersey, Connecticut and eastern Pennsylvania.
About 200 dealers own it, says Andrea Karsian, CEO of Wholesale Auto Supply. Each dealer buys one share of stock. Dealers can buy goods at reduced rates and get a dividend based on the amount they buy each year.
"They own us, and we're going to take care of them," Karsian says. "We negotiate and purchase, say, janitorial supplies from a vendor. Our customers then order them from us."
Karsian says the savings are so significant that even some large public dealership groups are members.
While neither she nor Wisco's Hackman would discuss specific savings, they estimate dealers save about 15 percent on average by buying products through the co-ops.
"They save on their upfront invoice, and then they get a check at the end of the year for using us," Hackman says.
Some vendors benefit from working with dealer associations, too.
Walter Osterman, president of Social Mavens, started a relationship with the New York State Automobile Dealers Association in late August.
"There are approximately 900 dealer members," Osterman says. "We have a list of names and numbers, a captive audience, and I can do Webinars. It's less hunting for my salesperson in the long term."
Social Mavens is a New York City company that trains dealerships to use social media. Osterman declined to be specific but says he offers NYSADA members his services at a 10 percent discount.
Power in numbers
A new consortium, called Dealers United, is open to all U.S. dealerships with a similar intention of helping single-point or family-owned dealerships get better prices.
But unlike a co-op, which is owned by the dealers, Dealers United is an independent business that takes a percentage of what vendors make on each deal. It is free for dealers to join, but dealers must agree to receive weekly e-mail with special offers from vendors.
"I've never seen something not work when you have power by the numbers," says Mark Mason Jr., general manager of Lugoff Ford in Lugoff, S.C.
Mason signed up Lugoff Ford and Lugoff Toyota for Dealers United.
Dealers United has a research team that selects the vendors. It negotiates the lowest prices with the vendors by offering volume purchasing from dealer members.
The founders of Dealers United won't say how many dealers have signed up so far, but they say they plan to have 10,000 members by February.
Mason believes he has nothing to lose and everything to gain by joining it. He pays $11,000 to $12,000 a month for his data management system, for instance, and hopes Dealers United can find a vendor to provide a system for $7,000 a month if enough dealers agree to buy it.
"It doesn't cost me anything, and it gives me the chance to save 30, 40 or 50 percent on my vendor costs," Mason says. "So let's find out."
A high-5 handshake
Dealers United is the brainchild of Jesse Biter and Matt Buchanan.
Biter, 35, comes from the vendor world. He founded HomeNet in 1996. HomeNet is a provider of inventory merchandising, management and marketing. He sold it to AutoTrader.com last December.
Buchanan, 27, grew up on the dealer side. He runs his father's Ford store in Sarasota, Fla., part of Buchanan Auto Group, which once owned 21 dealerships. In 2004, it was the 20th largest U.S. private dealership group based on new-vehicle retail sales units, he says.
"Having multiple stores, we could go in and talk to vendors or insurance companies, and they'd meet our terms within reason because we were a powerful group," Buchanan says.
But in 2005, Buchanan's father, Vern Buchanan, sold most of his stores to run for U.S. Congress. Then in 2009, Chrysler Group terminated Buchanan's Dodge store during Chrysler's bankruptcy restructuring.
There are just three stores left. Matt Buchanan estimates that he pays vendors at least double what he did in 2004 on some products because the group's reduced size has whittled away the leverage he once had with vendors.
Meanwhile, Buchanan had known Biter for years. They're both pilots who fly Cirrus single-engine planes and JetRanger helicopters. So when Buchanan ran into Biter at a reception during the National Automobile Dealers Association convention in February 2010, the two formed the idea to start a consortium to represent thousands of smaller dealers to leverage better prices with vendors.
Buchanan says: "We did a high-five handshake to seal the deal, and it's been in the works ever since."
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