AutoNation tries luxury vehicle outlet
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AutoNation is trying to replicate its outlet center approach with luxury vehicles.
The nation's largest dealership group operates 27 Value Vehicle Outlets that specialize in selling older, less expensive used cars. The company opened its first Premium Vehicle Outlet in May, a pilot operation at a Mercedes-Benz dealership in Pompano Beach, Fla.
AutoNation COO Michael Maroone said the early results are encouraging.
"There seems to be a market for it," Maroone said. "All those cars would have been wholesaled in the past. Every dollar is an incremental dollar. Every customer is an incremental customer."
Maroone has a second luxury outlet location in mind, but no decision has been made to expand the program.
AutoNation opened the premium outlet after requests by John Evanicki, general manager of Mercedes-Benz of Pompano.
He saw the potential after the company's value outlets opened starting in 2010. The Pompano Beach store has a large indoor showroom in a former Sam's Club building. With additional inventory, Evanicki thought he'd be able to convert service customers and bargain shoppers to vehicle buyers.
"We had all this square footage that was just sitting here doing nothing," Evanicki said. "So I said, 'Why don't you let me have the luxury cars that don't fit anybody's core.' If there's any daylight left in them, we'll sell them retail instead of shipping them to the auction."
The program is working, Evanicki said. AutoNation has 17 stores in the market, including several Mercedes locations, that supply inventory to the outlet. Mercedes-Benz of Pompano has doubled its inventory and sales of used vehicles since the outlet was launched. It now retails 80 to 100 used vehicles a month, up from 40 to 50, he said.
Advertising for the outlet is limited to listing vehicles on Mercedes-Benz of Pompano's Web site and with third-party vendors such as AutoTrader.com, Evanicki said. Outlet vehicles are typically at least 7 years old with more than 70,000 miles. The vehicles are reconditioned and listed for no-haggle prices with three-day money-back guarantees. Most are priced between $15,000 and $30,000.
Average grosses and finance-and-insurance income on used vehicles have dropped slightly with the influx of lower-priced vehicles, Evanicki said. But the venture is profitable, and the increased volume makes up for any per-vehicle decline.
The key, he said, is to give the customer a premium experience. That gives you the chance to keep that person's business for the long term.
Maroone said: "If they have more success in their life, they can ride up and continue to buy other products from the organization."
Age: 7 years or more
Mileage: More than 70,000 miles
Pricing: $15,000 to $30,000
Source: AutoNation
You can reach Amy Wilson at awilson@crain.com.
