Stressed by growth, group pulls in reins
Less inventory, more service bays and staff ease congestion
 | Jack Anderson, West Herr Automotive: “Another 10 percent of growth last year would have just crushed us for what we could support.” |
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In 2005, West Herr Automotive Group Inc. crafted a used-vehicle strategy that proved highly successful.
Almost too successful.
Going into 2012, the dealership group in a suburb of Buffalo, N.Y., revised its practices, in part by slashing its used-vehicle inventory. The goal was to keep increasing used-vehicle sales, but at a more manageable pace. It continues to tweak those strategies and practices.
"Our used-car operations grew so fast that we just couldn't handle the volume," says Jack Anderson, the group's used-vehicle director and the architect of its used-vehicle strategy.
"We decided last year to take some pressure off -- just choke inventory down. We knew we could sell the same volume, but we knew we weren't going to grow by the double-digit increases that we've been growing, and we didn't want to," he said.
"Another 10 percent of growth last year would have just crushed us for what we could support."
Seeds of success
West Herr Automotive sowed the seeds of its success in 2005, when the Blasdell, N.Y., group created its own in-house brand for late-model used vehicles -- Peace of Mind -- side-stepping most of the certified used-vehicle programs offered by the manufacturers.
That year the group sold 5,000 used vehicles. By 2011, sales had soared to 13,887. It also had retail sales of 17,933 new vehicles in 2011, making it No. 23 on the Automotive News list of the top 125 dealership groups in the United States.
To support its own brand, the group pulled its used-vehicle listings off third-party Internet sites such as autotrader.com and cars.com, instead buying TV, radio, newspaper and billboard ads focused on driving consumers to its own westherr.com site.
At the site, West Herr explains the merits of Peace of Mind. Those include a three-day money-back guarantee, 30-day or 1,000-mile exchange policy and its six-month or 6,000-mile powertrain warranty.
"Where other dealers were taking out full-page ads in the Sunday paper listing cars, our full page ad was: 'Visit westherr.com,'" says Anderson. "When they got there, we told them what a West Herr Peace of Mind car was, why you could have confidence in it."
Overwhelmed
But after several years of growth in used-vehicle sales, the dealership group was almost overwhelmed.
Take the service department. At some stores it took as long as two weeks to get used vehicles acquired as trade-ins or from auctions through its service department to ready them for sale. That was unacceptable. So the group took action.
Last year, to relieve the pressure, the group reduced the 1,500 to 1,600 used vehicles it stocked at any given time by about 300.
It also added service bays and expanded its parts operations at some dealerships to get used vehicles reconditioned and ready for sale more quickly. Now it takes no more than three days.
Most of the group's dealerships -- depending on their size and sales volume -- had used-vehicle inventory managers in addition to used-vehicle managers. At some of the group's high-volume stores, such as West Herr Ford Hamburg in Hamburg, N.Y., the company added a second inventory manager.
The strategy paid off.
The group's sales grew a more manageable 4 percent or so in 2012, to about 14,500 used cars and trucks, Anderson said.
Now that the company has its arms around its used-vehicle operations again, it has increased its inventory by about 150 units this year.
Anderson says West Herr has increased its used-vehicle capacity to varying degrees in virtually all of its stores.
Take Mercedes-Benz of Rochester, in Rochester, N.Y., which the group acquired almost two years ago. Now the store averages about 50 used-vehicle sales per month, up from about eight. The group built a new building for the Peace of Mind brand, which gave it the capacity to handle the increase in volume. It also added personnel, such as sales staff and people who handle trade-ins.
Now West Herr is revising its certified-used strategy as well.
With the exception of some luxury brands such as BMW and Mercedes-Benz, West Herr did not participate in factory-sponsored certified used-vehicle programs, preferring its own in-house certified program. But now it is beginning to promote and sell the certified used vehicles of all 22 brands it holds franchises to sell at its 19 dealerships.
West Herr rolled out certified used-vehicle programs in its Chevrolet and Toyota stores in January and will add certified in its other stores as it trains staff and sets up processes and procedures.
The dealership group will continue to offer its own certified Peace of Mind brand as well -- for example, on vehicles that don't meet the manufacturer's criteria to be certified.
Anderson concedes the dealership group's change of strategy is based in part on the fact that virtually all manufacturers are aggressively lobbying dealers to participate in their programs and tying certified sales to dealership incentives.
But he also likes the increased commitment of many manufacturers to their certified programs. They have field staffs dedicated to helping dealers with their certified used-vehicle programs and are spending considerable advertising dollars to drive consumers to search for the vehicles online.
He says he wants his used vehicles to be wherever consumers are looking for them.
"People don't call you to say, 'I'm on your Web site and I don't find any certified cars,'" Anderson says.
"Instead they search certified cars and then go buy them from people who have them. If you don't have them, you just don't hear from the people searching for them."
You can reach Arlena Sawyers at asawyers@crain.com.
