When AutoNation opened a used-car superstore in Dallas two years ago, Renee Issip was ready.
Issip is the manager of Sonic Automotive Group's Lute Reily Honda in Richardson, Texas, which is only a couple of miles away from the AutoNation store on North Central Expressway.
Issip says he 'welcomed' the competition. But he was not complacent.
He bolstered the quality inspection on used units from 27 points to 150 points. The beefed-up detailing had cars sparkling like new. What he did not do was fiddle with his pricing strategy.
'We looked at (AutoNation's) one-price policy,' says Issip, who tried and abandoned one-price selling on used cars before AutoNation came to town. 'We knew customers would go there, shop, then come here and buy from us. We negotiate. Consumers love to negotiate.'
Issip at first saw customers shuttling between AutoNation and his store, looking for the best price. Then his business started to pick up.
'Last year we averaged about 160 cars a month,' he says. 'Then all of a sudden we're up 40 percent this year.'
Issip's monthly average now is about 225 units, or $4.1 million in sales. He grosses a little more than $2,000 per unit.
No car people
The AutoNation store was shuttered Tuesday, Dec. 14, along with 22 others across the country. The nation's highest-volume automotive retailer had announced that it was pulling out of the used-car superstore business it had pioneered. The concept - no-haggle pricing and huge inventories of late-model cars from which to choose - wasn't making enough money.
Issip says two strategies are key to being successful in the used-car business: Control inventory and hire the right people.
He keeps a 21-day supply of vehicles. None is allowed to remain in stock for more than 60 days. If a unit is not retailed in that time, it goes to wholesale or to auction.
'If you have the right people, you can sell cars,' he says, and the right people are 'car people.'
'(AutoNation) didn't have car people to buy (inventory),' Issip says. 'I think they were buying to keep the lots full. They paid too much. And they didn't have salespeople, just clerks taking orders.'
Issip's 60-day inventory control policy mirrors Sonic Automotive Group's chainwide policy, which covers 110 stores. In 1998, Sonic was the eighth-largest seller of used vehicles in the country, with nearly 25,000 in unit sales.
Sonic President and CEO Scott Smith says a daily, computer-generated report for each store notes vehicles that have been in inventory fewer than 45 days but have not been on a test drive in two weeks.
Sales managers drive the problem vehicles to figure out what's wrong. It may be something as simple as a lost key or a less-than-adequate detailing job. Then the vehicle is added to what Smith calls the 'focus' list.
'So by the time a car's been on the lot for 30 days, everybody is aware we need a sale,' he says.
Issip says he gets about 90 percent of his used inventory from trade-ins, but he also uses newspaper classified ads and brokers and gets some vehicles from auction. Sales staffers who find good used vehicles through the classifieds get a cash bonus.
Issip's new- and used-car operations share the same showroom. New-car sales average about 600 units a month. Used-vehicle overhead is about $250,000 a month, or about 76 percent of used-vehicle sales. Issip would like to drop that to 65 percent.
But some selling expenses are higher for used cars than for new. He has a larger management staff, for one thing: three used-car sales managers plus three reconditioning managers, compared with four new-car sales managers. And he needs more space. He can display only 120 used units.
If the price is right, he'd like to buy AutoNation's newly vacated store. It's an expansive, beautiful facility - typical of the chain.
Says Issip: 'I've been wanting to find something like that.'