Rural dealer becomes used-car powerhouse

PINCONNING, Mich. -- When Russell LaFave lost three of his four new-car franchises in the bankruptcies of General Motors and Chrysler in 2009, the rural Michigan dealer vowed he would never again put his future in the hands of the factory.

So he turned to used cars in a big way with savvy digital marketing -- and he has never looked back.

Today, at his lone remaining new-car store, Schafer Chevrolet, LaFave sells nine used vehicles for every new vehicle sold.

The 242 used vehicles sold in the first two months of 2015 placed Schafer Chevrolet 16th in Michigan among stores selling all brands and all independents, according to the vehicle data service Cross-Sell.

That's impressive considering that Pinconning is a town of 1,200 people with little drive-by traffic except for occasional summer vacationers rushing to their cottages.

"We don't look at ourselves as a Chevy dealer," LaFave, 57, said. "We're a used-car dealer."

LaFave is a third-generation car dealer in Pinconning. His grandfather, the late Russell Schafer, opened the Chevrolet store in 1928 and was a pillar of the community, serving as the mayor and operating other businesses.

To metro Detroiters who trek north to cottages on weekends, Pinconning is a well-worn town about a half-hour north of industrial Bay City where the countryside along Interstate 75 changes from civilization to forest.

Pinconning itself is best known for a hearty cheese that is sold at several shops along the main thoroughfare.

A block from Schafer Chevrolet, a warehouselike building displays a hand-written sign offering "bear feed" for the spring bear-hunting season.

It's an unlikely home for one of the highest-volume used-car operations in the state.

LaFave and General Manager Brad Gross, 46, attribute the store's success to an all-digital marketing strategy, disciplined use of software tools to buy and price used cars, and a dedicated staff of 40 people, including 11 salespeople.

Schafer Chevrolet had just one salesperson leave last year.

Much of how the store sells is contrarian, LaFave said proudly.

First, prices are non-negotiable on all vehicles, he said. The price online and on the window sticker is what the customer pays -- no exceptions.

LaFave said his vehicles are priced aggressively for his market, and many shoppers dislike haggling. Consistent with that philosophy, salespeople receive a salary and volume bonus rather than being compensated on gross profit, Gross said.

Salespeople motivated by gross profits can push high-profit vehicles rather than the best fit for the customer, Gross said.

Salespeople also handle all aspects of the sale, including finance and insurance, so customers aren't handed off, a widely disliked practice. The one-price, no-handoff method has been in place since 2009, he said.

LaFave said he knows his vehicles are priced competitively because he uses vAuto inventory-management software to check selling prices within a 120-mile radius.

Those same computer tools also determine what vehicles are hot in his market and what purchase price to offer at auctions, he said.

To reach beyond little Pinconning, Schafer Chevrolet spends its entire $15,000 monthly marketing budget online, but with an interesting wrinkle. It spends only on third-party classified sites to list inventory and for extra advertising on the sites to feature Schafer vehicles, LaFave said.

That means no paid-search advertising on Google or any traditional media, such as cable, radio or direct mail.

LaFave said his prospects are looking for deals on the five sites he uses: Autotrader.com, Craigslist, Cars.com, CarGurus.com and KBB.com.

He said years back he tried but discontinued Google paid-search, a popular advertising medium with dealerships. It generated insufficient traffic, he said. With paid search, dealers bid for search terms and pay Google a certain amount each time a shopper clicks on a link.

"I mean how many people are going to search for 'used cars Pinconning,'" LaFave said.

LaFave said the online classified sites work great for him because he can adjust vehicle prices by watching how many people are clicking on specific car listings, known as vehicle detail pages.

He said he has boosted his spending on the third parties from about $10,000 per month in June.

Not coincidentally, that's when Gross persuaded LaFave to go in another contrarian direction: He said Schafer Chevrolet needed more used-car inventory on the ground.

So LaFave said he took the plunge and nearly doubled his inventory from 80 vehicles to about 150, mostly by buying at live auctions. That also doubled the cost of the inventory to about $2.3 million.

The tactic worked. With more cars in front of online shoppers, used-car sales have been ticking up consistently. In 2014, the store ranked 66th in used-vehicle sales in Michigan. It sold 1,020 used vehicles and 217 new for the year.

LaFave said the store is on track, at least early in 2015, to reach its goal of ranking in the top 20 stores selling used vehicles statewide. In March, Schafer Chevrolet sold 156 used vehicles vs. 17 new, a 9-to-1 ratio.

LaFave also is carrying way more non-Chevrolet used inventory than Chevy used inventory. That's by design, he said. His market, especially from Flint to Saginaw-Bay City-Midland to his south, once was lined with GM factories. Many are long since shuttered.

But many families in the area still qualify for substantial GM employee discounts. So most of his GM competitors carry lots of GM inventory, pushing down prices for new and used GM vehicles.

Consequently, 29 percent of LaFave's used inventory is Ford, and 26 percent is Chevrolet.

Back in the dark days of 2009, it was hard to see that losing franchises would be the best thing for LaFave and his employees.

He lost a Pontiac franchise when GM terminated the brand. And he lost Chrysler and Dodge franchises when Chrysler cut a quarter of its stores.

During LaFave's 2007 heyday, the franchises sold 348 new vehicles and 273 used -- about half of last year's total.

So today, he is happy to concentrate on used.

LaFave said: "I never want to be in a situation where I have to rely on new-car sales again."