Retail Solutions operates in Denver, where it supports EchoPark, and in Chicago, where it serves a number of new- and used-vehicle dealerships. More locations are coming.
Manheim reconditions 20 to 30 vehicles a week for EchoPark, or about 15 to 20 percent of the dealerships' volume. That's poised to grow, Dyke said.
The first EchoPark outlet built a reconditioning center before it opened, Dyke said, but given the success of the experiment with Manheim, the auction company will "probably end up taking it over."
Stages two and three of EchoPark, each with a large hub store and smaller satellite outlets, will open next year. "Starting then, Manheim will do all the reconditioning for those stores," Dyke said. Satellite stores' service bays will be used only for customer-pay work, he said.
"I won't have to build the facility," he said, or have "the carrying cost of the people. Manheim does all that."
Sonic, of Charlotte, N.C., ranks No. 5 on the Automotive News list of the top 150 dealership groups based in the U.S., with retail sales of 135,932 new vehicles in 2014.
As Dyke noted, Manheim now has to take on certain costs, such as reconditioning centers and personnel. For example, Manheim's Wholesale Solutions arm had reconditioning staffers who could prep vehicles for the auction by touching up paint or cleaning the vehicles, but it had to add a dedicated staff for the Retail Solutions side, said Shane O'Dell, Manheim's senior vice president of vehicle solutions.
"Manheim hadn't done much on the mechanical side before," O'Dell said. So the auction company had to hire mechanics certified by the National Institute for Automotive Service Excellence who could do major vehicle repairs.
Manheim took on those costs in part because it saw a new-business opportunity growing out of its core auction operations. In addition, its Retail Solutions' business model of serving multiple dealerships offers economies of scale.
Today, Manheim's Retail Solutions will put the window stickers on, make a new set of keys, or "even do the merchandising," say by posting Manheim-shot photos of the vehicle on the dealership's website, O'Dell said. But there is a limit: It can't certify vehicles for a manufacturer-approved certified pre-owned program.
After launching with EchoPark in the first quarter, Manheim opened its Retail Solutions business in Chicago in the second quarter. It has been a continuous learning process. "We've had our team training them," said Sonic's Dyke, adding that Manheim has made "huge progress."
Manheim's O'Dell admits the Chicago operation was not ready to open until after "about three, four months of planning and preparation."
Chicago initially had three or four larger customers. It now serves about seven, mostly independent, used-only dealerships. The smallest has just one rooftop with fewer than 20 used cars on the lot, O'Dell said. DriveTime Automotive Group also is a client. DriveTime, of Phoenix, bills itself as the nation's largest used-vehicle dealer focused on the subprime-credit customer, with more than 132 dealerships nationwide.
One common thread: Many Retail Solutions dealership clients lacked service operations and had to send all vehicles elsewhere to recondition them for retail sale.