AutoNation Inc. is sticking by its commitment to a one-price model on used-vehicle sales, even though the switch dragged down the retailer's used-vehicle margins in the second quarter.
The nation's largest dealership group fully implemented its one-price strategy in the second quarter. The strategy has been successful in some markets and difficult in others, CEO Mike Jackson said.
The one-price program started on the West Coast at the beginning of last year. Lance Iserman, then western region president, led the rollout. His team trained dealerships' sales staffs and collaborated with a centralized pricing and appraisal team.
The change didn't go smoothly at first, but the strategy is now successful on the West Coast, said Iserman, now AutoNation's COO. The company is "working to replicate the results across central and eastern regions," he said.
Because of the centralized approach to appraisal and pricing, there needs to be effective communication between dealership managers and the pricing and appraisal team, Iserman said. That was the first "big shift of what needs to happen, so sometimes that leads to obstacles. We feel like we have that figured out now," he said.
He also cited the legacy of "a typical negotiating environment" in stores and "getting our associates trained with the word tracks," as well as getting customers to understand "what we're about and how we price our cars." Jackson conceded problems at the centralized pricing level in trying to "find the optimal line between price and volume."
Their comments came as AutoNation said its second-quarter net income fell 22 percent to $87.7 million, as revenue dipped 3 percent to $5.28 billion. AutoNation cited weak Texas and Florida markets, where the company gets 45 percent of its retail sales, and the pressures on used-car margins. New-car margins have been under pressure industrywide.
