Dealer Insights - Nov Dec 2011 - Dealer Digest
Selling to the "Concierge"
A new type of third-party car-selling is entering the marketplace. If you haven’t yet worked with a “concierge” car-buying service, it might be only a matter of time.
These enterprises are wrapped around the simple — but winning — concept of working to find the car a customer wants at the best price. Unlike auto brokers, a concierge service accepts no fee or commission from the dealership. It works on the customer’s behalf, saving the customer time, money and the stress of direct negotiations.
In Chesterfield, Mo., Concierge Automotive Services (CAS), which started up in April, says it “evens the playing field” for the customer by knowing the ins and outs of auto costs and pricing. CAS finds the desired vehicles through its national network of auto dealers and auction houses and then handles the negotiation process. Customers also may elect to have CAS take care of vehicle registration, license plates, warranty registration, and so on.
Southern California’s Authority Auto (AA) has been offering two kinds of concierge services to customers since 2006. If a customer wants AA to locate a specific vehicle and negotiate a deal, AA charges a flat fee upfront. Or, if the customer has already found a vehicle and negotiated a price with a dealership, AA will take over and base its fee on a percentage of what it saves the customer over the price he or she initially negotiated.
Some dealerships say they enjoy working with concierge services because these professional car buyers understand the business and are likely to return to dealerships that show flexibility.
M&A Activity Blooms
Merger and acquisition activity among auto dealerships rose dramatically during the first seven months of this year. Public retailers completed $411 million in acquisitions through the end of July, a 92% increase over commitments made in all of 2010, according to the Automotive Retail M&A Update for mid-year 2011. Financial services firm Presidio Merchant Partners prepared the report.
A number of factors are believed to be responsible for the sharp M&A rise: a pent-up interest by dealers awaiting more favorable conditions to exit their businesses, strong unit sales, fewer marginal dealerships and record dealership profitability. Lower operating costs, low interest rates and stabilized real estate values were cited as other contributing factors that have boosted both public and private sales.
If you’ve been thinking about selling your dealership, now might be the right time to start getting it sales-ready. Valuations of dealerships remain low, but that trend might change within the next few years.
Dealer Insights - November/December 2011