Automotive Blog

More and more competition to buy used cars from private customers

Luca Blog


In the main European markets most used car transactions are with private customers, particularly in France and Italy where they represent more than 50% of total sales, but also in the UK private to private sales has the largest share.

Over recent years more and more players have launched new initiatives and projects aiming to intercept these transactions in order attract more customers and exploit new commercial opportunities. These initiatives have been developed by different types of operators such as dealers, used car superstores and new entrants.  Starting with dealers (mainly located in the US and UK), recently they have added a ‘webuyanycar’ formula with an instant online trade-in evaluation, with the aim of attracting new potential customers and increasing volume and profit in the used car business, and further assisted by the opportunity to exploit scale in sourcing, reconditioning and digital marketing.  In the UK, there are several examples - Pendragon, Arnold Clark, Lookers, especially prevalent amongst the largest groups. Some French groups are also testing similar initiatives albeit the ones in the UK dealers are more advanced: they are assisted by better integration of the different tools (appraisal systems, inventory management, DMS, etc.) which allow them to manage all processes in a more efficient and ‘fluid’ way.  A similar approach has been adopted by some large UK used car superstores, such as The Car People and Car Shop (both of these were recently acquired by Sytner).

But in the recent years there have also been many new entrants, some of them operating mainly online (as a broker) and others with a mix between digital and physical activities. Broadly speaking, the most innovative examples of online players in Europe operate in the UK market where often IT systems are integrated with the opportunity to exploit also third-party information in order to offer customised and automatic answers for online users. There are different approaches, from one side portals where users can get more quotations for their used cars from different players (e.g. Wizzle), in other cases a platform where users can get an online quotation which must be confirmed at the closest branch operated by the same player (e.g. We Buy Any Car, acquired by BCA, or We Want Any Car, owned by Cox Automotive) or by third operators (e.g. Trusted Car Buyers).

For now however, the most successful example is Auto1 which was founded in 2012 and in a short time has become the largest used car online player across Europe, with a presence in 30 countries, a turnover of 1.5 billion euros in 2016 and around 300,000 used cars sold.  Their business model is focused on strengths in sourcing, selling and logistics, based on massive scale effects thanks to very large volumes across all stages of the used car flow. From the sourcing point of view, there are two channels, business to business (B2B) and customer to business (C2B). Currently B2B solutions are available mainly in Germany, while in the other markets they are working to implement similar tools. Looking more in detail at B2B, Auto1 collaborates with different partners - dealers, leasing and captive companies, liquidators and so on, communicating with them via dedicated systems and organising payment and collection within 72 hours to take it to their logistic centres for a further examination before placed in the auction system for resale.On C2B side, instead, customers can get an instant online valuation on national websites as “noicompriamoauto.it” in Italy or “wirkaufendeinauto.de” in Germany, and receive an approximate instant trade-in valuation, which must be confirmed at their nearest physical sourcing centre where the car is checked over and then the customer receives a final offer based on Auto1’s database and algorithms. If the customer agrees, the car is deposited and payment is arranged immediately. In terms of B2B distribution, there are many options to resell these cars online via tools such as 24-hour auction, instant buying or via customer auctions and this happens involving around 35,000 operators between dealers and traders over all Europe and beyond. Recently Auto1 has implemented further initiatives like the “zero risk trade-in” solution for B2B channel, where Auto1 provides equipment such as tablets and supporting software to dealers and other operators for free use for all trade-in activities and which is able to provide instant information on desired models sourced anywhere within Europe, exploiting scale economies and big data. This innovation is also being introduced on B2C side - for example, in November 2017 the group launched in Germany a selling platform for customers, called Auto Hero.  The objective by 2021 is to manage a volume of used cars of over 2 million units, hence around 7 times more than in 2016. For the time being the growth has been helped by multiple money raising activities from investors, one of the most important happened in 2017 with an input of €360 million to improve the business.

What could be the lesson for dealers and OEMs? First of all, that the private to private market represents the main opportunity to improve the used car business and to attract new potential customers, including the possibility of increasing one’s database via more active data collection. However, to exploit this opportunity, it is necessary to implement IT systems which must be integrated with each other to give an immediate answer to the customer, time is a key lever when customers browse on the web. Furthermore, OEMs could help dealers to create a global IT infrastructure which is able to exploit big data, optimises customer satisfaction / experience and also maximises dealer profitability.

In the coming months, ICDP will monitor these initiatives in order to understand best practices and to offer new ideas and opportunities to ICDP members.

 

Written by Luca Montagner

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