BANDON, Ore. — Social networking as a used-vehicle selling avenue has emerged as a "force to be reckoned with," and its influence in the market is likely to continue growing, according to CNW.

"Social network sites such as Facebook and Twitter are becoming a force to be reckoned with as a used-car selling channel," suggested Art Spinella, president of CNW.

"Based on a two-and-a-half year study of such sites, it is increasingly clear that a growing percentage of private party used-car offers and sales are being made via social networking sites," he added.

Two years ago, there were roughly 1.3 million private party offers-for-sale via social networking. This represented close to 11.9 percent of the 11 million total casual sales (through social media or other avenues) that year.

Of the roughly 1.3 million social networking offers-for-sale in 2008, there were 785,000 that resulted in an actual sale via social media, which represents a 60.2 percent sales rate.

In 2009, there were 1.9 million offers-for-sale posted on social networking sites. Of these, 68.8 percent — or 1.305 million — were converted to sales.

Through Tuesday, roughly 70 percent of social-media offers have led to sales so far in 2010. If this rate continues for the rest of the year, there will be more than 2 million units sold via social networking with 2.95 million vehicles being offered through this medium.

Impact on Classifieds

With the emergence of this trend, however, paid classified advertising has seen a negative impact. For example, of sellers who listed a vehicle on a social networking site in 2008, roughly 55 percent also posted a classified ad, CNW noted.

Only roughly 49 percent did the same last year, and even fewer (less than 39 percent) have chosen the classified avenue so far in 2010.

"Translated into lost-liner ads at commercial classified outlets such as local newspapers and 'shopper' publications, this year could approach nearly a million units no longer offered in a classified ad environment," Spinella shared.

Time Frame

Interestingly enough, social networking sales typically take longer to complete than sales via "mass-market" classifieds like AutoTrader.com or Cars.com, Spinella said.  

In fact, the offer-to-purchase time frame on social networking sales averages 6.2 weeks. Conversely, the turn times for commercial mass marketers average fewer than five weeks.

This occurs despite there being increased pressure for both buyers and sellers using social networking than those on traditional classifieds.

"What we also found with SN sales is that the seller and the buyer are typically more pressured to make a sale than those who use classified ads," Spinella pointed out.

"That is, a sale is financially more important to the SN seller and the need for a vehicle is higher than for the SN buyer," he continued. "In both cases, however, the time from offer/search to sale/purchase is longer than with mass market classifieds such as AutoTrader and Cars.com."

Offering some more context to the overall data, Spinella stated: "While this is a short version of the complete data, it provides a taste of what may be in the future for paid used-car advertising in the private party marketplace.

"In the study we found that there were almost as many ‘Do you know of anyone with …' used-car requests as there were ‘I have a XXXX for sale,'" he continued. "Unlike the classic advertising model, this is effectively two-way marketing. Not just the seller is actively searching for a buyer, but buyers are actively searching for a seller.

"For those commercial enterprises that rely on classifieds for their livelihood, including newspapers, it means finding a new value-added message that justifies spending hard-earned cash to sell a vehicle," Spinella noted.  

Social networking as a sales avenue also looks like it is having an impact on Web sales altogether.

As of the end of May, Web sales have climbed sequentially for three straight months and five of the last seven. Moreover, the conversation rates of units offered via the Web have jumped from 15.69 percent in May 2009 to 25.87 percent in May 2010, and have shown sequential gains for three straight months and four of the last six.

The emergence of social networking as a used-car sales avenue could have been a big reason for these gains, Spinella stated.

Used Sales, Pricing Trends

Continuing on, Spinella expects that based on data so far this month, used sales for June are likely to fall marginally (0.6 percent) year-over-year.

More specifically, there are likely to be 4.475 million used units sold this month, compared to more than 4.503 million in June 2009.

Franchise dealers are projected to post sales of 1.6 million units, which would be down 1.6 percent from the same period of last year, while the expected sales for independents (1.5 million) would be 4.6 percent softer.

Spinella indicated that "some of the heat that independents have seen in the first five months of 2010 dissipated in June."

However, private party sales are forecasted to reach 1.375 million vehicles, marking a 5.4-percent upswing.

Year-to-date used sales for franchised dealers are down 1.1 percent at about 6.38 million, while independents to-date sales are up 11.2 percent with more than 6.46 million vehicles moved.

Casual sales have shown a 2.4-percent upswing with just about 5.22 million vehicles sold.

Overall, there have been 18.06 million used cars sold this year, which is 4 percent ahead of last year's pace.

Looking at pricing, though, Spinella said: "From a price standpoint, the trend shows what might be seen as surprising strength."

In fact, asking pricing for franchised dealers has averaged $11,169 in June, compared to $10,526 a year ago. Independent dealers have seen their asking prices jump to $9,584, versus $8,749 last June.

Meanwhile, independent transaction prices have moved up 8.6 percent, with franchised dealer transaction prices showing a 4.3 percent gain.

"Month-over-month, however, reflects a slight new-car price decline and may signal an end to the significant increases seen over the past 18 months," Spinella explained. "This reflects wholesale activity."

State of Sales-Per-Outlet?

In a bit of a surprise, sales per outlet have not taken as big of a hit recently as some might project given the industry circumstances in the last two years, Spinella shared. Last year, franchised dealers posted used sales of 60.3 units per month per outlet, a gain from 58.4 vehicles in 2008.

Meanwhile, independent sales per month per outlet climbed about two units as well to 25.7, which Spinella said marked the strongest level since the 1990s.

"With the elimination of many franchised dealers at GM and Chrysler as well as the heavy losses of independents in 2008-09, the lower overall volume of used sales hasn't hurt as much as one could expect," he noted.

Offering some more context, Spinella added: "The biggest short-term competitors to the dealer body are private party sales. As it becomes easier to offer a vehicle through online and social networking sites, which in many cases have robust search modes, the willingness to visit a dealership of any stripe diminishes.

"This is not to say used-car dealerships are an endangered species. They certainly are not," he continued. "But they will have to increase spending, capitalize on the advantages of the Internet and provide a value-added component to compete."

Spinella added: "The greatest concern for franchised dealers: Loss of trade-ins as consumers sell their own vehicles rather than use it as a down payment on a newer model."