A five-point customer-focused growth plan is driving used-car volume at Crown Automotive Group.

Crown operates 25 dealerships in Florida, Ohio and Tennessee, retailing luxury and domestic brands along with factory-certified pre-owned vehicles and a selection of “Crown Certified” used cars.

Crown’s used-car operations averaged a combined 850 monthly sales in 2019. Volume was up 8%, the third consecutive year-over-year increase. Front and back profit averaged $2,000 per vehicle.

David Simches is the group’s used-car director. He has been in the used-car business since 1986, save for a brief time as a vendor technology sales and performance manager. He joined Crown in 2016.

Crown has a 70-day turn policy and a goal to retail 70% of inventory within 30 days of acquisition.  In practice, 50% to 65% of stock sells within that time, Simches said, noting his high reconditioning standards for any gap.

Substandard recon, Simches said, is the No. 1 reason vehicles age.

“I prefer to get my cars frontline-ready as opposed to frontline-available. Frontline available means inventory’s out there, but not fully reconditioned. I’d rather have a customer-focused, priced-to sell, properly reconditioned car to market and then learn to transact at my selling price,” Simches said in a late December phone interview.

To achieve results — and drive for continuous improvement — Simches’ growth plan is focused on implementing and improving processes to build consumer (and sales team) confidence in Crown used cars. This culture must permeate everything Crown dealerships do to make it easier for people to buy from them.

To support those objectives, Simches and team:

        • Market a “first-price” sales strategy

        • Improve trade effectiveness

        • Focus on reconditioning quality and speed

        • Embed buyer confidence in used cars

        • Strengthen digital retailing

First-price strategy

By no means rocket science, a first-price strategy must have teeth: a fair price and sales professionals able to hold margin. 

“Everyone is online and looking at your cars online, so pricing high and working down from there with the customer is a race to the bottom,” Simches said.

As helpful as pricing tools are, old pricing habits die hard.

“Everyone feels as though they need their shot, right? So, even though they’re paying for a pricing tool, they still practice cost-plus pricing. This practice causes aged units and no-gross deals,” he said.

For Simches, an effective first-price sales strategy demands that every vehicle moved to the used-car or virtual lot must “stands tall,” thoroughly presentable and complete.

Trade effectiveness

Trade-in practices are such important sourcing decisions today. Is the goal to maximize margin — or win a customer to capture an asset for the used-car department and pick up additional downstream revenue opportunities?

For Simches, the play is appraisal-to-delivery ratio, which he said is a more accurate and meaningful metric than the traditional look-to-book trade-in performance method.

Simches minimum appraisal effectiveness is 150 appraisals to 100 deliveries. “A dealer actively sourcing or trading should achieve a best-in-class appraisal-to-delivery ratio of 2 to 1. When I increase appraisals, I sell more units,” he told Auto Remarketing in 2018.

“I want to appraise every car, whether a trade, a private sale, cars in the service lane — or phone ups and Internet leads — because I want to ensure consumers do business with us. When we buy a car, a lot happens downstream, and because we now rely less on auctions, our cost per sale is going down,” he said in the 2018 interview. “In today’s transparent market, why not give the customer what the car is worth — who knows, the guy might buy a car from us,” he said.

He said tools and apps that provide buyers “instant cash” and other trade-in enticements have radically changed vehicle trade-in dynamics. Dealers slow to adapt might continue to profit handsomely buying trades, but too often high-ball trade appraisals cost replacement inventory, the sale of a new or other used car, and missed F&I opportunities and downstream service and maintenance dollars.

“Trade effectiveness has to be the number one focus for a dealership,” Simches said again, for this story, in the late December interview.  “People ask dealerships all day long, ‘What’s my car worth?’ We must start paying attention to all the opportunities that exist in front of us and go after them aggressively.

“A dealer needs to know what they want to pay for a particular car and offer that price upfront, which is a strategy to acquire an asset versus some upfront profit number,” he said. 

“When someone today asks for a trade appraisal, you better believe they have a number in their pocket. If your offer is low to test the customer’s temperature, especially if they’ve been online first, you’ll not see them again. Mike Anderson of the Rikess Group has a compelling statistic that shows that 70% of consumers today walk away from the best deal when they don’t trust it,” Simches said.

“That’s why I’m driving culture change here. If you’re looking at a trade that’s worth $5,000, but you offer the customer $3,000 and end at $7,000, the customer’s still likely to walk away from this deal — which is a phenomenal deal— thinking that they got ripped off. I’m trying to stop this and the culture of under-allowing on trades,” he said.

Recon quality and speed

I know dealers who report selling quite a few cars online seemingly simultaneously as they are unloaded from transport and recon, but Simches won’t have it. He’s convinced the proper recon culture and process can result in cars sale-ready fast and fully reconditioned to his standards.

Furthermore, he said, a retail-available process that may rush cars through recon to get eyeballs on them devalues those cars. 

“You get eyeballs on them sooner, but allowing substandard recon to achieve that is a significant reason for gross erosion and aging, which happens as soon as you find yourself having to apologize for those cars as your prospect points out missing trim, cosmetic blemishes or a smelly interior. The gross descent when that happens is pretty quick,” Simches said.

Premature placement also confuses the sales staff and can perturb the customer.

“It’s a Thursday, so the used-car manager doesn’t want to have that car off the front line for the weekend. That afternoon a salesperson takes a call. ‘Hey, do you have that blue Grand Cherokee? May I come in on Tuesday and take a look?’ ‘Sure, you can.’

“On Monday, however, the car’s pulled off the lot and sent to the body shop for bumper repainting. When customer arrives on Tuesday and because the sales associate was not advised of the move, both she and the customer are confused, which creates tension,” Simches said.

Crown’s reconditioning practices use automated recon software tools to eliminate those types of communications mishaps. The process also gets cars reconditioned to Simches’ standard in four days, from acquisition to sale-ready.

“In my 34 years, I’ve learned that when you show a car reconditioned to stand tall and priced right, you don’t have to worry about a turn policy. The cars just sell,” Simches said.

Crown Confidence program

Crown retails factory-certified pre-owned cars and older and higher-mileage cars, as do most franchised dealerships. To build confidence in non-OEM certified vehicles, Crown warrants their dependability under an internal certification program it calls Crown Confidence.

Crown Confidence warrants 9-year-old and newer cars having up to 90,000 miles on their odometer. There is no time limit on this coverage. Benefits include a vehicle condition report and clean title guarantee and a 101-point inspection. A seven-day, no-questions-asked return policy adds further purchase confidence.

“It is borderline how much extra gross the program produces, but it does help us close deals,” Simches said.

A further confidence builder, he noted, is a full-motion, high-definition YouTube video walkaround and inspection service program he’s rolling out this year. The service captures both lot or showroom vehicle images as well as mechanical inspection and repair processes. Attached to Crown online listings and pushed via text to Crown sales teams and their prospects, these videos Simches said will build confidence in Crown cars with his sales teams and their customers alike.

The on-lot video service also records before-and-after multipoint inspections to personalize buyers’ digital experience further.

Digital retailing

By experimenting with digital retail tools, Simches hopes to close the gap between Crown dealerships’ customers and prospects’ online and in-store experience. He’s been experimenting with various digital retail technologies, with mixed results.

One technology, in particular, drew sales team endorsement — at first.

“It was a good idea, but it wasn’t going to be quite as easy (to transition his team) as we first thought,” he said.

For example, the technology revealed essential differences between Crown’s in-store and online sales processes. That awareness, Simches said, is helping his teams unify those experiences.

“Sales are increasing, and because salespeople feel empowered, their turnover has dropped. Volume has increased relative to stores that did not adopt digital retail technologies,” Simches said.

Crown continues to experiment with digital retailing products.

Online used-car sales stand at 31%, based on a lead-form submission data only. Simches suspects the actual online sales percentage is higher but cannot document that assumption.

Photo/video credit: The video in the above window is from https://www.crowncars.com/crown_confidence.html.  The photo in thumbnail is a screenshot from that same page.