It’s a cutthroat world, FirstLook and MAX Systems founder Pat Ryan Jr. says, where dealer profit margins are under attack by well-armed consumers and a ferocious used-vehicle market is making it hard to maintain inventories.
Ryan: Getting right inventory and maximizing used-vehicle profits two biggest dealer concerns.
Pat Ryan Jr. believes he has automobile dealers’ two biggest problems solved.
The founder of software firm FirstLook and MAX Systems (FMS) says his company’s highly automated inventory management, vehicle appraisal and marketing service can help dealers maintain the optimum vehicle stock and, once they do, maximize profits from the sale of those in-demand new and used cars and trucks.
It’s a cutthroat world, Ryan says, where dealer profit margins are under attack by consumers well-armed with detailed Internet pricing data and a ferocious used-vehicle market is making it hard to keep car lots brimming with high-return used models.
He points to a recent FMS national dealer survey in which respondents were highly optimistic about the future.
“There were only two things people cited as concerns,” Ryan tells WardsAuto at the National Automobile Dealers Assn. exhibition in Las Vegas earlier this month. They said, “‘I can’t get enough of the right inventory,’ and on new and used (vehicles), 67% expressed concern over Internet pressure on their profits.”
Chicago-based FMS's MAX software addresses the latter by helping dealers easily post their inventory to the Web with compelling advertising copy designed to draw buyers motivated more by high value than low price.
“Twenty-two percent of people cite price as their primary (purchase) driver,” Ryan says, quoting a study by megadealer CarMax. “That means 78% of the market is about everything else.
“Fundamentally, if you boil it down, it is about price to value. So then it is all about how you sell the value.”
MAX attempts to increase the value proposition by trolling the Internet for detailed information about a particular car, then assembling that data into an attention-getting package to lure shoppers.
He points to one listing created by MAX that includes precise information about the car’s high-feature equipment and options, third-party ratings and reviews, repair history traced through its specific vehicle-identification number and a thorough price comparison against similar vehicles offered for sale in the area.
Instead of the typical, more-pedestrian description of a car found in many used-vehicle postings, the MAX software mines the manufacturer’s new-vehicle website for specifics that will resonate with buyers.
In a MAX posting, it’s a “Harman/Kardon 12-speaker surround sound stereo,” for instance, not simply AM/FM radio. Wheels aren’t blandly 18-in. aluminum, they’re “bright-machined” aluminum wheels.
“The manufacturer spends billions of dollars designing, procuring and marketing all this fantastic equipment,” Ryan says. “We basically are able to go across the Internet and say, what’s the best of the best about this car?”
There is other software out there to help dealers post vehicles for sale to the Web, but the FMS executive says MAX differs from first-generation products in that it adds pizzazz to the ad and speaks the customer’s language, answering a half-dozen or so key questions consumers want to know about a particular vehicle.
“MAX takes the very best of what the best retailer could do by having a guy spend 45 minutes a car (creating a posting) and does it automatically,” he says. “We identify the equipment packages, marketing descriptions, model comparisons – everything that made (that vehicle) great.
“People are unintentionally sabotaging their own success,” Ryan adds, pointing to more generic used-car advertising that hypes price not value. “People end up pricing at or below average (to make a quick sale). It is like a race to the bottom.”
FMS's FirstLook 3.0 product handles the other half of the equation: maintaining the right inventory for maximum profit.
Ryan says franchised dealers should stock a high percentage of used vehicles that are the same brand as the one they sell in their new-car showrooms, not fill their lots with the other guy’s models.
“Eighty percent of consumers looking for used cars start (with) an interest in buying a certified used car,” he says. “They see late-model, certified cars as a new-car quality for less. So we think brand matters a lot.”
The problem is the used-vehicle market is nearing its competitive peak, with prices high and supplies low, so it isn’t easy for a dealer to stock the right models. Retailers rely on third-party auctions to build inventory, but the process tends to push costs up and margins down.
FirstLook tracks a dealer’s inventory and analyzes sales performance, calling out which models are moving the fastest and for the highest return. It also provides instant searches to auction sites and ferrets out Internet postings by private owners, creating an opportunity for the dealer to make a bid on a hot car or truck he knows he can turn quickly.
The software’s appraisal tool presents a quick, easy way for retailers to make offers on vehicles that roll through their service departments, as well. In-demand models are flagged by the system, and customers get a detailed printout of what their vehicle is worth on a trade or sale when they return to pick it up.
“One of the things we (ask dealers) is, how many of those 100 cars (a day coming in for service) would you like to stock?” Ryan says. “The answer is always a big number.”
Dealers like the idea of turning their service lanes into auction lanes, he says, because they are not competing with 50 other bidders like at big auctions, and it can lead to another new-vehicle sale. “Customers like it because they get to buy a new car.”
FMS says about 1,000 franchises use its MAX software today, while FirstLook is just hitting the market. Pricing varies, but, combined, the two packages can be had for about $1,400 per month.