It's a 1st-Class Used-Car Act

For years, Phil Smart Jr. was frustrated in his efforts to get his pre-owned department to perform to the levels he thought possible.

His store, Phil Smart Mercedes-Benz on Pike St. in Seattle, had no used-vehicle lot to speak of. So he devoted roughly half the showroom to displaying used units.

The rest of the pre-owned inventory was parked in as many as a dozen different locations within three or four blocks — whatever Smart was able to negotiate from other business owners with extra space. It was a logistical nightmare for sales and support people.

In the more than 40 years since his father, Phil Smart Sr., opened the business, there never had been what most dealerships take for granted: a good-sized, visible lot on a busy roadway as well as plenty of contiguous storage for used vehicles working their way through reconditioning.

There were a number of failed attempts to purchase land over the years. Then, a few years ago, Phil Jr. was able to lease a 4-acre property occupied by a former truck dealership on Airport Way about a 10-minute drive from his dealership.

The site is in an area near Seattle's sports stadiums and the world headquarters of Starbucks. It is visible from a heavily traveled elevated freeway a few hundred yards away.

A building that housed a Mack truck dealership on the property makes it a good spot for the pre-owned operation Smart had long dreamed of running.

The opportunity outweighed the downsides of the location, such as Airport Way itself not being a high-traffic road and the site not being within walking distance to the main dealership.

But Smart thought he could make it work. Given the economic volatility of the last several years, he chose to take a gradual, but steady investment approach.

“In times like these, you can't lose your entrepreneurial edge,” he says. “You've still got to be willing to take a good risk to stay viable in the market.”

After roughly five years of hard work, he's on the verge of realizing his vision. He is in the last of a series of renovations to the building, of which 8,000 sq. ft. are devoted to display and 2,000 sq. ft. to office space.

The rear part of the interior holds up to 40 used vehicles that customers can comfortably examine on even the rainiest Seattle days.

In the front, he's created a more formal area for displaying vintage Mercedes-Benz vehicles he and his dad have acquired over the years. The sense of heritage is one of the core values in his branding message.

Four large windows were installed in a front brick wall to bring lots of light. In the center of the showroom is a raised fireplace and cozy furniture setting. On one wall is a parts boutique; on another, large cherry-wood cabinets holding 47 years of art and awards.

There is also a 300-gallon fish tank, a kiddie play area and high-definition television. Not bad for a used-car showroom.

Outside, there is plenty of lot space to display another 40 vehicles. Landscape enhancements include a long row of cedar trees in decorative pots.

The Airport Way property also afforded Smart a chance to build badly needed additional service facilities.

On the other side of the lot, Smart leased a second building for fixed operations overseen by Dave Schuelke and John Shepard. Service work and profits are up.

A high wall of this second building presented another opportunity to make the location stand out. Smart commissioned a local artist to create an eye-catching wall mural.

To optimize the pre-owned sales opportunity, Smart and General Sales Manager Don Stevens, brought in Michael Hayes, a seasoned local pre-owned manager. They created a separate sales force for the new location.

Dividing the sales force was a big decision for a dealership with many veteran sales people working out of the original location for more than four decades. The used-vehicle facility also is getting its own full-time finance and insurance person on site.

“We just decided as a team to go for it,” says Smart. “Not just a separate location, but an entire operation, worthy of new-vehicle sales but dedicated to our pre-owned with a separate sales force and a strong, consistent message to the community about who we are, where we are and what we stand for.”

The creation of the used-vehicle facility required an ad campaign to get the word out. Smart did that through cable TV, radio, direct mail and Internet marketing.

It seems to have worked. In the past, he had sought to consistently sell 35 used units a month with good margins. But he rarely hit that number.

When the advertising reached full stride in late 2006, records were broken month after month, moving into the 40s and 50s, with quick inventory turns, healthy margins and supplemental F&I sales.

On the agenda this year is fine tuning the brand message to leverage the dealership's heritage, integrity, quality and selection so the used-vehicle operation can average 55 unit sales a month — a number that once seemed unreachable.

“Most of us in this business know very well that a good pre-owned operation is worth every bit as much as an additional new-vehicle franchise,” says Smart. “It's strange that so few of us really follow through on that.”

Auto veteran Bob Kamm heads Kamm Consulting, a leadership development firm in San Luis Obispo, CA. He is author of two books, The Superman Syndrome and Real Fatherhood. He is at [email protected] and www.bobkamm.com.