How to develop used stores at a low price – L’argus PRO

“Five years ago I would never have dared to sell these vehicles! ». Like this distributor, there are a few of them that are still on the cutting edge who have launched themselves in used vehicles at low prices.

In the wake of the pioneer, the distribution group Gemy, which created its label “Easy Gemy” in 2009, we now find Easy VO (Amplitude), Oh! used (Rouyer), Appigo (Cobredia), Low’caz (Jean Lain), Stock Deal (Bernard) and a few others.

Where are we today? Club Argus took stock during a round table organized in Paris on 17 June.

The idea had matured just before the crisis, in 2008-2009

“Pascal Gérard, (ed.: head of the Gémy group), forced us to think about how we could sell the used version differentlysays François Guérin, director of Gémy Used Vehicles. It was the era of Easy Jet… “.

This major distributor of the Peugeot brand, present in Brittany, Pays de Loire and in the Var, is testing its low-cost UV approach, Easy Gemy, at its Toulon site and then at Angers. After a few adjustments, the success is there. Today, the group’s 18 dealers wear the Easy Gemy colors and thus sell 150 used cars at low prices every month.

A strict return policy

The vehicles, which for the most part come from trade-ins, are more than 4 years old and have driven up to 150,000 km. They are offered from 3900 euros, but they can go up to 29,000 euros for a premium model at a low price (in fact, the median price is 8,300 euros). This large single-brand Peugeot group (which is now also a partner of Citroën) offers 17 brands under its Easy Gemy brand.

Each low-cost car generates a noticeable average margin of 1500 euros. The main ingredients in this success? A strict take back policy and the low cost of repairing these UVs at their UV preparation center near Angers. This veritable little factory, running in 3×8 shifts, releases 35 VO per day.

All vehicles older than four years are not necessarily eligible for the label. If the repair costs, especially on the bodywork, are too high, they are not retained.

The rules for low-cost concepts

This approach is part of the general wave of low costs that has imposed itself in many areas. But what are the driving forces and the rules?

“This is a simplified offer which does not involve a search for social status on the part of the buyer. It responds to a need that arises as a result of the trend in unemployment and the fall in purchasing poweranalyzes Pascal Perri, economist and co-founder of the association of low-cost companies.

To be effective, the low-price offer must be visible and legible to the customer. This is why a “duplication strategy” must be adopted. In fact, low-cost products are not sold under the same brand as traditional products, they are not staffed by the same sales teams, and the routes to market are different (often with a greater use of the Internet).

Take a piece of the pie from peer-to-peer transactions

The path that Gemy has opened in the automotive sector is in line with the times. The market itself naturally moved towards the offer of older vehicles. Between 1995 and 2015, the share of used vehicles over five years in total used vehicle sales increased from 57% to 67.4%.

The challenge for professionals is now to position themselves in this growing market by offering used cars at lower prices and thus take a piece of the pie of transactions between individuals. Buy side and sell side. It is in this context that the supply of cheap used cars has begun to flourish over the past two years among car dealers.

 “The Jean Lain Group created the Low’Caz brand in June 2014, comments Mickaël Borget, manager of used vehicles for this group of 30 dealers in Savoie, Haute-Savoie, Ain and Isère. We have tried to reduce costs while maintaining the essential, safety. We communicated about the first prize of 3,000 euros”.

A separate offer

Over the months, the approach has been refined. ” Initially this offer was integrated into the used car offer in general, now it is offered separately because it was difficult to manage it all. “. Today, the typical UV sold under this brand is between 6 and 7 years old, more than 80,000 km and the price is around 9000 euros. Mickaël Borget hopes to sell a thousand this year.

 For his part, Gérard Richard, chairman of the Amplitude group (ten sites in the Loiret, Aube, Haute-Marne, Côte d’Or and Yonne) launched the Easy VO brand in May 2015. “We wanted to look for margin, starting with the Dijon location and then Auxerre, with vehicles with 100,000 km at prices around 6,500 euros. The offer will be extended to seven dealers next year”.

The art of buying well

Where do the vehicles come from? For Easy VO, half comes from repossessions, the rest comes from auctions, short-term rental returns, “dry” repossessions (without purchase) or even purchases from colleagues. On the Low’Caz side, 50% of the supply comes from external purchases, 25% from trade-ins and 25% from “dry” purchases. In particular, the Jean Lain group orchestrates these “dry” takeovers by so-called “Friday cash” operations with an online estimate of a conversion rate that reaches 70%.

Repair costs must remain low, but the necessary changes must be made to avoid the explosion of warranty costs. They are between 700 and 800 euros at Jean Lain/Low’Caz and between 600 and 650 euros at Amplitude/Easy VO, who mainly use Motorcraft parts.

Vehicles should rotate through inventory fairly quickly. They are on average between 35 and 40 days. If a vehicle is over 60 days old, Amplitude changes its destination and resells it at auction.

Significant margins

What are the margins? At Jean Lain/Low’Caz, the gross profit is around 1800 euros, and the “limited” margin 900 euros, i.e. twice the traditional used vehicle. For Amplitude/Easy VO, the gross margin fluctuates between 20% and 25%, and the semi-net margin is 9%. The goal is to get closer to 1000 euros. This margin can be improved by selling options, extended warranties or aftermarket packages. A few rare customers are ready to spend more to remove a scratch on the offered vehicle as is.

Who are the customers? For Gérald Richard, these are first-time car buyers, buyers of a second car for a household, but they do not come from the underprivileged strata of society. Unfortunately, he laments, it turns out that these low-cost customers take the financing formula little or not at all because “they have money.” Perhaps they are also, like smart buyers, wary of credit.

Mickaël Borget, for his part, also notes that these buyers are getting access to cars for the first time. They have a budget but don’t want to spend it all on buying a car. Kudos to his M&I who manages to sell them funding.

Manufacturers participate in the race

In the wake of distributors, a few rare manufacturers have taken an interest in the supply of low-cost cars in their network. This is the case with Peugeot and Toyota. The Lion brand launched the Primo warranty in 2010, covering vehicles over 8 years old.

 “We were looking for a younger clientele to complement the one we already had, says Laurent Fayet, used car manager at Peugeot. By retaining these customers, we run the workshops and sell spare parts. “.

The Primo brand benefits from identification in used parking lots and on the Internet. This warranty, which originally covered vehicles up to 130,000 km, will be extended to 160,000 km and a maintenance contract may be attached. In fact, these vehicles, which are an average of 6 years old, have 83,000 km on the odometer. The offer starts from 3500 euros.

Toyota will offer a warranty to individuals

For its part, Toyota has promoted Zen events for vehicles between 7 and 15 years old and over 150,000 km.

“It is a way to strengthen the profitability of the network ” says Alexandre Moissette, head of used and short-term rental companies at the Japanese manufacturer.

This brand, which will soon be renamed “Essentiel”, represents 5% of the warranties sold, i.e. just under 2,000 UV. Zens Occasions have an average of 80,000 km and sell between 5000 and 7000 euros after 700 euros of preparation.

 In the same spirit, Toyota approached people who sold their car to other people and offered them a Zen warranty (at 109 euros for a Yaris). The experience made Alexandre Moissette realize that it was more relevant to target the buyer of the used vehicle and not its seller.

To animate their networks, manufacturers are tempted to promote, even to monitor the budding activity of the low-cost business. Fortunately, many of the distributors are a few steps ahead in this area.

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