If the current rumours circulating the car world that Tesco are about to enter the world of selling used cars, (Tesco to sell used cars?) well let’s just say we wish them luck. Clearly they have an enviable record and no doubt they are kings of their particular jungle; however as anyone who has been in the business for any length of time will tell you it certainly isn’t as easy as it might at first appear.
In fact selling cars is a rather unique business which companies like Tesco really need to understand when thinking about getting involved. For example the mark up on food is infinitely more than cars and there are a lot more products to spread your risk on. There is talk of Tesco using an online system to sell thousands of used cars for very low margins in order to generate massive profits by selling finance and insurance products via its insurance arm. Well, welcome to the club, the car business has being going down that particular road for quite some time and even for the experts it’s not that easy.
We have been saying for a while that eventually the cars will just be used as profit generators for other products, but the public aren’t stupid and the clever ones are already negotiating discounts on cars whilst giving the impression that they will take a pile of add-ons only to decline them once the car deal has been agreed. We all know that dealers cannot sell the car at one price as long as the dealer takes finance products because that is illegal.
If Tesco really think that from a standing start they have the knowledge and expertise to be able to sell used cars by the truckload and do it better than the pros, we say good luck to them because it is getting harder and harder to make a profit.
The other question they may have to ask themselves is just exactly where they think they are suddenly going to find big volumes of quality stock? The PowerPoint peddlers in corporate meetings love the word “challenging”; well it will certainly be that.
Ask anyone of us in the trade trying to do it daily and often failing and we know what we are doing. They certainly have the financial muscle, the brand image and are a hugely recognizable and established brands in the market place like Autoquake may have some concerns if Tesco do enter the fold. But can Tesco really make a challenge and grab themselves a piece of a market which is ultra competitive to say the least?
Remember Richard Branson getting his fingers burnt with Virgin Cars? Although times have moved on somewhat Branson’s predictions of selling 24,000 cars in the first year with a £300m turnover were well wide of the mark as they barely managed 10% of that figure and quitely shut up shop a year or so later.
Tesco could need every little bit of help they can get.
Subscribe to Motor Trade Insider by Email