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I wrote an article about Autoquake when they went belly-up a few years back which brought me a lot of positive feedback. When Tesco cars got into bed with the struggling Carsite operation, I again wrote a brief piece about how they should be able to bring some fresh knowledge to the market and how using Carsites experience of a tough few years of online retailing might be able to make it work.
I did point out at the time that I believed Tesco only viewed Cars as a gateway product to Finance,Servicing,Insurance etc, this was based on my knowledge of the car trade and the ridiculous margins that the trade works to. So a little over a year later Tesco have decided to shut this project down. I am not surprised and the only eyebrow raiser was why they didn’t get out after about two to three months, time enough to know used cars are a non runner.
Tesco as a company will steamroller to massive profits as usual this year and the closing of a car retailing arm will be one of several hundred promotions/strategies they will introduce or scrap on a yearly basis. I think analysis of stock or pricing models etc is old news, we all knew the model and plan. The bottom line is Tesco introduce Lean systems into the market. In any retailing project they take on they look to trim the fat out of the supply line so they can place the product into the consumers basket as efficiently as possible. They cut out waste, cut out middle men and agents, streamline systems to be as labour effective as possible, maximise existing profit streams and develop new ones.
When Tesco entered the UK used car market they entered the leanest possible used car market on the planet. I have moved around the world buying and selling cars, I keep in regular contact with overseas clients and can guarantee you that nobody works for smaller money than a UK used car dealer. Today I will have buyers at Three large auctions spread out across the country. They will be standing toe to toe with buyers for major chains and retail supermarkets who will all be trying to buy similar product. We all see cars differently and this is a determining factor in the sale price. Another determining factor is how cheaply dealers are prepared to work, and when it comes to saleable stock that has a good turnover large retailers are happy to take on good Vauxhall,VW,Ford and Toyota stock with £300 to £500 ticket in them and hope to be able to make any actual profit from Part/ex or a finance/warranty/servicing plan. When I speak to friends overseas bemoaning the fact they only pulled a few grand from a used deal or speak to friends in other retailing businesses moaning about how they only make £30 profit from an item they are buying for £40 a unit I really feel they don’t know how easy they have it.
In my mind Tesco would have had a definite plan to make it work but a few months of operations would have shown them the real profits, and after looking into every avenue to reduce costs and maximise profits only to find the entire industry at its cutting edge was running as lean as possible anyway, decided they would leave it to us and get back to profitable projects.
© 2012, MD. All rights reserved.
