Laureate winner shares his insights
At this year’s ADESA remarketing forum, Steve Chipman, 2010 Laureate winner and president of the Birchwood Automotive Group, based in Winnipeg, MB, provided insight into the auto business to an audience consisting primarily of large commercial vehicle remarketers, including manufacturer finance, leasing and rental companies. The content of this presentation was so compelling that I asked him if he would permit me to share it with Canadian auto dealer’s readers.
In fact, this is the first of two articles that will be derived from that presentation. In this first article, we discuss Chipman’s perspective on what has transpired in Canadian new-and used-vehicle markets over the past five years, while the second article will present his thoughts on where things are headed in the next five years.
As president of Birchwood, Chipman oversees a Winnipeg-based operation that was founded in 1964 and now consists of ten dealerships, two collision centres, a leasing company, a rental company and an independent used-vehicle store. This certainly provides a great window through which to view the automotive business in Canada as it continues to evolve. Chipman’s presentation identified several areas of change that dealers have had to contend with over the past five years, including retail marketing, subprime financing, competition and vehicle sourcing.
Adapt to your audience
Chipman notes that the marketing tactics employed by his dealerships have evolved to make use of channels that are highly visible to potential retail customers today. His marketing dollars have been redeployed to make use of the Internet, creating detailed vehicle listings with photographs for publication on his own online properties, as well as on the leading Internet media sites. Increased efforts are also being focused on maximizing Search Engine Optimization (SEO), including both organic placement and sponsored positioning. He notes that more and more vehicle shoppers are turning to web-based information sources and that dealerships wishing to reach such potential buyers must adapt.
Access to financing has been a significant challenge for many dealers and customers. Chipman says that tightening credit has changed the way that his dealerships handle subprime customers. All elements of these transactions have been affected and Chipman’s sales and F&I staff have had to modify the way they market to, sell to, and support customers in this segment. Helping these customers find appropriate vehicles is foremost for his team, since in many cases people’s expectations have to be tempered and refocused on their utilitarian ‘needs’, as opposed to their ‘wants’.
Since there is less flexibility in retail credit granting, the sales process on the lot has been modified to ensure that the customer is being directed only to those vehicles that fit the available financing options for their specific situation.
Stock on your lot
Finding the right vehicles to stock has become easier for Chipman’s dealerships. He notes that the growth in online auctions helps his group buy exactly what they need more effectively. The offset is that with such a wide selection available, his buyers can sometimes be overwhelmed by the choices. They need to have a plan based upon what is selling in their marketplace before they begin the buying process.
He is also very focused on moving stock that has been on the lot too long, and has implemented strict guidelines within his used-vehicle operations to ensure that inventory does not sit around. These guidelines address both intra-group trades, as well as a directive to use wholesale auctions for remarketing units that cannot be retailed elsewhere within the group. This is a key element of Birchwood’s strategy and Chipman believes strongly that used vehicles must be sold at auction once it has been determined that they have been on the lot too long.
Changes in the business
The challenges in the new-car sales business since the recession began have certainly resulted in a renewed focus on used-vehicle sales. Many franchise stores have begun to embrace used-vehicles to offset the downturn in their primary business, while others, as a result of downsizing their franchise networks, have gotten completely out of the new-car sales business and transitioned to pre-owned sales exclusively.
This has intensified the used-vehicle competition for Birchwood, and Chipman points out that many of these operations are managed extremely well. The entire used-car business has evolved into a larger, more professional and analytical enterprise, and he expects that used-vehicle retailers will continue to get better at buying and selling in the market.
He recognizes that there will be more demand for the good units that could push prices of those vehicles up and squeeze margins for the dealerships. As a result, Chipman will continue to refine his own processes and ensure that Birchwood stores are buying deals right and reaching the right buyers.
Birchwood has proven to be a significant success story within the Canadian automotive market. With successful operations in almost every aspect of the business, Chipman’s insight is quite unique and certainly valuable to other stakeholders in the business. Our next discussion will focus on where Chipman thinks the business is heading and what his operations will be doing to ensure they are ready for the future.
