A Volkswagen dealership in Marion, Ill., is deploying strategies traditionally used to foster vehicle sales to encourage staffers to buy more used cars directly from consumers to help the store stock its lot.
The efforts have helped reduce Volkswagen of Marion’s reliance on buying from wholesale auctions, lowered its per-vehicle acquisition costs and boosted used-vehicle sales and overall dealership profitability, said Ashlee Church, general manager at Volkswagen of Marion.
Store leaders ramped up efforts to purchase directly from consumers in early 2019, bolstered tracking procedures around those acquisitions and subsequent sales and implemented bonus opportunities for sales reps who were successful at the new approach. The dealership also scaled back emphasis on its business development center.
“We really had to work to get everybody to embrace this philosophy … that acquiring a vehicle from a customer today generates a future sale,” Church told Automotive News. “That can be difficult in sales because a lot of salespeople, by nature, want instant gratification. They want to sell a vehicle today, earn a nice commission on it and move on to the next customer.”
But the direct vehicle acquisition strategy needed to be a longer-term play, Church said. New policies around tracking acquisitions and sales, lead handling and compensation were key because the resulting daily practices and subsequent data helped store managers reinforce with staff why it was important to stay focused on direct buying.
The strategy became even more critical in March 2020 in the early weeks of the coronavirus pandemic. Volkswagen of Marion’s showroom temporarily shut down, and staff pivoted to selling by appointment. Dealership managers reevaluated sales strategies and made changes that sharpened staff attention on the direct buying approach, Church said.
Since then, she said, the dealership has evaluated sales rep performance on both the number of vehicles sold and acquired.
“We went to our sales team, and we said, ‘We really need your help in acquiring inventory,’ ” Church said. “From our sales reps to our sales management team to our leadership team, we all take on that accountability of acquiring vehicles. Our sales reps on the floor are the ones who handle all of the leads.”
It’s pretty similar to how “we do on the sales side of things,” she said.
Much like how retail vehicle sales are tracked, each acquisition by every rep is detailed on a board in the dealership’s conference room. Acquisition goals are communicated along with sales goals, and performance against those goals plays into evaluations of sales staff.
Reps receive a flat payment — the amount wasn’t disclosed — for each vehicle they acquire. They have opportunities to earn additional bonuses that are tiered according to the number of vehicles acquired per month. Those bonuses start when the rep acquires three vehicles in a month and go up with every two cars beyond that. Reps also receive an additional bonus for bringing in an acquisition without relying on a lead from elsewhere.
In Marion, with a population of about 17,000, the dealership sold 787 vehicles in 2021 — 306 new and 481 used. This year so far sales volume is trending up, with new-vehicle sales of about 30 and used-vehicle sales of about 40 each month, said Church, who credited the increase on the used side in part to the direct buying strategy.
Ryan Dare, sales and inventory manager at the dealership, noted that acquiring vehicles for inventory directly from customers has aided other departments such as parts and service, which gets to book reconditioning revenue for each car that goes through the shop on its way to the lot. And the finance department can book finance and product sales revenue when those vehicles are then retailed.
Dare, who assumed inventory management oversight for the dealership in June 2020, also noted that the approach has kept him from having to ever visit a physical auction to buy vehicles for the store. And it made for a steady pipeline of vehicles even as the industrywide vehicle shortage created an inventory crunch in 2021.
From March 2021 to February 2022, 37 percent of the dealership’s retail used-vehicle sales are attributed to direct-from-customer acquisitions, Church said. And for each of those directly acquired vehicles retailed, the store generated an additional trade on just more than half, she said.
Volkswagen of Marion is averaging 20 vehicles acquired directly from consumers per month so far in 2022. That’s grown well beyond the two to five vehicles bought directly each month back when the strategy was launched, Church said. With its early numbers, the store could have thrown in the towel on the idea back then, she said.
“It’s easy to think it’s not that impactful that we’re starting to acquire a small number of units,” Church said. “It would have been really easy at that point to give up on it and say that it wasn’t worth it. But when you look at that now, we acquire many more than two to five vehicles a month.”