Big Boxes Tinker with Auto Sales and Rentals

Discussion
Apr 06, 2011
George Anderson

Back in 2003 when the Asbury Automotive Group decided to
pull the plug on a test selling used cars in lots set up in four Walmart parking
lots, we were surprised. We figured the locations had the traffic and proper
demographics for the venture to succeed. It would certainly prove a winner
for Walmart, which only leased out the space in the lot and was not responsible
for the inventory and other costs.

Over the years, non-auto retailers have flirted
with car and truck sales. The warehouse clubs, for example, are all involved
with car buying services for their members.

This week, two news items caught
our attention.

First, Tesco announced it was launching TescoCars.com in the
U.K. The site offers shoppers the opportunity to buy used cars online. Consumers
reserve their car on the website with a £99 deposit. They are then sent
a full RAC (Royal Automobile Club) report on the car along with links to a
video and photo gallery of the vehicle. If the shopper is happy with the auto,
they can pick it up themselves or have it delivered to their door for £149.
Cars, which come with a free RAC platinum warranty, can be financed through
Tesco Bank.

According to the website, cars are sold directly to consumers by
banks, leasing firms and fleet operators. By selling the cars online, the physical
costs associated with running a dealership are largely eliminated, allowing
for greater savings to consumers. TescoCars intends to offer up to 5,000 cars
on a weekly basis with updates happening daily.

TescoCars.com has partnered
with the National Service Network garage group which will operate Tesco Autocenters.
The centers will offer vehicle repairs at "up
to 30 percent less than main dealer garages." TescoCars.com
purchases and repair work done at Tesco Autocenters will all come with Clubcard
points.

There were mixed reviews
to Tesco’s new venture in the U.K.

Car Dealer Magazine columnist James Litton, who is also a used car
dealer, tweeted, "Just been reading RAC reports on Tesco Cars. Tires on
the legal limit, poor wiper blades, stuff not working. Game changer? Not with
this model."

Steve Fowler, editor-in-chief of What Car?, said cars
on the site were "well
priced" and the selection was a "decent offering."

In another
auto venture closer to home, Home Depot and Penske Truck Rental were sufficiently
happy with a test of truck rentals at 100 of the home improvement retailer’s
stores to expand the offering to 400 locations across the U.S.

Ron Defeo, a
spokesperson for Home Depot, told Dow Jones Newswires
that consumer interest led to the expansion and that future results would determine
if truck rentals eventually became standard at the chain’s roughly 2,000 stores.

Penske
also has about 2,000 locations across the U.S. and trucks rented from Home
Depot locations can be returned to either companies’ lots.

Home Depot’s primary
rival Lowe’s does not offer a similar service.

Discussion Questions: What is the attraction for big box retailers that are testing partnership programs for the auto sales and/or rental markets? What is your assessment of the Tesco and Home Depot programs?

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5 Comments on "Big Boxes Tinker with Auto Sales and Rentals"


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Doug Stephens
Guest
Doug Stephens
10 years 1 month ago

Whether such ventures will prove fruitful or not is debatable and one can only assume there’s been ample homework done at Home Depot and Tesco. But I’d sum up the broader trend by saying that over the next 5-10 years there is no category that will escape the gaze of these giants as they attempt to keep the fires of growth blazing. They are currently facing the reality of a growth rate that is up to 25% lower than they are accustomed to and will therefore be turning over every rock they find for potential revenue streams.

All retailers in every category should be on high alert and use what time they have to solidify an own-able position in their markets!

Gene Detroyer
Guest
10 years 1 month ago

Truck rental + Home Depot (or Lowe’s) makes perfect sense. It is a natural tie-in. Plus, if the trucks could be rented by the hour it would be a tremendous convenience to shoppers and huge incremental business to both HD and Penske.

With regard to Tesco, it isn’t a matter of Big Box, it is a matter of online. Over 80% of potential car buyers now do their pre-buying research on line. They narrow their choices to a few. If they are not familiar with the cars, they may go to a showroom. But, many then leave the showroom and head back to their computer to get the best price and buy it online.

The growth on online automobile purchases is fast outpacing the industry. The future winners will be the online merchants that can provide post purchase support as Tesco has. Why not Amazon?

Gene Detroyer
Guest
10 years 1 month ago

So, I asked myself “Why not Amazon?” See my comment above.

I went to Amazon and there were 4 links for online buying of automobiles. I guess my conclusion is “Why not Amazon?”

Bill Robinson
Guest
Bill Robinson
10 years 1 month ago

I remember when my wife and I decided to renovate our house few years ago. This started a pattern for going to Home Depot several times a month. I recognized soon the connection between big box and short haul transportation. After three trips I bought a used station wagon. I paid $15,000 for it, used it exclusively for that purpose for about a year, then sold it when we were done.

Home Depot is very smart to explore truck rental in its mix of services. Not only will it draw customers the their box that might have otherwise gone to Ryder or UHaul, it will respond directly to those customers who don’t have nor want an SUV or station wagon. When those customers rent the truck, they’ll be more inclined to fill it up with more stuff. Traffic, Service, and Upselling–not a bad combo!

Larry Negrich
Guest
10 years 1 month ago

Used cars online without expense of carrying the inventory doesn’t have too many pitfalls. Looks to be like an AutoTrader-type endeavor that will be “selling” consumer cars and used fleet sales with Tesco driving site traffic.

My local Home Depot has been renting trucks for some time to accommodate consumers who need to transport large or heavy products. I often see the rental trucks in my local Home Depot parking lot sitting in their designated spots so I’m not sure how well a larger-scale rental business will be for them. But Penske has been successful at most of their businesses so I would bet this will work out with them being involved.

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