Manheim foresees 'challenges' for Tesco cars business model
The supermarket giant has teamed with online car retailer Carsite and will sell up to 3,000 cars from fleet and lease fleets a week. Buyers won’t be able to test-drive the cars themselves but will be able to see a video of the vehicle being tested. All vehicles will come with a one-month RAC warranty and buyers will have a 7-day money back guarantee if they aren’t satisfied.
However, Mike Pilkington, managing director, Manheim Remarketing, has expressed his concerns with the business model.
'The Tesco brand is attractive to many retail consumers, however it is unlikely that the brand alone will be enough to address consumers’ reluctance to purchase big-ticket items online and clearly a used car up to four years old is a big-ticket purchase. Also, very importantly, used cars are not a commodity item, which Tesco is used to selling. Each one has its own features, degrees of usage and thus individual characteristics. The buying process is still very much something in which consumers like to properly engage and, in the main, this means they want to "see and touch" before buying.
'A recent survey by Manheim Auctions of 3,000 motorists has shown that although most will spend an average of 18 hours online researching a car before they make a purchase, taking the plunge and buying online is still a step too far. Two thirds of consumers admitted they wouldn’t have the confidence to buy online, whilst 25% said that although they’d be happy to find a car and agree a price online, they wouldn’t part with any cash until they had seen the vehicle.
'After the recent demise of the UK’s leading online retailer Autoquake, the success of the new Tesco/Carsite partnership will have to be judged on results rather than claims at launch. Although Carsite has been in existence for a number of years, if its volumes is to step up from its current suppliers of vehicles, then it will need to beef up its infrastructure in order to handle the additional demand. Then, of course, it still has to achieve the required higher values and necessary stock turn on a consistent basis, across greater volumes, to ensure it maintains the supply of vehicles. This could be something of a challenge.'