A trio of MBAs are trying to create a new model for selling cars at a consignment store they hope will somebody be the flagship of a new chain.
Michael Bor, Aaron Montgomery and Will Boland opened shop earlier this summer at CarLotz in Richmond, Va.
Although they've sold fewer than 100 units so far, they hope to follow the path of Richmond neighbor CarMax Inc.
The idea for the store came about when the partners were driving around town. They would see cars for sale by owner parked on the corner of busy streets.
"We thought there had to be a more efficient way for the private seller to sell their car than parking it on the side of the road," Bor said.
So they raised capital for a new venture even though only Montgomery had any dealership experience.
He had worked for several large dealer groups and as an auto consultant for McKinsey & Co.
"His hands-on dealership experience has been invaluable in getting this off the ground and developing processes that makes this a business than can have some considerable scale," Bor said.
Bor and Boland came from the finance business.
The store opened at the start of the summer with capacity for 60 cars. They thought the rollout would take a while, but they filled the lot within two months.
By mid-August, CarLotz consigned 90 cars and sold about half of them.
The founders handle all aspects of the process themselves, so far. They employ one person and a couple of interns.
They don't call themselves salespeople, though, or even associates.
They are "coaches."
A large role the coaches play is in managing people's expectations.
Many times people believe their cars are worth more than they think while other times they underestimate the value.
CarLotz appeals to consignors because they handle the hard work involved with selling a car.
Each vehicle is detailed as soon as it is taken on consignment.
It is then photographed and marketed on all the major websites, such as AutoTrader.com and Cars.com.
The CarLotz staff keeps the car clean and the tank full until the vehicle sells.
The biggest advantage for the consignors is not having to leave their offices at lunch time to meet some stranger in a Wal-Mart parking lot to sell a car, Bor said.
Buyers come to CarLotz for the same reasons as any traditional dealership. The store offers financing, service contracts and a wide selection of vehicles.
"What we're trying to provide people is a super transparent way of buying cars," Bor said.
That selection is a little different in one way, though. It's dictated by what people want to sell rather than what people want to buy.
That creates some challenges for the CarLotz owners.
They overcome that by marketing to find a buyer who may differ from the traditional private sale customer, such as an exporter.
CarLotz is located in a prime location along the Midlothian Turnpike.
It's nestled between a Porsche dealership and a Volvo store, across from a CarMax.
Finding a site like that was crucial, Bor said, because they needed a place where people would feel comfortable leaving their cars.
The CarLotz founders can find some hope for their business plan in the success of Gulliver's in Japan. That chain of consignment stores has grown into a major player overseas.
The downside of that is Gulliver's has been eyeing the U.S. market for expansion, as well.
It already has a store in California.
View the original article here
Turn your Auto Notes into cash
