There were rumblings in the trade since February that Autoquake were struggling. They have subsequently gone into Administration, and what was worth salvaging was last week purchased for £350,000 from the receiver by Carshop. Who are one of the companies in the trade that appear to be getting stronger through good practise.
So What could have gone wrong? I remember the first time I came across Autoquake, I believe it would have been about 2004/05. All I know is I found three of my sales staff huddled around a computer looking at Autoquake listings on eBay. It would be a bit much to say in disbelief, but they were all aware that on price this crowd were hammering us. What they were looking at was very interesting and I spent the rest of the day going through their stock and website and could see they had a good Idea presented very well. I have used the internet as a tool for a long time; In retrospect I haven’t used its full potential. But at the time Autoquake were ahead of the game.
I am always sad to hear of the demise of any car group. For one it means redundancies for normal car people, and for another it’s an indicator that the entire trade is suffering. When people in the trade where telling me this news however I have to be honest there was a lack of empathy. Autoquake were viewed by some areas of the trade as a group of MBA’s running around with a lump of Venture Capital to play with, and stories of over spending and hubris are floating around in the trade
If you want to analyse a business, sometimes it is far easier to pick over the bones of a failed one than try to get the facts on a fully functioning one. In due course all the figures will be available for all to see, but by then most people won’t be interested.
I was involved many years ago in a high profile Liquidation. The facts of why the company went under were known to me, other high level staff, and pretty much nobody else. But once the rumour train leaves the station in the car trade it becomes some pain in the XXXXX. Everybody knows what went wrong but nobody knows anything. I don’t know former CEO Dermot Halpin but in fairness to the man he has stuck around to talk about his role and defend what happened, when a month in the Algarve would have been my plan.
So here is my brief and uneducated overview of what went wrong. First the trade accusation that they were business people and not car people and that they were burning through cash. In my experience Business people know how to make money!! I’m not party to exact wages figures, but it would be fair to say they had a lot of well paid people at the top. I also came into contact with a few of their buyers, all of whom were well looked after by industry standards. In most businesses that would be no harm. If you want to succeed you need to employ the best people and if you pay peanuts you get monkeys. Well the car trade is not like many other businesses, it’s harder than that. The amount of hard working smart people that have been spat out by the trade over the years is testament to this. Successful car dealers tend to be workaholics that have employed people to work for them for magic beans, the bigger companies are formed on lines where nobody is paid a penny more than they have to, and that commission calculator just keeps on crunching out new figures at month end. Over the years if I have visited a garage and seen the directors upgrading themselves to new mercs and being introduced to new finance or IT managers etc I smell a liquidation coming.
Autoquake have claimed that the rise in online advertising prices had contributed massively to their costs. I can see the truth in this one; five years ago the enticements to advertise online were huge. eBay motors was cheap and setting up eBay stores and relisting items was very cost effective. If I had as much online presence as Autoquake then, I would have had a lot of hungry advertisers vying for my business. Now advertising online is the norm and is very expensive. I can’t help but feel that Autoquake never really evolved. Their profile never seemed to increase from start up; I don’t remember any T.V ads etc. The website was so good that they needed to push people towards that instead of selling individual cars. If they had the vision to foresee a web based retailing future then surely they would have the foresight to see increases in online costs?
Selling online is still a very hard game. I have personal experience with web based selling and also through the companies I deal with overseas. In a nutshell people are cynical about handing over a deposit on something they haven’t viewed. I have been able to buy cars to order for Japanese Import customers, because they are aware that the product comes from far away and it’s a niche market where if they want something unusual they need to take a chance. With U.K cars I have reduced it down as far as “give me a £250 deposit on your credit card or PayPal, I will procure the car and prepare it so it is perfect for you, and if, when you inspect it you are not 100% delighted with the car I will hand you back your £250”. It is absurd that I would be off buying ten grand’s worth of car for a customer, on the strength of a £250 deposit but that is what you are prepared to do. And yet it is still hard to get a customer to commit to this, they are still weary of a car they haven’t seen, they fear they are locked into a deal by small print that they cannot see, or they believe that I am going to take their £250 and retire to Mexico on it!
Autoquake were ahead of the game but the game caught up. Autoquake were one of the first “fleet to street” type companies, Carsite where another. The premise was simple, cars direct from Auction/Fleet prep’d and made available directly to the public. The plan was to cut overheads by stripping expensive links out of the retail chain.
If I thought I was exposing “industry secrets” I wouldn’t be maintaining this site. There are no hidden tricks left and anyone with a bit of savvy these days can find cars as cheap as the trade. Twenty years ago when I used to buy cars from a large leasing company it was impossible to get “in” with them. I had to buy cars through a friend in London who was able to get cars through a girl he knew that worked there. Getting in with car leasing companies or big garages to buy their stock took major persistence, big balls and a lot of personality. Now I can register online to buy lots of stock direct from big re sellers, in many instances the most proof of trading I have to show is a fax number. Because of this there is no longer some 20% difference between trade and retail, half the trade are trying to sell direct to the public for whatever profit they can take.
Basing your buying strategy off book value and having an across the board pricing policy: If I sent any buyer to auctions and told them to get cars at book price, or for the sake of argument 7% below book price I would still end up with a lot of cars, plenty of which I would not consider good stock. You can analyse the market all you want but the book is merely a guide and sometimes I look at the book price and know that if it says £10000 for a particular car I will still be lucky to buy it for £11500 because it is good saleable stock. Conversely some cars that book at £15000 I would cry if I bought them for £13000. Pricing is a specialist role I believe Autoquake put a set figure across the board on their cars. I have seen this policy fail in action many times before.
There was a famous Japanese car importer on Dublin docks in the early 90’s. At the time they would have imported maybe 2000 cars a month. The operation was so big that it was obvious they were costing the cars up and adding a grand on top. A grand on top of an undesirable car that was purchased at top money meant nobody wanted it, A grand on top of a desirable car that was bought cheap at some rural auction meant a bargain. Myself and most other savvy buyers would commit to buy our cars on paper two weeks before the boat landed. I don’t want to labour the point but another example is salesman A: does a cracking deal and part ex’s in a car standing us £6000 that if I had bought from auction would be standing us £8000. So does this give salesman A,B or C the right to sell the car for £7500 and take the profit?. Absolutely not the rule remains the same in the car trade if you have done your job well and both something well worth the money, you are not obliged to just hand that advantage over.
From looking at Autoquakes prices it was apparent to me that this was happening. There were a percentage of cars that were cheap enough to sell to the trade and an ever increasing amount of cars that were not priced any more keenly than car supermarkets, by now they had lost their advantage.