10 April 2012

I heard an interesting story in the wake of the closure of Tesco Cars this week.

Apparently several major fleet operators stopped supplying vehicles to Tesco Cars simply because they were “too difficult” to deal with. Indeed, I’m told by a reliable source that the operations manager of one major daily rental firm ended up throwing the Tesco rep off his premises because of his “arrogant attitude”.

The rental firm had offered a batch of cars but they had to go ‘now’. Meanwhile, the salesman was insisting the rental firm keep the cars until Tesco had found customers for them. Apparently the young salesman knew more about the business than the experienced operations manager.

Tesco says it closed the business because it was unable to source the cars it wanted. Whether that is true or not (we have been told they were only selling 150 cars a month) is hard to tell. But it does seems one of the major issues was its own attitude towards its suppliers – the contract hire and rental industry.

This may come as no surprise to those of you familiar with the working of high street supermarkets. In a world where the retail giants rule the roost, they dictate terms to the supply industry. But in our world (new and used), it’s all about supply. Auto retail groups may occasionally flex their muscle but nobody dictates terms to the national sales companies or the major fleet operators.

Tesco Cars was never going to be popular (coming into an industry and promising to undercut the established players by 20% is not a great way to make friends) but ultimately it failed because it didn’t understand how the used car sales business works; just as high-profile Autoquake failed before it.

In times of tightening supply, both were forced to go out into the open market to buy stock; thus sweeping away one of the key pillars of their business model.

Is this the end of the story so far as supermarkets and car sales are concerned? Probably not.

Other major supermarket groups have been watching the Tesco experiment with interest. Most likely they will have a quick chuckle at its failure and put their own plans back on the shelf – for the moment at least.

Rupert Saunders

Have we learnt anything from Tesco Cars? email me at rupert@auto-retail.com.
 

Tags: Autoquake, closure, online retailing, Tesco Cars, used cars