The Ricart organization, located just southeast of Columbus, OH, has been one of the best-selling dealer groups in the country for years. Known for being one of the top Ford dealers, the group also sells Mazda, Nissan, Hyundai, Mitsubishi and Kia.
With more than 500 employees, Ricart has been recognized as one of the best large companies to work for in Central Ohio for three consecutive years.
Meanwhile, located on 71 acres, Ricart also has one of the top used car operations in the country and recently was ranked as the top certified pre-owned dealership (and second amongst all franchise locations).
Ricart’s Used Car Factory is critical to the group’s overall growth. Dealer magazine recently talked with Rick Ricart, a third generation dealer, about the success of the used car operation and how he has leveraged the Internet to drive that.
How many stores does the Ricart organization have now?
We have one large location that has six different new car brands, along with the used car factory, which has been my baby.
That store is doing the Motor Trend Certified program and its numbers keeps growing. We also have a store dedicated to the fleet/commercial business which includes a large (heavy duty) truck center. There are really eight different brands that include the six new car franchises and all the different businesses attached to them, that work together.
Your father and uncle are well-known in Ohio and throughout the dealer community. As you were growing up, did you always want to join the team or were you thinking about doing other things?
I think until I was about twenty-one years old, I was neutral about joining the car business in my mind. I studied general business and marketing at college. I did a little bit of acting and theatre growing up and continued that in college.
And you know, there’s always that thought, when you’re an immature adolescent, that just maybe Hollywood may call or the head coach of the college football team wants you to join the team and you’ll make it to the NFL someday or something like that.
So back in the days of being young and naïve, I kind of knew I had a fallback plan in the back of my mind but I didn’t really understand or know everything that happened at the store.
Growing up, I spent a lot of time with my father. We used to spend every weekend and holidays together. I grew up in a house with three sisters and my brother, Ross, who’s now part of the business. He’s eight years younger than me and often was left at home with the sisters as my dad and I would race go-carts, dirt bikes, street cars, and stock cars.
Because of that, mechanical engineering was one of my first passions. I loved building engines and working with my hands.
Even with that time with your father, you still weren’t sure what you wanted to do?
Well, my dad never talked business. He never brought up the car business. It wasn’t until I was 21 when I started working on the sales team that I really started learning about it. I didn’t know the numbers; I didn’t understand rebates or incentives or monthly payments. In fact, at the beginning, I didn’t realize that we secured financing for people. I thought people came in and wrote checks to buy cars. You could say I started at the bottom.
So I spent that summer as a sales consultant and because I wasn’t thinking about what my future was going to be; I was loose and confident. But, I sold a ton of cars.
It was at that point my dad encouraged me to attend Northwood University to take the dealer-focused classes there. I really didn’t want to go to Midland, Michigan, but I noticed that there was a campus in West Palm Beach, Florida.
So I spent a year there doing the post grad program and learned how simple the car business is. Meanwhile, as I got to know the others in the program, my confidence began to grow about what I could accomplish in the business. I saw they were normal people like myself – it wasn’t like we were Rhodes Scholars. The experience convinced me that I could hold my own in the industry.
When we met a few years ago, you were becoming known for having a grasp of the used car business.
So after I came home, I decided to learn the dealership business and see if I could be any good at it. But the truth is, I knew following in the footsteps of my father and uncle was going to be hard. They were setting the world on fire. From the late 80s through 2001, they were the number one selling Ford dealership in the country most years.
I knew it was going to be hard to duplicate that. But in those years, I just focused on progressing through my career and by 2005 I had worked in eight different positions with the various brands.
At that point, I became the used car manager for the Chevrolet store. I saw that no one was really focused on that part of the business or even had a passion for it. I started thinking that was where I could put my signature on this business. So I began to focus all of my attention on mastering used cars.
But I also started jumping into various departments that were having trouble and fixing them. And that was from 2006 to 2011 – some of the worst years of the business.
So you were sidetracked a little from the pre-owned business?
That is exactly what happened. I ended up as the new car general sales manager for a couple years. My job was to work with our Nissan, Kia, Hyundai, and Mitsubishi franchises to get the numbers back to where my uncle wanted them. That experience though reinforced my desire to work on the used car side. I learned that on the new car side, we’re really under the control of the manufacturer.
I saw pretty quickly that the only way to really win in new cars is take what the manufacturers tell you to do and do it better than anybody else. They provide the playbook, you just have to follow it. Make them happy and get the inventory you need. And it actually worked.
But I really wanted to get back to used cars. So in July of 2012, my uncle said, “Okay, now you’re going to run the strongest department in the company. Let’s see what you can do with that.”
Walk us through your process and what the results were.
At the time, our used car operation was stable and doing a healthy 300 to 350 sales a month. Numbers were good; everything was in line. But I knew we could do more – we were in a hot location and we had a strong customer database to work with.
The first thing we did was to put the Motor Trend Certified Program in place. It’s a consistent process for every used vehicle – whether we traded for it or whether we purchased it, whatever the make – they received the same inspection.
Part of that was establishing a group of dedicated technicians whose job is to inspect those vehicles.
Another part of that process is developing a formula for pricing. As our volume grew we saw our gross and our profit actually begin to slip. Our performance manager at the time really understood the numbers. So we worked together spending countless hours as a team developing the formulas and the science behind the model. It’s data that helps us appraise and price the vehicles better.
Secondly, we worked out the reconditioning costs and developed a process for that. My cousin (Jared Ricart) and I incorporated a bucket system in which every vehicle is placed. That way, we know exactly what the reconditioning costs are going to be, no matter how much work the car needs.
We know how much to pay for every car because we know up front how much work cost-wise we’re going to have put into the car.
Rapid Recon is a company that we use that helps us measure all of our reconditioning statistics. It keeps us in line. Having those metrics is important.
The third part of our strategy involves the marketing and promotion of the inventory. Very early in the process, I got connected with Jeremy Anspach, the founder of PureCars – he’s really become a friend of mine.
Jeremy and I worked together and talked all the time. I had harebrained ideas and he had smart digital people that said, “Well, let’s try to do that and see what happens.”
He let me test a lot of ideas. We were one of the first dealers to use his smart advertising platform. It allowed me to learn how to master the search engines in way that lets customers find our vehicles easily. We were able to reduce our dependence on third party and listing sites and instead bring customers directly to our website.
I don’t really want a customer comparing our vehicles with one of our competitor’s vehicles. If I can get customers to our website, they’re going to compare our cars with another one of our cars.
You have to really commit to that strategy.
That’s true. It’s our entire marketing strategy: so we call it money ball. It’s all about hits to our website — getting people to our website. Everything we do has to direct people to wherever they are online or whether they’re watching TV and they see a commercial or listening to the radio, we want to direct them to Ricart.com.
I customize the experience for them exactly the way we want it to be. I realized couple of years ago that the biggest fault of the industry was Internet leads. I’m looking at the numbers and seeing the dismal conversion rates and became convinced we were kicking a dead horse. We weren’t turning those leads into sales.
In order to make that change, we had to understand exactly why our customers were sending leads – what did they want to know or accomplish? For one month, my e-commerce director and I took every used car Internet lead – all 2,000 of them — and read through them.
And then we figured out what information they wanted and put all of it on the website. We made three simple conversion buttons based on what we learned from our research.
But you haven’t moved completely away from the third party or listings model?
The big companies – Autotrader and Cars.com are going to get the traffic. They advertise heavily and are on TV so they’re going to get that traffic. Because of that, I want my cars listed there. I just question the need to pay for some of the higher packages. According to an internal survey we did, I found that 14% of our used car customers made a buying decision based on Autotrader and Cars.com. But 40% to 50% of our ad budget went to those sorts of listing sites. We adjusted our spend to better match the impact those sites have on our business.
The bottom line is, the content on our site, the information we have and how we’ve structured our VDP (vehicle display pages) is what really has made the big difference in our growth.
There has been a lot of talk about digital retailing in automotive expanding to more of an online transaction model. Are you seeing that?
I can agree with the word expanding, but it’s expanding slowly. Every consumer’s different. Every deal stands alone. So we do try to appeal to everybody.
If 5% to 10% of our customers wanted to point and click to buy a car – and whether it’s delivered to their home or they show up to a car vending machine at the dealership and take the keys, or go through a delivery process, there are those customers and of course, we like that.
We still have that traditional buyer. There are still customers I talk to every day in the showroom that may or may not have gone online and done a little pre-research but they want to come in. We see parents bringing their millennial teens to the car lot because they want to show them how they bought cars. They’re telling their kids, “No, you don’t buy a car on the Internet. You walk the lot, you touch them, smell them, and drive them.”
It’s funny to watch their faces. You can see the kids wondering why they’re out doing that. Their parents are trying to fight the Internet age, too. So we get a little bit of both.
We also have buyers in the middle, and I think that’s where you’re going to find the majority of people. I think the majority of people don’t like the negotiating, they don’t like the runaround. They want to see the best price online; they want to see that transparent overload of actual information.
They want authenticity so when they come to the dealership, everything is as we say it is online, everything matches, they know what to expect. And to this day, the only thing that’s preventing that from being a forty-five minute process is the amount of paperwork.
What does that mean to you and how you’re adapting to changing customer behavior?
Right now, I’m working on developing our own paperless solution.
But it’s a challenge.
But going back to that online model – I still think if you’re buying a used car, you’ve got to drive it. I’m surprised that there are dealers who have a lot of success in selling used cars by taking a nonrefundable deposit.
Many of the consumers I talk to, tell me they aren’t ready for that yet. They don’t want to even admit that they want to buy the car until it’s down to the last step. They’re waiting for more information.
Meanwhile, the customer is trying to withhold information. We’re trying to be progressive and we’re trying to get on the front end of the technology and the communication.
The customers are still thinking about the last time they bought a car, which may have been four or five years ago, and they were trained and taught – because if you Google “how to buy a car,” you would find cases of documentation of them saying, you know, “Do your financial research but don’t tell the dealer that you did that.
This is crazy because the deal would be open enough. So the consumers have the mindset of, “Okay, dealers are going to be willing to be fair and do things right and they’re going to just do everything that they say they’re going to do as long as I provide everything upfront. ” That’s a perfect world scenario and it’s not going to happen.
Are you going to add stores in the next couple of years?
Certainly, we’re going to continue to grow organically. We have seventy-one acres and we’ve got a lot of land and brick and mortar. We can continue to sell more cars.
But I look at just the used car perspective. We’re selling eight hundred a month now. The next goal is eight-fifty; after that, nine hundred, and eventually, it’s a thousand. At some point, I’m going to hit a glass ceiling where we don’t have production or reconditioning space or even space to hold 45 days’ worth of inventory.
For example, I recently researched parking garages and found one would cost us about $20 grand a space.
But will we add stores? I think it’s smart business to also diversify as many brands as we can get. Currently, we have six different brands on one property and that has allowed us to keep strong.
At any given time, we could see a brand struggling. We’re lucky because four of our brands are doing very well. They’re selling a lot of cars, they’re growing, and the business is good.
But next year, one of those brands — whether it be a catastrophe, such as the tsunami and earthquake in Japan a few years ago – could be hurting. So it’s great for us to be able to offer our customers options. From an acquisition perspective, prices seem to be high right now, so I’d guess we’ll wait for them to come down.
You have a large family, though. You might need to add stores.
Fortunately, we have seven active Ricarts working in the company and that number is growing. There’ll be an eighth joining this month, a ninth shortly after that, and they are all super talented – real car people. So of course, they all want to run their own store.
But we also have some employees who have been with us a long time who could run their own stores. The point is, we’re well-positioned to grow from a talent perspective.
Looking at the next three to five years out, what do you see the greatest challenges being?
I think it’s on the legal side and the industry’s interaction with the CFPB (Consumer Financial Protection Bureau). We have to protect consumers, but I’m not sure they’re going about it the right way. We’ll adapt to whatever regulations are thrown at us, but it does affect the margins.
But NADA is working hard to limit the negative effects. My uncle is on a subcommittee at NADA that’s working with the CFPB to make sure dealers aren’t slammed.
What about opportunities?
I think this is a positive for us, but consumers are starting to accept the Internet way of life, not necessarily the digital retailing side, but understanding Internet marketing and pricing and how that happens. As they become more educated and research more, they’ll be more accepting of our pricing because they’ll see and understand why it makes sense. So I think technology will ultimately make the process easier.
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