Last summer, in partnership with the Asbury Automotive Group Inc., the country's largest privately owned car retailer until it went public in March 2002, you quietly set up four used-car dealerships in the Houston area and began marketing them under a brand called Price 1 Auto Stores. Because you're still experimenting with the concept, your Price 1 initiative remains in stealth mode. Asbury can't use your name in any of its promotional materials, and there have been no radio, TV, or newspaper ads to inform Houston residents that they can buy a used car at Wal-Mart. But the dealership's cinder-block facade, painted in Wal-Mart blue and gray with that ubiquitous red stripe, would be recognized by any denizen of your big boxes.
As soon as I stepped onto the lot, I was greeted by a twentysomething salesman. He explained that Price 1 is built around a nonconfrontational selling model: He doesn't get a commission, but he could nail a bonus if I purchase a vehicle and he scores high on a customer-service follow-up call. Price 1 sells relatively new used cars. All of the 100-odd cars on the lot are under 5 years old, with less than 75,000 miles. And I quickly found that while Price 1 believes in a soft sell, it makes a hard, competitive offer: one "no haggle" price, a 5-day money-back guarantee (no questions asked), a 3,300-mile warranty, and, most remarkable of all, 12 months of roadside assistance, a feature unheard of in the used-car biz.
There have been other retail giants that have attempted to crack this market -- such as Circuit City's initiative with auto retailer CarMax -- but none have really scored a big success. Still, it's pretty clear why you would take a hack at it: Used cars is a multibillion-dollar market, but there's still no single player that owns a substantial share. Your brand name has a reputation for low price and reliability in a market where price is uncertain and reliability is nonexistent. And you see an opportunity to apply your hyperefficient distribution system to one of the last vestiges of prehistoric, inefficient retailing in the country. Who knows? If you win big, you could make the used-car business a springboard for getting into the new-car business. Maybe in the not-so-distant future, you'd partner with, say, a Korean manufacturer to sell exclusive, private-label Wal-Mart cars at a very low price.
So is the six-month trial run of Price 1 proving to be a winner? The Price 1 salesman gushed that you plan on launching 600 dealerships nationwide starting this year -- a sign that you are committed to making used cars a key part of your strategy. But in a conference call to Wall Street analysts, Asbury Automotive executives were a tad less sanguine. Citing heavy startup costs and a disappointing turnout from your customers, Asbury says that this will be a make-or-break year for Price 1 -- although the risk-rewards trade-off remains "very compelling."
What's the real deal? I'm trying to clarify all of this with you, but we both know that you're not talking. Still, I remain your dedicated customer.
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