How Asbury is Making Q Auto Work
Perhaps the best way to describe the state of Asbury Automotive Group’s Q auto stand-alone used-car retail program would be this: it’s a work in progress that certainly has made some progress.
Asbury opened a Jacksonville, Fla., Q auto store in October — the company’s second Q auto location — and has plans to roll out a third store in Fort Myers, Fla., during the fourth quarter.
During the retailer’s third-quarter earnings conference call on Tuesday, investment analysts asked Asbury management several questions about Q auto, including where the program stands in terms of development.
“We’re still in the early stages of development. We are committed to do the third store, and we’re very excited about the results that we’ve seen. I think the major parts of this that we’ve learned is that there are different ways to sell cars to the consumers. We’re learning that we can make that work,” said Michael Kearney, Asbury’s executive vice president and chief operating officer.
“We are developing some technology that is different than what we use in our other stores that is very promising and may be expandable in the future,” he continued. “And we’re learning, as we know from the other business, that there is a substantial amount of Internet business that is out there.
“So, it has been a learning experience. We are very pleased with the results so far," he added.
One strategy that Asbury president and chief executive officer Craig Monaghan emphasized during the call was this: “We are trying to control the amount of capital that we tie up in these stores, as we work on these prototypes.”
The first Q auto location, which opened in Tampa, Fla., is in a leased facility, Monaghan said. The company did do some refurbishing to the facility, brought in signage and so forth, but the real spend there was in people and advertising, he said.
The retailer is working with their partners to bring about new technologies for that store “that we don’t see anywhere else,” Monaghan noted. There has been some spending on technology, but most of that is in the form of infrastructure, as a lot of the software work is being done by Asbury’s partners.
Meanwhile, Asbury owns the facility housing the second Q auto store (Jacksonville). The site was vacated when Asbury transitioned the Toyota store it had there to a new facility.
“We think there’s a lot to be learned in this space,” Monaghan added. “One of the things that we’ve learned from others is that it seems to be that the smart thing to do is to minimize capital and try to maximize throughput. And that’s exactly what we’re working on.”
Throughout the call, a few more interesting nuggets about Q auto came up. One was that inventory for Q auto stores will go through their own reconditioning and prep work. Additionally, Asbury is anticipating Q auto will keep the same target of 30- to 35-day used-car supply that its other stores have.
“When you open one from the beginning, the first one or two months you may see something a little higher than that because we have to acquire (the vehicles) all at one time,” Kearney said. “But on an ongoing basis, you could expect that Q auto would keep the same disciplines and days’ supply as our other brands.”