CARY, N.C. -

While Sonic Automotive leadership declined to comment further after announcing a strategic review of EchoPark Automotive, company president Jeff Dyke did share more details about Sonic’s investment in its standalone used-car program in an interview with Auto Remarketing on Thursday.

The wide-ranging conversation included more details on the digital retailing platform in the works for EchoPark and plans to hire a chief marketing officer specifically for the pre-owned stores.

Starting with digital retail, Dyke said that is becoming a more integral part of EchoPark, and the company is looking to improve that experience and bolster EchoPark.com.

May marked the first time that there was more website traffic for EchoPark.com than traffic coming from third-party sites, a trend that carried over to June and July, Dyke said.

“So, that's very exciting for us. But the website is wonky. It's just not as efficient and effective as we want it to be,” Dyke said. “Not as user-friendly as we want it to be, like the consumer might use in other retail environments outside of automotive. And so, the product that we're launching in the fourth quarter really will answer the bell.”

The digital retailing platform for EchoPark will allow consumers to complete a deal online from start to finish, but a minimal percent (less than 5%, Dyke said) actually want to go that route.

“But if you wanted to, you'll be able to do that without any human intervention, whatsoever. And there won't be any human intervention on our side either. The system will handle everything, which is really neat. That's going to be by itself in category when we launch,” Dyke said.

“So, we're real real excited about that. But more importantly, it'll give the guest the experience anywhere they want to stop in the process,” he said. “If you wanted to come on and choose a car, get your financing done and get a trade appraisal and then go to the store, drive the car and finish everything there, you're going to be able to do that and it'll be seamless. And so, it's more of a hybrid approach. And we use that today, but it's just not as effective and efficient as we'd like it to be."

While many digital automotive retail models have included home delivery, Dyke doesn’t see EchoPark adding that option, given the cost and what he describes as inefficiency of it.

Instead, EchoPark will continue to lean on its hub and delivery center distribution model, he said. Sonic expects EchoPark to cover of 90% of the 1- to 4-year-old car-buying population by 2025, through this distribution network model.

“Each hub will have a 200-mile circle around it and cover 90% of the population. When you add in the delivery centers, we're going to be in a market near you or in your own market, where you're going to be able to easily get to us,” Dyke said. “But to go the last mile is so ridiculously expensive and inefficient, I'd rather save the customer $3,000 a car and we believe the customer would rather save $3,000 a car than invest in a delivery system to deliver at home. 

“If one day it's something that's needed to be done, then we can pivot, but i just don't see that happening. The customer's not asking. We offer it and the customer never asks us to bring the car to their house. They want to come to the store, touch it, feel it. And you know, it's the second or third most expensive thing that somebody's going to buy in their life, probably behind a house and college education,” he said.  “And so, they want to come see what they're buying and not have it dropped off at their doorstep.”

EchoPark plans on opening approximately 25 EchoPark locations a year (including 20 delivery center and five medium or large retail hubs) from 2021 to 2025.

They anticipate covering 25% of the population by the end of this year.

Standalone used-car store growth industry-wide

Sonic is not alone in seeing geographic growth or platform development in its standalone used-car store program.

For example, Penske Automotive Group and Cox Automotive announced last month that they have built an automated technology platform that will facilitate online used-car sales at Penske’s U.S. CarShop used-vehicle SuperCenters and franchised stores.

During the second quarter, AutoNation opened a standalone used-car store in San Antonio, and plans on adding four more AutoNation USA stores in the back half of the year and another 12 next year. The plan is to have more than 130 by the end of 2026.

Why the interest among big dealer groups in these stores?

"Look, at the end of the day, I think, you don't become so reliant on one business. And the used-car business is so fragmented. And if you're good at it, the opportunity (is there). It's a trillion-dollar business. The opportunity’s just huge,” Dyke said.

The 40 million-plus used cars sold annually (a pattern that goes back decades, Dyke said) is the “most consistent thing about our business,” he said.

Standalone used-car stores are, “just too big of an opportunity to pass up,” Dyke said. “These companies are full of money. They execute well and they're going to dive in. I think that there's going to be more. I don't think that we've seen the last of the EchoParks, Carvanas, Vrooms of the world.

“And now it's spreading across the world … I expect more people to enter. But it's also a business that you’ve' really got to know what you're doing,” he said. “Because it is a commodities business. I can tell you EchoPark's a commodities business. We're selling apples. 

“And you've got to know how to buy them, transport them, recondition them, merchandise them, detail them and get them on the front line and get them gone. And in order to do that and do that well, in order to make money at it. You saw a lot of companies that dove in that got out. And it was just miserable for them because … it's not the same thing as running a franchise used-car business, where somebody brings you a trade 60% of the time that you're (selling) a car. It's a much easier business to operate than running a standalone dealership.”

Getting the word out

EchoPark has historically not made investments in marketing or advertising because the preference is to put that money toward lowering the price of the vehicle instead, Dyke said.

Sonic says EchoPark’s pricing is as much as 40% lower than new-car pricing and as much as 10% below the market rate for used-car prices.

But as EchoPark expands, it may necessitate looking into  marketing investment.

“So, it is an ongoing discussion around here about, ‘When are we going to Echo Park’s tell the world who we are?’ And no question, as our footprint grows across the country, you're going to start seeing this,” Dyke said.

The company is in the process of hiring an EchoPark-specific chief marketing officer (there already is a CMO on the franchised side) to help determine the “most efficient, effective way” of building the brand.

“We are the low-cost provider. Everything we talk about at EchoPark (is), ‘Can we save $100 and reduce our price by $100?’ because we know the traffic goes up exponentially every time we do that,” Dyke said.

“So, it's real difficult to get any of us to spend money on anything at EchoPark because we always just want to drop the price,” he said. “But there is going to be a point in time where the brand becomes more powerful than the price point. And when that transition happens, you'll see us advertising EchoPark, probably a little more traditionally, but certainly in the social media world in a big way.”