The concept of market absorption isn't just a strategy; it's a survival tactic. Taking inspiration from the likes of Bill Gates, who once noted the zero-sum game of business competition, we delve into why being the go-to dealership by absorbing your market could be your ticket to unparalleled success.
Understanding Market Absorption
Market absorption, in essence, means acquiring a significant share of available products—in this case, private party vehicles. For example, if you’re a Toyota store and you acquire all the publicly listed Toyotas on Craigslist and Facebook marketplace it forces your local Toyota consumers to shop with you. If you don't think this works ask our CEO Nick Patterson. He ran the used car department for his grandfather's dealership Chuck Patterson Toyota. He did this exact strategy and it literally grew the store into one of the highest-grossing Toyota stores in the northwest region.
*Note: And of course, Nick had created some car dealer software to help him out with these vehicle acquisitions.
Competing for Local Market Share
The opportunity cost of not absorbing your market might outweigh even the benefits of the advantages gained. For every single decent car in your market that you don't buy you're not just losing a sale; you’re losing a customer, and you're potentially creating a competitor.
Bill Gates is quoted "Competition is a good thing. It forces us to do our best. It keeps us on our toes. But competition is also a zero-sum game. When one company gains market share, it comes at the expense of another company."
In the intense rivalry for market share during the late '90s and early 2000s, Bill Gates had an interesting perspective on competition. He reasoned that for every dollar Apple earned, it was as if they had earned two dollars in his eyes. Not only did Microsoft miss out on potential revenue, but its key competitor, Apple, simultaneously grew stronger. Each gain by Apple was seen as a double loss for Microsoft - a loss of potential revenue and an increase in Apple's market strength.
As a dealer that's how you should look at the private party market. Every vehicle you don't buy that's in you’re wheel house you’re just making your competition stronger. Unfortunately for you, you don't just have one competitor either. In your case, you could potentially be feeding hundreds of private buyers in your market.
Absorbing Your Market: More Than Just Sales
When you absorb the privately listed vehicles in your market, you're doing more than just making a sale. You're:
- Enhancing Customer Loyalty: By being the primary source for FILL IN THE BLANK, you become the first and last stop for customers, fostering loyalty and repeat business.
- Weakening Competition: Each vehicle acquired off the street is one less vehicle for your competitors, weakening their position and strengthening yours.
- Boosting Market Share: Every car bought is a step towards a larger market share, directly translating to higher revenue and a stronger brand presence.
Real-World Example: The Amazon Paradigm
Consider Amazon's trajectory. Starting as an online bookseller, it gradually expanded its domain, absorbing market opportunities across various sectors. Today, Amazon stands as a behemoth, a testament to the power of market absorption. It's a strategy that has not only fueled their growth but has also significantly handicapped their competition across multiple industries.
Beyond Brand-Specific Strategies
Maybe you’re not a franchise store but an independent. You can use the same strategies but for other segments not brands. This could be a price range or type of vehicle such as trucks.
For example, if you specialize in the $15-30k price range you could implement the same idea as the Toyota example. Local consumers when they’re looking for a car in that sweet spot the first thing their going to think of is you.
This is called developing your beachhead market and just like Amazon did you can scale up from there.
The Role of Dealer Software in Market Absorption
This all sounds fun and dandy but how in the heck does a dealership realistically absorb all of the local inventory that fits their parameters? Three words… Vehicle Acquisition Software… yes it exists and it's the only way to stay competitive in your market. If you aren't leveraging AI and automation tools someone else in your market likely is and it’s just matter a of time until they start to gain market share.
If you want to stay competitive with private party car buying take a peek into VettX. Our whole mission and the reason why VettX exists was to give dealers a tool that would allow them a fighting chance against the growing private party market. If there’s anyone who understands the struggle of having to compete against a million private buyers on sites such as Craigslist, Facebook marketplace, car gurus, and others it's us. We’ve built every tool/feature that you’d ever want when chasing these leads, and have the best processes and technology hands down. It's truly a car buyer's dream.
Empowering Dealers, One Market at a Time