Tesco: are they mad?

  04 April 2011

I find it wonderfully ironic that Tesco launches into used car retailing within a month of Autoquake going into administration and in the same week that the Office of Fair Trading handed out a major slapping to webuyanycar.com.

Surely, if Tesco needed any warnings about the pitfalls of used car trading, they are there.

No responsible auto retailer would condone the alleged trading practices of webuyanycar, but mud sticks; and this industry needs this sort of public humiliation like it needs a hole in the head. Don’t be so naïve as to think the OFT will be happy with just this one action. It’s no co-incidence that it was a used car buyer/retailer that was targeted under the new Unfair Trading Regulations and I expect more to follow.

So, what’s the sense in Tesco – one of the most respected brand names in high street retailing – getting involved in the used car trade? They don’t need the money and they certainly don’t need the hassle. Despite all the safeguards (RAC Inspection, HPI check) we all know that rogue cars can, and do, slip through the net. What will that do to the Tesco brand?

Yes, I can see the argument about sales of financial services but you don’t need to be actually putting you name to the cars to do that. And Tesco has been offering car loans and insurance for years; so nothing new there.

The collapse of Autoquake, working to a similar business model as Tesco Cars, proves that used car trading is not just about a slick website and a strong consumer offer. It’s a highly competitive business which depends heavily on tight margins and, most especially, supply and demand.

My understanding is that Autoquake failed because it couldn’t maintain its supply without going into the open market to buy – at which point it lost its price advantage. Tesco says it will offer ‘up-to’ 3,000 cars each week with new cars being added daily. Right now, I just don’t see the market being that buoyant.

Okay, no doubt Tesco will have considered all these things. This launch has been at least 18 months in the making and you don’t get to be one of the world’s biggest supermarket chain without covering your bases.

Hey, what do I know? If this was new cars, I could see the sense in it. But used? I’m really not so sure.

Read more about the Tesco story here: http://bit.ly/eWtpXp

So, are Tesco mad? Or just being naïve? Tell me what you think (plus any other gossip you’ve got for us): rupert@auto-retail.com

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