January 9, 2012 | last updated June 4, 2012 11:31 am
BUSINESS STRATEGY

Auto dealer opens lot aimed at young

CONTRIBUTED PHOTO
CONTRIBUTED PHOTO
Running the new Hoffman Auto Groupís H Lot Live operation are Kevin Warriner, left, the general manager of both Hoffman Lexus and the H Lot Live, and Fran Marinaro, general sales manager of H Lot Live.

Typically, the opening of a used car lot is not the sort of thing that makes news but what the Hoffman Auto Group is doing with its H Lot Live — focusing it on 18 to 24 year olds and selling only models costing $8,000 to $15,000 — is what sets it apart.

Jesse Toprak, vice president of industry trends and analysis at TrueCar.com, said in an interview that targeting a demographic is unusual but what the Hoffmans have done with the price point is stumble upon the projected fastest-growing segment for used car sales in 2012.

The "sweet spot" for 2012 used car sales, Toprak predicted, is going to be in the $7,000 to $12,000 because that is the price people who need transportation are willing to pay if they cannot afford new cars. The key word is "need"; the approach doesn't target people who want to buy new transportation.

"Our goal is to build a relationship with customers that starts with the purchase of their first vehicle and lasts with every one thereafter. H Lot Live provides us with the opportunity to achieve this," said I. Bradley Hoffman, who co-chairs the Hoffman Auto Group.

"Every dealership (Hoffman sells nine brands in three locations) sells used cars. We decided to come up with a new pre-owned car concept," said Jeffrey S. Hoffman, the other co-chairman, adding that management felt this fills a void in its offerings — something for first-time car buyers.

Kevin Warriner, who heads up H Lot Live lot in addition to the Hoffman Lexus dealership, said the marketing for the new store includes social media, billboards, and radio stations like 93.7 FM that are targeted at the 18-24 demographic. The used car store will also be involved in event sponsorship. "It's targeted to the buyer we are looking for," he added.

The store had a soft opening in late October right before the freak pre-Halloween snow storm hit. A formal grand opening is planned for the first quarter of 2012. No demographic data has been compiled on buyers since its opening.

Jeffrey Hoffman said H Lot Live's prominent location on Connecticut Boulevard in East Hartford amidst the other Hoffman stores gives it an instant leg up. H Lot Live is located at the site of a former Hoffman smart dealership. Mercedes-Benz took over control of smart dealerships when it acquired control from the Penske Auto Group in the United States.

About $300,000 to $500,000 was invested in the buildup of the former dealership (not counting inventory). Jeffrey Hoffman said it was difficult to pinpoint an exact amount because some of the work was done as part of the dealership's recent multi-million dollar upgrade of all of its stores. Five new jobs were created with the opening of H Lot Live.

Dealers used to shy away from inexpensive used cars, Toprak pointed out, but now realize they can be an important aspect of a profitable used car center. The reason franchise dealers can now go after these older used cars is dependability. Ten years ago, a five-year old car with 60,000 miles could be a risk to a dealer's reputation if mechanical problems knocked it out commission. New cars have become so dependable in the last five years (witness the rise of certified pre-owned used cars) that franchise dealers can sell older used cars. "There's less risk to the reputation of the dealership," Toprak said.

One unusual aspect of H Lot Live is it does not incorporate the Hoffman name directly in spite of the Hoffman family selling new and used cars in Connecticut for 90 years. The "H" logo is common to both but that's about it. Jeffrey Hoffman said that was a conscious decision to set the used car lot apart from other Hoffman properties. "Tagging it Hoffman wouldn't differentiate it," he said.

Warriner, general manager of H Lot Live, said the vehicles' price points also required the name be different. "We really wanted it to stand on its own," he said.

Having its own brand doesn't negate one advantage: Hoffman money backing it. "We can afford to put some additional money behind it," Jeffrey Hoffman said. "It takes time to get it going and interest people in the new buying experience."

This new used car dealership does not replace the used car lots at the other Hoffman stores in East Hartford, West Simsbury and New London nor does it cannibalize their sales. "It's one company at the end of the day," said Jeffrey Hoffman.

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