How Paragon Honda Is Turning Inventory Faster by Simplifying Their Recon Process – Hugh Hathcock & Brian Benstock

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On today’s show, we’re excited to be on location here at Paragon Honda in New York with Partner GM and Vice President, Brian Benstock along with auto industry veteran, Hugh Hathcock, who is also the owner of ReconVelocity.

Don’t forget NADA 2020 is just around the corner! So to find out more about what ReconVelocity can offer your dealership, be sure to stop by their booth #3827C.

Hugh HathcockVIDEO TRANSCRIPT: 

Jim Fitzpatrick: Gentlemen, thank you very much for joining me today.

Brian Benstock: Jim, thanks for being here. Welcome to Paragon.

Jim Fitzpatrick: I know. This place is great.

Brian Benstock: It’s great to have you here.

Jim Fitzpatrick: Listen, I want to start with you, Brian, because you are certainly a thought leader in the retail automotive industry. We see you all over the place. Dealers follow you. They hang on every word you say because of the volume and the job that you’ve done here at Paragon Honda and Paragon Acura over the years. You’re an innovator. That’s for sure. We’re here today to talk to you specifically about Hugh’s company, which is ReconVelocity. I know that you are a client of theirs. We want to get the skinny on it. What’s the real deal? So, there’s dealers that are watching, that are going, “Recon? I don’t think I have a problem in my recon department.”

Brian Benstock: Everyone’s got a problem in recon, right, today? It’s speed; it’s velocity; it’s throughput. And the theme for Paragon in 2020 is simplicity. We’ve got so many vendors sitting on top of the DMS. Like pizza boxes, one on top of another…

Jim Fitzpatrick: Pizza boxes. Right.

Brian Benstock: … on top of another. That’s true.

Jim Fitzpatrick: No, I know.

Brian Benstock: And they all charge us that standard 1,500 to 2,000 a month. It’s only 1,500 to 2,000 per month, per rooftop.

Jim Fitzpatrick: That’s right.

Brian Benstock: And when you add the number-

Jim Fitzpatrick: And you can’t get out of the contract.

Brian Benstock: And you can’t get out of the contract.

Jim Fitzpatrick: That’s right.

Brian Benstock: And, by the way, they don’t play well together. Why? Because they have disparate intention, right? They’re all trying to outdo one another. So what was really great was that we were able to sort of… When Hugh formed the company… to say, “What would we like?” To build it from the ground up. Now, he built it, but we sort of said, “This is what we’re looking for. We’re looking for something that’s simple to play to the lowest common denominator in a dealership.”

Brian Benstock: Remember, we don’t have MIT graduates as porters. We don’t have MIT graduates, necessarily, as lube techs. But we’ve got great people. We’ve got to build it so the average person can use the technology because the technology is useless if it can’t be used. So he built it really simply. He built it in a way that everybody in the dealership knows where every car is, every step of the process. That was what was key for us. It’s simple, it’s accurate, and it tells us where it is.

Brian Benstock: And again, we thought we were at a certain prep time. We thought that was closer to six days, and we thought that was really great. But it was more like eight to 10 days when you factored everything in. So, realistically, what does that cost you per day? And there’s a dollar amount that that cost is. And what we wanted to have built for us, and what is built for us, was the ability to see the cars each step of the game so we could bring the cars down here. As you know, our inventory is prepared 37 miles away.

Jim Fitzpatrick: Incredible. Right.

Brian Benstock: So we need to rely on technology. And we have our lots 100% sold, and we use a turn and earn method. So when one of the lots sells five cars, we take five from the recon center and bring them down. It really-

Jim Fitzpatrick: Like an OEM?

Brian Benstock: Yeah. We’re like an OEM. It requires some precision. And, unlike the OEM, we don’t have to take cars we don’t want.

Jim Fitzpatrick: That’s right. That’s right. Now, Hugh, obviously everybody in the industry knows you as Elead and ELEAD1ONE, and you’ve done an incredible job, obviously, with that company. Share with me a little bit of your philosophy because, if I remember correctly, you built ELEAD1ONE around the needs of the dealer as well. Right?

Hugh Hathcock: Well, I think Brian could tell you. One of the greatest compliments he’s always given me, when he refers me to another dealer, is the support.

Jim Fitzpatrick: Yeah.

Hugh Hathcock: And one of the lines he’s used is, “I can get this guy, and they have somebody here whenever we need, anytime, fast.”

Brian Benstock: Some of the great people that I’ve done business within that space… Right? A Sean Wolfington, a Dale Pollak, or a Hugh Hathcock.

Jim Fitzpatrick: Right.

Brian Benstock: What they have in common is, for me, they’ve provided incredible service after they sold us whatever the item was. Right? And in Hugh’s case, I feel… now that he’s sold the company… I felt the technology was, at the time, a little antiquated at Elead. There were certainly other people that had more bells and whistles. But if I had a problem, if I had a need, I picked up the phone. He was there.

Jim Fitzpatrick: Which is huge with dealers.

Brian Benstock: It’s everything.

Jim Fitzpatrick: It is.

Brian Benstock: It’s everything. Because it’s not that hit-and-run sell you, sign you, and dump you.

Jim Fitzpatrick: Yeah. And in six months you call, and the salesperson that sold it to you isn’t even with the company anymore.

Brian Benstock: That’s exactly right. And the other good thing was that we were able to grow with Elead as our needs changed. Hugh was able to advance and update the system. So, I think that was incredibly important. And so, when we were talking about recon and what we needed in recon, he was saying, “Here’s the base of what we’re building.” And then we said, “Well, we’d like it to do this, this, and this as well.” And he came back to us in a short period of time and said, “It can.” So we beta-tested it first in our Acura store…

Jim Fitzpatrick: Wow. That’s great.

Brian Benstock: … and now we’re going to roll it out to the Honda store.

Jim Fitzpatrick: Yeah. We’re looking at a lot of disruptors. We’re going into NADA 2020, and dealers are concerned. Companies like Carvana sold 176,000 units last year to consumers, basically… I say… right out of the showrooms of new car franchise dealers.

Brian Benstock: Right.

Jim Fitzpatrick: Do we have to get better at what we’re doing? What are the takeaways from a company like that?

Brian Benstock: What are the takeaways? They’re a force to be reckoned with, one. Two, they’ve organized used cars in a way that makes it consumer-friendly. They pay more for the cars than everybody else does. They charge more than everybody else does.

Jim Fitzpatrick: That’s the one you take away.

Brian Benstock: But the experience is better.

Jim Fitzpatrick: Right.

Brian Benstock: And so if we can increase the experience, we can have a better margin on the cars that we’re selling. Look at Amazon. They don’t give you the lowest price. You don’t get the best price for a telephone when you buy it from Apple. It’s an incredible experience. So I think that’s one of the takeaways from Carvana. The other thing is your inventory is worth more than you think. Hold on to it. Because, if not, those guys are going to buy it. We have a natural advantage over those guys because we have the cars. We have trade-ins coming into the dealership that they don’t have. They’ve got to go out and buy those cars. So let’s leverage our advantages and use tools like ReconVelocity.

Brian Benstock: We have to use tools and technology like ReconVelocity to enable our people to make better decisions whether they’re in the lane or they’re in the store. And I think that’s what we’re looking to do, to use technology to keep up with the big guys.

Jim Fitzpatrick: That’s right. That’s right. And digital retailing is coming, right around the corner, and really Carvana has kind of showed us all how that’s done. Right? This plays into that, doesn’t it? I mean, it really gets to the point where these vehicles need to be reconned as soon as possible for the least amount of money.

Brian Benstock: Whether we like it or not, you’ve got to be good at every step of the game. You can’t have a weak spot. Wherever you have a weak spot, that is going to be exploited by the competition. And so, from acquisition to front line-ready, the shorter the distance there, the better the turn, the better the margin. Right? And the better the deal for the consumer.

Jim Fitzpatrick: That’s right.

Brian Benstock: So we’ve got to be playing by their rules, right? And, talking about this recently, why do we measure ourselves against other car dealers? I think it’s time that dealers start measuring themselves against Amazon. And…

Jim Fitzpatrick: That’s a good point.

Brian Benstock: … manufacturers should do the same thing. How do you compare your experience at ABC Motors with the last purchase you made with Amazon?

Jim Fitzpatrick: That’s good point.

Brian Benstock: And I think we’d see the scores go from the high 90s to much lower level initially.

Jim Fitzpatrick: Right. Until you figure it out.

Brian Benstock: And now it’s a new target, right? Because what you aim at, tends to dictate what you do.

Jim Fitzpatrick: That’s right. That’s right. It’s all about managing your inventory at a whole new level now. Right? I mean, we can no longer just sit back and, “Okay, we’re going to let the car sit here for 60 days, and we don’t know how long it spent in recon.”

Brian Benstock: I think-

Jim Fitzpatrick: And there’s a lot of dealers out there right now that still suffer from not knowing, not having that knowledge.

Brian Benstock: Well, the transition right now is we’ve all got the data. It’s taking the data and making it actionable. Because data that you don’t use is like a book on a shelf that you don’t read.

Jim Fitzpatrick: That’s a good point.

Brian Benstock: How do you make that data actionable? How do you know in advance, and prepare in advance, what you’re going to do in advance, right? And so, you’ve got a car. A company like Carvana knows which areas a Honda Accord is going to sell for more money. So they take it out of an area where it might not do so well, put it into a different area. And we don’t have a national reach. But here we have an obligation to know what the right cars are to stock. The right cars and what the right pricing is to ask for the car.

Jim Fitzpatrick: What-

Brian Benstock: So we tie that in with what’s going on with the auto right now. We think it’s a real potent combination.

Jim Fitzpatrick: What kind of an impact does this have in the sales department, with managers and salespeople? How does that rollover to what you guys are doing with ReconVelocity in the recon center over to the sales department?

Brian Benstock: Again, it lessens the time from acquisition to front line-ready, and if we buy a car right and we can put the right number on the car, they can offer that car for sale much quicker. And so the long story short is we’re going to get a higher margin per transaction, which is always good for the sales managers and the sales rep.

Jim Fitzpatrick: No question about it.

Hugh Hathcock: And we’re building for him. One of the things we talked about when we came in is he wanted something we could print out for the consumer, showing what he invested in the car.

Jim Fitzpatrick: Right.

Hugh Hathcock: That’s going to grow in the next 90 days, where he can actually see, and we can… It’s like a value sheet that his salesperson can give to the consumer, saying, “Here’s what we put in this car. Here’s what makes it.”

Brian Benstock: That’s a super good point. Right? When I went to a 20 Group, I thought we were paying more for recon than everybody else. We were paying about $1,800 a car. I sat there, and there’s a dealer from Boise, Idaho, and I’m looking… He’s paying $1,800 a car. So I said, “I’m not the only one putting that kind of money into cars.” People don’t believe that. They don’t know that we’re investing those dollars in a certified car, and that it is worth more. And, again, right now an average certified RO, in this market… To do it right, it’s about $1,800. The salespeople need to share that information.

Jim Fitzpatrick: That’s right.

Brian Benstock: And they need to have that information in a believable format for the customer. You won’t have to do all of this.

Jim Fitzpatrick: That’s right.

Brian Benstock: You can get that, or you can go down a block, and roll the dice, and see. You may have saved some money, but do you want them saving money on these safety items? Absolutely not.

Jim Fitzpatrick: That’s right.

Brian Benstock: Because many of the items that we do in a Honda-certified inspection don’t need to be done to pass New York state inspection.

Jim Fitzpatrick: Ah, okay.

Brian Benstock: So, the average non-certified car, the RO, or repair order, is about $500. This is over three times that.

Jim Fitzpatrick: That’s right. That’s huge.

Brian Benstock: And that provides a great story and a great value for.

Jim Fitzpatrick: But all too often, for the dealers that are listening, that story is never told. It’s just, “Put the car out there. Okay, I’m going to work my deal from cost plus. I’m going to add two grand to it; see if I can get it. Throw it in the box.” And it’s like, “Did you ever tell the consumer what this car has just gone through?”

Jim Fitzpatrick: It’s huge.

Brian Benstock: And, again, with a Honda-certified program, it’s a really great offer, and I think it’s a story that needs to be told more by the OE, and it needs to be told more at the dealer, at the point of contact with the consumer.

Jim Fitzpatrick: Right. Right. You’re the number one pre-owned certified dealer in the country for Honda.

Brian Benstock: Yes.

Jim Fitzpatrick: Right?

Brian Benstock: Mm-hmm (affirmative).

Jim Fitzpatrick: Tools like this, they got to mean a lot…

Brian Benstock: Every-

Jim Fitzpatrick: … to maintaining that.

Brian Benstock: Every day that we can compress in the preparation cycle is worth thousands of dollars a month.

Jim Fitzpatrick: Right. Yeah.

Brian Benstock: You saw. We’re on four, five city blocks. Cars are everywhere.

Jim Fitzpatrick: It’s unbelievable. Yeah.

Brian Benstock: It’s incredibly important to us to know where the cars are now. We’ve got this new thing that you’ve got, right? With the OBD plug-ins, that’ll show us where the cars are specifically.

Hugh Hathcock: Velocity locators. He’s going to do a centralized recon lot, and we’ll be able to plug the OBD port into the car, and not only will it take us through the steps and automate that, it will-

Jim Fitzpatrick: And that’ll be put in when the vehicle hits the lot.

Hugh Hathcock: That’s step one.

Jim Fitzpatrick: Okay.

Hugh Hathcock: And it comes out when it hits retail-ready.

Jim Fitzpatrick: Gotcha.

Brian Benstock: That’ll be taken out. I don’t want to keep buying these things.

Hugh Hathcock: No, you don’t.

Jim Fitzpatrick: Those’ll be taken out and reused for another vehicle.

Hugh Hathcock: But at a dealership with this much real estate, it’ll be a game-changer.

Brian Benstock: But think of it. Certainly, in the online process, we can see where customers were getting stuck in the process, and we could try and make that better, right?

Jim Fitzpatrick: Sure.

Brian Benstock: Take the friction out of it. The same thing in recon. We’re finding if the cars are getting stuck in one particular area, that we can apply more labor to that and take labor away from something else.

Jim Fitzpatrick: That’s right. That’s right. And when is that program going to be available?

Hugh Hathcock: It rolls in NADA. It’s already in certain stores. We just had to figure it all out because when you’re talking about all the steps in recon… We had to make sure the notifications and everything were as smooth as we could get it, and dealers wanted it to do more. They want to do inventory audit, manage their loaner fleets with it, possibly look at F&I type situations with it.

Brian Benstock: You’ve got, also, the thefts concern, and for us…

Hugh Hathcock: Secure.

Brian Benstock: … the cars being 37 miles away… When the cars are being shipped, it’s really beneficial to know where on the truck they are…

Jim Fitzpatrick: I bet.

Brian Benstock: … and how they’ll be here.

Jim Fitzpatrick: Do you have a big theft problem here?

Brian Benstock: We don’t. We got rid of the fences and the barbed wire many years ago, and we rely on technology, on cameras. Occasionally someone gets to get one of the wheels, the tires, off the car on the lot. And…

Jim Fitzpatrick: If they get it, they deserve it. Because they got bought by all of that stuff. Right?

Brian Benstock: Absolutely.

Jim Fitzpatrick: Yeah. So, let’s switch gears a little bit and talk about the industry as a whole wise. We’re going right into NADA 2020. Dealers are a little bit concerned that the analysts out there, especially the ones here on CBT News, will say that the SAAR is going to drop a little bit on the new car side.

Brian Benstock: Yeah. Yeah, it is.

Jim Fitzpatrick: But it’s probably going to increase on the used car side.

Brian Benstock: Yeah.

Jim Fitzpatrick: What’s your take on that?

Brian Benstock: Well, I think that’s absolutely right. And we’ve seen that reduction in car sales, which is, surprisingly, continuing to decline. Truck sales are pretty strong, but they’re saying we’re going to come in now in the mid-16s, down from just under.

Jim Fitzpatrick: 16.6 is what.

Brian Benstock: And I’m okay with that, as long as it’s coming out of someone else’s hide.

Jim Fitzpatrick: Yeah.

Brian Benstock: We’re projecting that used cars will continue to grow in fixed ops. So, as you know, over the past two years, we’ve invested heavily in our fixed ops…

Jim Fitzpatrick: Yeah. I know. I know.

Brian Benstock: … facilities and our ability to have outreach with customers.

Jim Fitzpatrick: And how’s that going? Give us an update on it.

Brian Benstock: It’s really exciting. It’s now become a regular part of our business. We’re picking up and delivering over 3,000 customers’ cars for service. And we’ve built again, what we consider-

Jim Fitzpatrick: That’s every month?

Brian Benstock: That’s every month, yeah.

Jim Fitzpatrick: Wow.

Brian Benstock: And we’ve built what we consider an LCD, or lowest common denominator, platform that we can now start to do pickup and delivery for sales. And so, I don’t pretend that we’re going to give Carvana a run for their money, but we’re going to have the same offering and hopefully a higher quality car. Hopefully, better Honda experience in the market, in that we can deliver directly to the consumers.

Jim Fitzpatrick: Is digital retailing a fad, or do you think it’s the future of the business?

Brian Benstock: We’re on it, man.

Jim Fitzpatrick: We’re on it. We’re in it.

Brian Benstock: You’ve got to-

Jim Fitzpatrick: What do you say to the dealers that are listening, that say, “Am I supposed to be getting ready for this right now? Is this a five-year deal, a 10-year deal?”

Brian Benstock: Jim, I don’t want to give dealers advice because there are dealers that have a high-

Jim Fitzpatrick: They want your advice. You’re selling-

Brian Benstock: They have a high volume strategy-

Jim Fitzpatrick: You’re selling a stupid number of Hondas and used cars.

Brian Benstock: High volume strategies work. Low volume strategies work. The dealer’s got to pick and choose what strategy’s for them. I think, as we’re building plans for the future, we have to build it around the consumer, and the consumers are migrating to this. We’ve seen a proliferation of brokers in this business, and the brokers will deliver the cars to the customers. Why? Because they don’t have a facility. And, by the way, most of these brokers are doing it in a way that’s completely not legal.

Jim Fitzpatrick: Right.

Brian Benstock: That happened because the dealers were not filling that void. I think, the second the dealers start making the same offerings to customers, that we’ll be able to take that business away from the brokers. And now, in various markets like the New York market, Florida market, the broker business is becoming a huge business, where dealers are actually forfeiting their franchising and subletting their franchise to the other people for a pittance. I don’t understand that.

Jim Fitzpatrick: Crazy.

Brian Benstock: But, again, how dealers want to do business… That’s up to them. I think by providing an experience where customers can come to us or we can go to customers, whether it be sales or service… I think that’s a real benefit.

Jim Fitzpatrick: For sure. No question about it. And you’ve got a great vendor here, right? ReconVelocity. Get the cars in and out in a timely way. That’s what it’s all about.

Brian Benstock: My experience with Hugh is he’s not a vendor. He’s a friend, and we looked to him as a business partner when it came to the work that he did with Elead. And, certainly, in the initial stage of building this product, he’s really customized it to our needs. And I think that many of the dealers that Hugh is going to do business with will benefit from the beta testing here at the dealership.

Jim Fitzpatrick: Yeah, that’s right.

Brian Benstock: We’re real excited about it.

Jim Fitzpatrick: That’s exactly right. Well, for dealers that are listening to this conversation and want to learn more about ReconVelocity, run, don’t walk, over to the ReconVelocity booth at NADA. That’s just coming up next week. Because you owe it to yourself. You owe it to your dealership to take 30 minutes, maybe an hour, and you’re going to walk…

Hugh Hathcock: 30 minutes.

Jim Fitzpatrick: … them through the whole deal. And you can save, literally, thousands, if not millions, of dollars by the end of the year by just shortening that amount of time in your recon center and knowing where every car is at every minute. So this is kind of a no-brainer. Put my car hat on right now, my dealer hat. But that’s really what it’s all about.

Brian Benstock: What about, also, with the OBD port plug-in, being able to use this as a way of selling cars? Alerting the marketplace that this car is ready for retail, digging into the DMS, right?

Jim Fitzpatrick: That’s right. Very cool.

Brian Benstock: And then letting customers know. I think this is a whole data-mining opportunity here.

Hugh Hathcock: Well, that’s recon. So that’s what we’re trying to do. We partnered back in ’08… Cash for Clunkers… We did tons of data mining together through Elead.

Brian Benstock: Crazy.

Hugh Hathcock: This is a different scale. It’s used cars. It’s payment buyers. And it’s taking a guy, when he hits recon, and getting him sold by the time the car gets out.

Jim Fitzpatrick: And it’s a real.

Brian Benstock: It’s VIN-specific marketing, right? And getting that out in front of the right customers. Not having a race to the bottom with everybody else, but being able to put that car out in front of the right customer at the right time. I’m really excited about that. So that’s a cherry on the cake.

Jim Fitzpatrick: It’s a huge advantage in the marketplace to have that. Right?

Brian Benstock: Shh. Shh. I hope so.

Jim Fitzpatrick: Well, gentlemen, I want to thank you so much for joining us on CBT News.

Brian Benstock: Jim, thank you.

Jim Fitzpatrick: This has been great. Your dealership is incredible. If you’re ever in the New York area, stop by Paragon Honda. If you’re a dealer, you’ll get blown away. So, thanks so much for joining us.

CBT Automotive Network, the number one most-watched network in retail automotive. This has been a JBF Business Media production.

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