Sonic Automotive (SAH) is driving hard into the used car market with its EchoPark line of stand-alone retail used car stores.
Just two days after a new EchoPark opened its doors in Long Beach, California earlier this week, the company has announced plans to build its eleventh dealership in Atlanta. This marks the company’s first foray into Georgia, its closest location to Sonic’s headquarters in Charlotte, NC.
The EchoPark concept, first launched in 2014, is characterized by what Sonic calls a “phygital” environment. The company combines an open and welcoming physical space, with digital tools that provide the customer with a seamless sales experience.
The customer experience is led not by a salesman, but by an Experience Guide. This employee’s role is to place no pressure on the potential buyer. Instead, the salesman walks buyers through the options available, at what Sonic says are no haggle 20-40% below new retail prices for late model used cars.
As part of the brand development, dealerships also encourage employee involvement in the local community via charities, and by sponsoring community activities.
The EchoPark Model
The EchoPark model became profitable for Sonic earlier this year. EchoPark president Jeff Dyke, attributes the success of the model to the enhanced customer experience in combination with proprietary inventory management and pricing tools the company has developed.
Using a just in time inventory model the company is able to keep overhead and inventory costs low. EchoPark restocks inventory on a weekly basis. This then lets the company compete favorably on pricing. Dyke compares the inventory model to that used by CostCo (COST).
Sonic Chief Executive Officer David Smith, forecasts the EchoPark model will bring in $1 billion in revenue for 2019, when the company issues its final earnings report. Smith’s bold statement from earlier this year that “Echopark will exceed the overall volumes and profitability of our franchised dealerships” appears to be on track.
The aggressive expansion of the EchoPark brand this year, which as of the announcement of the proposed Atlanta location and will include 11 dealerships in 5 different states, has been internally funded thus far. This has alleviated any increased debt or equity pressures on the company’s stock price.
Indeed, the market appears to agree with the vision CEO Smith has for Sonic and the EchoPark brand, as the stock has risen over 130% thus far in 2019.
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