By Larry Bruce, CEO, PowerSportsX

In history, the term “Circle the Wagons” referred mainly to settlers traveling from the East Coast to the West Coast. At that point in time, that route was in constant danger from attack from the indigenous people of the United States. Their lives were threatened. Their assets (cattle, cows, etc.) were also. Back then, these were a form of not only currency but also one of survival.

According to the History Channel, traveling settlers trying to protect themselves and their horses would end the night by parking their wagons in a circle with their livestock inside because then they would be able to protect themselves from all sides and any dangers that could come their way. And it worked. What started with a group of 1,000 in 1843 grew quickly into groups of 3,000+ by 1845. Partially because of the season and partially because of their strategic successes as a group.

Fast forward to today. Carvana and other industry disrupters have been slowly integrating themselves into the used car retail market. While franchise dealers have taken notice, these disrupter’s market share has been around ~2% so they haven’t been all that concerned. Still watching, but not worried.

As the pandemic hit and used cars became scarce, both franchise and independent dealers found themselves competing even more aggressively than they ever had before. However, now they weren’t only competing as they had been in the past, but the industry disrupters joined the game – and were motivated to win to the point that they were bidding against themselves.

Now, Carvana has acquired ADESA, the second-largest auction house in the country outside of Manheim for $2.2 Billion. Why would they do that? Because, just like you, they need inventory to sell! If they were bidding against themselves for inventory and pushing dealers out of the market for as many cars as they could at auction, it makes total sense to simply acquire the auction company!

That is what Carvana intends to do! They no longer need to bid against themselves. They can simply cherry-pick the vehicles they want, auction off the rest, and make a profit all while expanding their reconditioning capabilities. It’s not about reconditioning. They just lowered their vehicle acquisition costs by wiping out auction fees and transportation costs. The only endgame that makes sense is that Carvana is trying to corner the market and gain market share by having the largest and best inventory to support their direct-to-consumer business model while leaving the franchise and independent dealers to run off to Manheim!

What does this mean to an independent store? Y’all must circle the wagons!

“Circle the Wagons” is a defensive position to fend off enemies no matter which direction they come from. Get ready because the Carvana and GM partnership combined with Tekion, t available used car inventory for both an independent and franchise dealership will be reduced by anywhere from 500,000 to a MILLION used cars!

What does this mean for the franchise dealer?

It means that you are moving one step closer to factory-direct sales. It’s already happening in other countries and the only thing saving you right now is your franchise agreements.

And you just thought we were in a consolidation and corporatization of public dealer groups…. BZZZ.. wrong answer! You do not win the “Showcase Showdown!” This is Big Box used cars without having the overhead or expenses of a physical location.

If you are an independent, single point, or small franchise group, you will all need to “Circle the Wagons” in order to compete.