One of the questions ISOs most frequently ask is "Where should I concentrate my selling time?" In this issue of The Green Sheet, we wish to share some information about some prime markets, and perhaps help focus your efforts. One thing Bob Carr has reminded us of this year is that "Knowledge IS Power." So here is some knowledge about market opportunities.
Automobile Dealers
The strongest and most lucrative market for check guarantee has been the "new car dealer." Several things are happening with Automobile Dealers:
* There is consolidation among the smaller dealers.
* New car sales are declining.
* Used car sales are on the rise.
Dealers are trying to compete with consolidators by pooling together for economies and advertising, inventorying of cars and parts, and even joint finance and personnel management administrators. The consolidation of dealerships may bring a lot of new opportunities and open doors that were previously closed. When change is occurring, it makes people consider further change.
Dealerships to Watch
Republic Industries Inc., run by billionaire financier H. Wayne Huizenga, is comprised of more than 350 new car dealerships in 18 states under a variety of names. Their locations generated $5.49 billion in 1997 alone. Republic also owns AutoNation USA, 38 used car superstores, and Alamo, National, and CarTemps USA rental agencies. Republic sold nearly three times as many new cars as the next three largest conglomerates, Hendrick Automotive Group, VT Inc. (Van Tuyl), and United Auto Group. United Auto Group has widened its holdings by entering California for the first time, with the purchase of the four Kearny stores in San Diego. Cross Continent Auto Retailers opened a new 62,000 square foot Toyota West building for its six-dealership cluster in Las Vegas. Groups such as Sonic Automotive, Inc., are taking full-page ads in industry magazines offering to purchase new car dealerships. The obvious trend is either to sell out or try to group with another dealership for strength against the mega dealerships.
Used Car Sales
While new car sales are declining, used car sales are on the rise. In 1990, 574,000 leased vehicles accounted for 7.3% of retail new vehicle sales, and by 1997 3,255,000 cars were leased, accounting for a staggering 30.6% of retail sales. These very same cars will later be sold as used cars when the lease expires.
Auto On-line
Who would have ever thought the Internet would take the place of kicking a tire, but it has! Auto auction sales on the Internet are growing. Atlanta-based Manheim Online, an extended service of Manheim Auction, is currently the only electronic commerce site for wholesale automotive professionals. Internet-generated vehicle sales by Manheim Online have surpassed $150 million as of early July, less than a year after the launch of the service. Currently, more than 5,000 auto dealers subscribe to Manheim Online. Manheim Online (www.manheim.com) has been named one of the top 10 electronic commerce sites of the World Wide Web by PC Week magazine. Products and services such as CrossCheck, Inc.'s, CrossCheck Now service is ideal for this business type, due to the fact that Manheim Online requires payment within one hour of purchase.
Auto Aftermarket
Driven by growth in the United States vehicle population, increasing vehicle age, and stricter emissions controls, the auto aftermarket is expected to grow at an annual rate of 3.1% or greater. According to Lang Marketing Resources, the United States auto aftermarket topped $136 billion in 1997.
Aftermarket products gained 3.0% in 1997 to $100.7 billion, slightly less than the 3.21% of 1996, but significantly stronger than the .47% of 1995. (These figures do not include tires, custom wheels, audio equipment, glass, crash parts, and other miscellaneous expenditures.) Purchased ervice grew to $36 billion, up from 34.6 billion in 1997.
Building Materials
Home center and lumberyard retail sales remain strong in the fourth quarter of 1998 due to high levels of new residential construction and record levels of maintenance and improvement spending. This strength in sales comes during a period of almost no inflation. The sharp reduction in exports to Asia has cut timber prices sharply from one year ago. Falling crude oil prices keep plastic and other energy-intensive product prices stable. If lumber exports to Asia were stronger or energy prices higher, dollar sales of lumberyards would be on the rise. Looking ahead, the strong pace in new construction and resales in the first nine months of the year will translate into higher levels of building material demand into the beginning of 1999.
U.S. sales are being pulled in two directions. Volume is strong, pulled up by rising professional sales and record consumer spending on maintenance. On the other hand, prices are weak, with wholesale softwood lumber prices off almost 20% from a year ago. Also, declines in crude oil prices are cutting into plumbing fixtures, plastics and other energy intensive commodity prices. Lumberyard sales were up about 6.1% from a year ago in the second quarter.
Pacific
California is leading the region, with San Diego, San Francisco, and Stockton ahead in the state. Portland is accelerating due to a pickup in new construction. Sales Growth: 6.0%
New England
The regional recovery is spreading to Connecticut, with Bridgeport and Danbury showing strong gains in new construction. The large Boston market and surrounding metro areas provide a solid base of strength. Sales Growth: 5.8%
Middle Atlantic
Central New Jersey is beginning to slow after being a driving force for the region. Part of the slack is being taken up in Northern New Jersey. Pittsburgh is experiencing strong gains in new housing. Sales Growth: 5.0%
East North Central
Sales continue to grow in Indianapolis. Major markets, including Chicago, Detroit, Cincinnati, and Cleveland, see very little change in new construction. Sales Growth: 3.7%
West North Central
Warm weather is boosting many metropolitan areas from weak levels a year ago. Topeka, Rochester, and Sioux Falls are enjoying strength in new construction activity. Sales Growth: 5.3%
South Atlantic
The Richmond market is seeing steady growth in new housing activity. Atlanta and Raleigh-Durham remain strong. Sales Growth: 4.3%
East South Central
This region is a study in contrasts. Most markets show small declines or limited gains from a year ago. A few, including Huntsville, Mobile, and Jackson, are enjoying booms. Sales Growth: 3.7%
West South Central
Texas markets are strong, especially San Antonio, Galveston, Dallas, and Fort Worth. The larger markets in other states of the region are not doing as well. Sales Growth 4.6%
Mountain States
Salt Lake City and Denver are the two larger markets in the region enjoying above-average growth. Phoenix and Las Vegas are experiencing a temporary slowdown in new construction. Sales Growth 5.3%
General Retail
Since growth in Electronic Check Conversion (ECC) is strongly supported by the National Organization of Clearing Houses, this service creates many opportunities that are reminiscent of the early 1980s in bankcard sales. This means that many new companies can become independent check service providers, outsourcing much of what they do, besides selling. We can expect that those organizations that are willing to step up to the merchant fraud question can buy services from other large organizations and become a full-scale ECC player. Authorization services can be purchased from organizations such as Rocky Mountain Switch, SCAN, or from CrossCheck; capture, settlement, and merchant reporting can be purchased from eFunds or BankServ; guarantee services can be purchased from CrossCheck, and perhaps others.
The point of this summary is that there continues to be a lot of opportunity in old market segments, and many new opportunities are just beginning to unfold. 1999 should be an interesting year for ISO sales.
Paul H. Green
Editor-in-Chief
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