It's no secret that the dealership population is shrinking The marketing gurus use words like right-sizing. The manufacturers have programs like "Project 2000." It doesn't make any difference what name you put on it, the result is the same - fewer and larger dealerships. If you're not emotionally involved, the trend makes sense. Cars last longer, service intervals are farther apart, and the need for a convenient neighborhood dealership no longer exists.

For years we've been discussing the possibility of public ownership for dealerships. Nothing much has happened, but now we hear about corporate giants like Circuit City and Blockbuster founder H. Wayne Huizenga getting into the automobile business. The message that they re sending is that traditional franchised dealers have been unable or unwilling to recognize the needs of the marketplace and that they, because of their experience in mass marketing, are positioned to bring about a revolution.

It seems to me that one thing you need to start a revolution is an adequate supply of ammunition. In this case, the ammunition is inventory. I don't know a dealer who would not like to have more clean, late model, low-mileage used cars. As I see it, the most difficult problem faced by these superstores will be the acquisition and maintenance of adequate inventory levels. This is where the manufacturers enter the picture. Car Max, the Circuit City entry, has already been awarded a new car franchise by Chrysler. AutoNation, the Huizenga entry, has said they don't plan to seek new car franchises.

A new car franchise will enable these superstore operators to participate in closed factory auctions. If the other manufacturers follow the Chrysler lead, we could return to the days of the Hertz and Avis outlet locations. We all remember large numbers of rental vehicles finding their way into the market outside the traditional franchise establishment. The NADA fought a difficult battle to end these rental outlets. If the same situation arises from the franchising of super stores, it is unlikely that an NADA protest will be as successful.

The revolutionaries are banking on large inventories (up to 800 units) and a one-price, no haggle, selling system. If the manufacturers go along by allowing access to closed auctions, we could actually see a major change in the way cars are sold. Dealers know that profit depends upon a viable used car operation. Historically, over half of the used car sales are private transactions. If these super stores take a significant portion of the remaining market, traditional dealers will feel a profit squeeze unlike anything they've experienced in the past.

The stakes are gigantic. The national used car market, from both private and dealership sales, is estimated to be in the $3,00 billion range. The real gold mine, attracting the interest of these retailing giants, is the financing. Jim Moran, the founder of Southeast Toyota Distributors Inc., has joined with Huizenga in the formation of AutoNation. Moran already has a captive finance company, World Omni Financial Corp. and the J M&A Group, a captive insurance and warranty provider. The income potential from providing the warranty, insurance and financing portion of the sales generated by these super stores is mind boggling. I can assure you Messrs. Moran and Huizenga are aware of the potential. What is developing here is a vehicle that will produce a high rate of return on investment with minimal participation by a manufacturer. And now there are several new car dealers who have launched organizations similar to CarMax and AutoNation. They also see the potential the used car market offers and they have been frustrated in dealing with the factories.

This may be the vehicle needed to make a successful entry into the public market and that's where the real money will be made. If one or more of these groups can operate profitably for a few years, they will be in a position to offer their shares to the public at a multiple of earnings that will provide huge benefits to the founders. These companies will not be saddled with the requirements placed upon dealers. Selling new cars at little or no gross, providing warranty service under terms dictated by the factory and providing the expensive single-purpose facilities demanded by the factories.

If the manufacturers make it easy for these new market entrants to obtain inventory, the result may well be the Revolution in Automotive Retailing that J.D. Power has been predicting for the past decade.