| Adapt to the Market and Meet Your Retail and Wholesale Profitability Goals |
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| Written by Bridget Townsend |
| Tuesday, 16 March 2010 09:53 |
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With the used vehicle supply tightening and wholesale prices on the rise, it is important for used vehicle managers to be well informed about the market and their own inventory performance, as well as to have a smart retail and wholesale strategy.
In order to remain competitive, it is critical to stay attuned to the market and able to adapt to changing demand patterns. As supply tightens, you will inevitably need to add different vehicles to your inventory mix. With the cost of sourcing vehicles increasing, however, it is important to make informed decisions about what vehicles to stock. Your choices need to be based on both demand and your ability to execute on those choices. In a perfect world, everyone would be able to retail every vehicle with the same level of success. In practice, however, all used car operations are not the same. You may differentiate your dealership in a number of ways—the services you provide, loyalty to your franchise brand, or a specific demographic you serve. Your operational challenges may be different from the dealer down the road. Your sales staff may be very knowledgeable about specific vehicles or they may be new and inexperienced.
If you want to know what vehicles to stock and when to retail or wholesale, you need to start with a baseline assessment of your current sales performance, as well as an evaluation of your retail and wholesale profitability, relative to the market. This process will help identify vehicles that have been strong performers for your operation. Some inventory management companies, like DealerTrack AAX, will provide this type of assessment for free upon request. As you look to source vehicles you haven’t sold before, this type of intelligence will provide guidance on potential vehicles and help you to identify areas where you may need to make an investment (such as marketing and sales training).
Once you have your baseline, put a robust process in place to take advantage of market opportunities and measure the ongoing performance as you change your inventory mix. With the right tools, you can identify the highest grossing, fastest turning units in your market by using actual sales transaction data to determine the top producing vehicles with the biggest ROI. Additionally, to stay competitive, you need tools in place to monitor and assess how your inventory relates to the real-time market supply listed on the internet in order to balance out the remainder of your inventory and determine hot selling units in your primary market area.
With a good system in place, you will get better at spotting strong performing vehicles versus weak ones, which lets you make informed decisions. This doesn’t mean you shouldn’t ever again try a vehicle that didn’t perform well for you in the past, since market conditions and consumer taste and demand are continually evolving. The ability to track performance allows you to make informed decisions and build a plan to drive positive, profitable results.
In the course of measuring performance, don’t ignore wholesale profitability. We have all heard too many stories of dealers racking up wholesale losses by following aggressive strategies that chased the market and left dealers stuck with vehicles they couldn’t retail. Stay in tune with the market and respond to it, but always bear in mind your own business strengths.
Lastly, capitalize on rising wholesale prices. If you get a vehicle coming in on trade that doesn’t sell well for you, be sure to consider potential dealer trade and wholesale opportunities—other dealers may perform well with that vehicle and be willing to pay top dollar for it.
Bridget Townsend is the senior director and GM, inventory solutions for DealerTrack. For more information, visit www.dealertrack.com.
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