Page 12 - GIADA May-June 2020

COMMENTARY

What Dealers can do Today to Prepare for

Post-COVID-19 World

By Majd Saboura, Senior Director of Offsite Solutions at Manheim

The magnitude of the COVID-19 pandemic
has left businesses across the country —
and world — in uncharted waters.

As we all try to process how quickly the
world has changed over the last several
weeks, one question at the top of my mind
is: What can we do today to position
ourselves for the best chance of recovery?

With dealership lots full of cars, reduced
demand and fewer consumers in the market,
there are steps that dealers across the U.S.
can take now to position themselves for the
best chance of recovery in the months ahead.

Ultimately, the goal is to reduce inventory
expense while generating cash to provide
flexibility — either to support overhead • Liquidate aged inventory, as well as to continue. Promote these heavily
or to buy opportunistically as the market any vehicles on their final curtailment through all of your advertising and
begins to return. payment immediately. marketing channels.
• Lower or eliminate the number of used • Independent dealers should evaluate
First, evaluate your entire portfolio of vehicles you have in the higher price third-party CPO programs to compete
assets. buckets, as these will be the costliest with franchise dealers. Consumers will
• Before you can make any decisions, — and most risky — to hold onto right likely be looking for an extra boost
you’ll want to have a solid now. These are likely to be your later- of confidence in major purchases—
understanding of your inventory. First, model-year vehicles (2018-2020). especially for used cars. The extra
group your inventory by the number • Price vehicles aggressively to ensure layer of protection that an in-depth
of days it has been sitting in inventory: quick liquidation and take advantage of inspection and warranty provides may
30, 60, 90 and 120-plus days. the limited wholesale buyers in market. help close the deal.
• Next, look at your floorplan cycle. Sometimes it is necessary to take a loss • Think wholesale as you retail to bolster
How many curtailments have you paid, rather than face worse outcomes. As trade-in valuations. Knowing your exit
and when is the payoff due? Notate this Dale Pollak wrote in his recent letter to strategy on a trade-in — whether you’re
information for each vehicle. dealers, cash is king right now. going to retail it or wholesale it — can
• Finally, further segment your inventory help you make more informed trade-
into price buckets: under $10,000, Once stores get back to near-normal in valuations. For vehicles you plan
$10,000 - $20,000 and so on. operations, there are a few more steps to wholesale, be sure to understand
• Next, dispose of costly inventory. you can take to ensure the best possible its latest valuation so you can make
outcome. an informed trade-in offer. And for
Once you have a complete understanding • Evaluate current consumer demand vehicles you believe you will be able to
of your current portfolio, dispose of “costly” and stock accordingly. A lot has retail, be more aggressive on the trade-
and aged inventory now to lower holding already changed since the pandemic in offer to help close more retail deals.
costs and minimize further losses. While dampened the economy, so the trends
volumes are lower in the wholesale space on which vehicle types were in demand Right now, the road to recovery looks long,
right now, some dealers are still buying before may not hold true in the future. and we’re all trying to figure out what the
cars. Leverage the various promotions • Push new car specials and offers new normal will be in the automotive
offered through wholesale digital channels. from manufacturers. OEMs have industry. But smart decision making,
been ramping up incentives to move backed by data, can help you weather the
their inventory, and these are likely storm. n

10 | GIADA Independent Auto Dealer MAY/JUN 2020