Page 37 - GIADA-May-2018-Final

“Don’t go to auction
when key players are off looking for cars, with the intent of filling
and unavailable to do things like close your lot at whatever cost.
deals, manage teams and move vehicles Go with a budget.”
more efficiently through reconditioning.

Merchandising Inventory: I was a
dealer back in the days when the In- Better Used Inventory
3 ternet first arrived. It was a pretty
clunky and time-consuming process to get
vehicles, descriptions and photos online. Management Can Start Today!
At the time, I understood that time was
money. The longer it took me to get my By Patrick Bergemann
cars online, the less opportunity I had to
sell them while they were fresh. That’s why It's evident that a level of change is needed in the dealership model. We've discussed
I missed a lot of bedtime stories with my hiring better, branding better, and countless other things to make a dealership a cus-
kids. I was still at the dealership, writing tomer-first business that empathizes with their community. But, many dealers still hide
descriptions and uploading files. behind feelings that these changes are too big to execute to right now.

We’ve come a long way since then. But I have two things to say to that: 1) It's not going to be easy, but nothing worth doing is
even so, it’s still far too common for five, ever easy. 2) It isn't expected to happen overnight. This is a long game. If there was a tool
seven or even 10 days to pass before many that could reinvent business overnight, it'd be groundbreaking. But success is one step at
dealers get their new and used vehicles a time. So let's start with a step you can implement today.
properly merchandised and posted online.
Thanks to all the advancements in technology, we have more data than ever. People are
The best I can tell, these delays are all due tracking their steps, sleep patterns, and a bunch of other stuff that they probably aren't
to process inefficiencies. Perhaps the in- going to actually analyze or fix.
efficiency relates to your service depart-
ment, or your detailing team, or perhaps But in business, there's still data that matters. Your used inventory manager should be
the outside vendors who work with you on able to tell you how long you generally hold on to a vehicle, which vehicles are selling best,
their schedules. Whatever the case, there’s and what they're usually selling for. Use this information to educate whoever is buying
room, I believe, for most dealers to mini- your used inventory. Dale Pollak uses the guiding principle to not buy anything for more
mize the opportunity costs associated with than 84% of what you expect to sell it for.
less-than-optimal (and time-urgent) mer-
chandising. For example, if you're selling a lot of family oriented sedans and you see a blue Toyota
Camry come up at auction, you should know that your average used Camry is selling
I’ve shared these three areas of opportunity around $13k, you should know that (packs and reconditioning aside) you shouldn't spend
costs because I believe they represent some more that $11k to ensure you turn the car around quickly and for a profit.
of the lower-hanging fruit that dealers can
harvest to mitigate margin compression In the same mindset, if you see a red Mustang come up to auction, you should know that
and improve their operational efficiency those are lasting 180-210 days on your lot and retailing around $22k. So once the auction
and profitability. gets past $18,500, stop bidding.

I also hope this post serves a broader pur- I know, you don't have any Mustangs on the lot. I know, it'll be cool to share on social
pose—to help dealers and their teams rec- media. I know, "someone" will want it. But is it really worth a spot on your lot when you
ognize that minimizing opportunity costs could be better investing your finances into inventory you can sell?
will ultimately provide more long-term
benefit to your operation than simply cut- The second practice to start your path to success is to set a cap on your inventory. Don't
ting your monthly expenses. n go to auction with the intent of filling your lot at whatever cost. Go with a budget. If your
goal is to fill the lot, you'll make more thoughtful spending decisions. If you sent a kid to
In addition to being a best-selling author a candy store and said "what do you want?", they'll want it all. If you send them with $2,
on Used Car Sales in his book Velocity, they'll start to decide if they really want more candy or better candy.
Dale Pollak is the chairman and founder of
vAuto, Inc., a company that provides retail So I ask...do you want more inventory or better inventory? Either way, an educated look
automotive dealerships with a better way to at your inventory purchasing will lead to better purchasing decisions. n
appraise, manage and price their pre-owned
vehicle inventory. In addition to serving as
vAuto’s spokesperson, Dale is responsible
for strategic planning and development.

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