So, what state of mind are you in? For years we have used the terminology "Gross Profit Is a State of Mind." That may have been true years ago. Not so much today. Gross is a state of pricing, processes, and doing a lot of little things each day.
Here’s where we are today. Dealers by and large have figured out that if they use technology to price their used cars then customers will show up, especially when they price the cars in the top five in the market.
Dealers have also noticed that their average gross profit has gone south and some have started to push back or push away from the pricing concepts that have generated ups in a tough and competitive market.
Some dealers have pushed the pricing to the sideline and have moved back to "going for the grosses" and not worrying too much about the "price position" in the marketplace.
I understand it. I get it. Those dealers have become convinced that they can’t replace their inventory so why worry about turning it? I’ll tell you why. If you adopt that sort of mindset you will wake up one day with lots of old stuff on your lot that you are stuck in. Do I need to remind you about how fast the market can turn? Gas prices go up or gas prices go down and the market goes sideways. If you keep hanging onto inventory, there could be a very sad day at the "OK Corral."
Here are some tips to get you on track:
1. Do a better job of training the sales people (and sales managers) to sell the value of your company and the value of the vehicle, and your grosses would be a lot better. The Team needs to learn to say "no" and to convince the customer that you have the best deal going.
2. Provide more information. The more information your sales people have about your inventory and how it’s priced to market the more likely they are to do a better job of convincing the customers you’ve got the best car at the best price. You have to sell the sales staff before you sell the customer.
3. Do more and better research. The more research you do on what’s hot and what’s not in your market the better off you will be. Grosses go up when you are selling a product that’s high in demand and low in supply. Key components for you to utilize are vAuto Stocking Tool, Auto Trader Data and data from Auto Count USA (Experian.) If you’re still making decisions on what to buy based on gut instinct you may want to rethink that.
4. Rethink "Buckets." Many dealers have become sold on buckets. Buckets are a solid discipline process, but you can’t take a position that all cars in the first 20 days are priced a certain way and at day 21 another and so on. There are some that need to be over market and some under market regardless of age. All cars have to be evaluated on their own merits and must be done daily, not in 15 or 20 day windows.
5. Track GAP and ROI. Dealers who are tracking GAP and ROI are seeing a big difference in their average grosses. If you’ve not bought into this process then maybe it’s something you should take a hard look at. If you need the GAP/ROI spreadsheet, send me an email and I’ll get it right to you. (It’s Free!)
6. Fix your reconditioning timeline. If your most profitable car is a 20-day car (and it really is) how can you allow the service department to bog you down with it spending 7 to 10 days in the shop? This is one of those things that’s fixable, but it has to be done by the dealer. If the dealer wants to fix it then it gets fixed. Speed wins; the lack of speed kills. It’s as simple as that.
7. Re-do your website. How does your website look? Your website is the "New Showroom." Do your pictures tell a good story? Do you have 12 to 20 photos? If that’s all you have then you are not in the game. You need at least 40 and they need to be done in a photo booth. If you don’t have a photo booth you need to make a commitment to get one. Saying you don’t have the space is a poor excuse. You can make it happen if you want to. Kind of like the issue in service. You can fix it. You just need to do it.
8. Install EWR into your "Trade Walk." Did you read my article two weeks ago on EWR? Early Warning Radar Here it is. Even if you’ve read it, read it again.
The used car department takes a lot of energy and effort to achieve the volume and gross you need to make big money. You can say that "gross is a state of mind" all you want, but what really creates gross is your mind getting in gear and fixing the things that impact gross, not sitting around thinking about it.
My state of mind is "that’s all I’m gonna say." Tommy Gibbs