It is not unusual for dealers to struggle with either the lack of volume or the lack of a high average gross profit per car sold. In either case that can lead to a decline in total gross which is how we pay the bills and pay ourselves. There are very few cases when you will achieve both high volume and high average gross profit. It goes against the laws of nature or something like that.
Either way has challenges. If you have decided to be a high average gross dealer then it’s a pretty sure bet you will see decline in your traffic. If you go after volume, which means aggressively pricing your inventory on the Internet, then it’s likely you will see traffic go up and average grosses go down.
It’s also very easy to convince yourself that there are no cars to be bought. I want to remind all of you once again that CarMax, Texas Direct and Drivers Select are still buying lots of cars. (Drivers Select is cool, CLICK HERE to check them out.)
Going after volume means you have to up the ante when it comes to finding replacement cars. There is a lot more to acquiring inventory than just running out and buying more cars for the sake of a larger inventory. It requires a strategic plan of staffing and research or you will find yourself with a lot of aging purchased cars.
Assuming you get a solid plan in place to find more cars is there anything you can do to actually improve gross? Yes. Can you do $3000 a copy on the front? No.
I have some ideas for you:
1. Goal setting. If you are now at $1000 a unit on the front, it’s a real stretch to set a goal of $1500. You would be far better off to bonus the management team for bumping the average up by $50 a unit for this month and then repeat the process the following month. To say to them you want a $500 bump in one month is unrealistic and if you do bump it up the $500 you can bet your volume will take a hit. You can ultimately get to the $1500, but you need to eat the elephant one small bite at a time.
2. 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.
3. 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.
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." Have you read my article on EWR and Life Cycle Management? Early Warning Radar Here it is. Even if you’ve read it, read it again.
I’m thinking you can increase your volume and average gross profit, and "That’s all I’m gonna say." Tommy Gibbs