I’m often asked by dealers, “Why hasn’t my volume increased in proportion to my increased inventory levels?”
More than likely your house wasn’t in order when you went off the deep end. You probably had aged units and didn’t address the problem before you amped up your inventory levels.
Your sales staff are putting all their efforts into selling the fresher pieces and letting all your old crap sit. Grosses will continue to erode.
The reality is your volume isn’t increasing and you’ve only made your problem worse.
Before you increased your inventory, you should have looked at a couple years history to see where the peaks and valleys were with volume. Had you done so, you would have discovered trends that would have served you well.
Dealers often increase their inventories based on the past couple months sales. Let’s say you had good sales in August and September and you live in the northeast. If you carry that same amount of inventory into the fall and early winter, you’re going to get crushed. You should have been paying attention to your sales history and cutting back vs. adding to.
Unless you’ve decided to be a total market disrupter, you have to be realistic about how much you can actually increase your sales.
You didn’t analyze your inventory based on turn. If you’re not getting close to 12 turns a year, you need to follow Dale Pollak’s advice and go on a diet. One out. Zero in. Or one out, one in until you get it squared away.
Until you increase your turn, you shouldn’t increase your inventory. Once you get to the 12 turn mark, you can add a few units.
Here’s another way to think about it; stock about what you’ve been selling over the last 60 days running average but be aware of your annual sales trends.
When you start adding inventory, the odds are likely that most of it will come from outside purchases. You cannot treat purchase units like you treat a nice trade. It’s likely that what you’re buying has a high cost to market and a high day’s supply.
One of the reasons you’ve not gotten the results you wanted when you increased your inventory is you weren’t willing to price those outside purchases competitive to the market.
You cannot expect to make as much gross on them as you would with a nice trade. My life-cycle process and UpYourGross software are great tools to help you take control of your inventory, increase turn, increase gross, and eliminate wholesale losses.
Isn’t it funny how common sense isn’t so common? That’s all I’m gonna say. Tommy Gibbs