Written By: Garry House
Last month I published a blog focused on the difference between good and great automobile dealers, and I promised to follow that up by discussing what we, at the NCM Institute Center for Automotive Retail Excellence, have learned about the differences between some of the good and great processes employed by these dealers. This is the first of those follow-up articles.
Most every dealership manager that we work with at NCMi recognizes and admits that the greatest challenge they face in their used vehicle department is aging. Both the good and great used vehicle merchants understand the need for a sound Used Vehicle Age Management Process, yet very few (only the “great” ones) know that their process must be developed, implemented and executed to manage their used vehicle inventory as it ages, rather than when it ages. Used vehicle aging is a given; it cannot be avoided. However, it can be effectively managed and the negative effects can be minimized. Following are the ten components of what the NCMi faculty believes to be a “great” age management process.
- Maintaining a used vehicle inventory of no more than a 35-days’ supply. The best dealers today are maintaining an inventory of 26 to 30 days’ supply and turning their inventory 12 to 14 times per year.
- Promoting “urgency” and “velocity” as the primary watchwords for used vehicle inventory management. For many dealers this is difficult because it involves a significant cultural change within the organization.
- Establishing and enforcing a “hard turn policy” of 60 days or less. This requires that you transfer ownership of any used vehicle to someone else, once it reaches 61 days in age.
- Focusing on, measuring and score boarding the time from inventory acquisition to preparation for sale. This means both minimizing transit time on purchases and clearing trade-ins for resale.
- Conducting a regimented Trade Walk every morning that you have fresh trades or purchases available for review. It is mandatory that all on-shift sales and sales management personnel (together with service department representatives) attend and participate in the Trade Walk. Include the Sales Consultant Adopt-a-Car Strategy as a primary process step during the Trade Walk. This process ingredient will spread some of the critical used vehicle management tasks throughout the sales staff.
- Requiring that all used vehicles are immediately listed on the Internet (dealership website and third party classified sites) immediately following the Trade Walk. Always maintain a scoreboard detailing the vehicles in inventory without an Internet listing, without adequate photos (and videos), without compelling descriptions and without most current pricing.
- Ensuring that average reconditioning cycle time does not exceed 72 hours (3 working days) and that reconditioning cycle time is accurately measured and score boarded. Utilize a Pre-Display Checklist to document the successful transition of a used vehicle from the reconditioning department to the used vehicle sales department.
- Developing and implementing a Bucket System to identify and manage used vehicles as they transition from one age category to another (become “bucket jumpers”). Regardless of the groupings and definitions of the buckets you decide to establish, the key metrics you must always have on the tip of your tongue are (a) the percentage of inventory units under 31-days old and (b) the number of inventory units over 45-days old.
- Conducting a disciplined Daily Stock Walk to touch and discuss ALL of today’s bucket jumpers. As with the Trade Walk, it is mandatory that all on-shift sales and sales management personnel (together with service department representatives) attend and participate. The intent of this exercise is to answer one question: “’Why hasn’t this vehicle sold?” and to take whatever corrective action is deemed necessary. You cannot do too much research or have too much information on each bucket jumper. For example, how many phone inquiries? How many Internet leads? How many demo’s? What’s the VDP penetration percent? The Sales Consultant “parent” (from the Adopt-a-Car initiative) should have the answers you’re looking for.
- Ensuring that the retail pricing on the vast majority of your vehicles is very close to, or below, average market pricing. Too many dealers have unfortunately found that that if it’s not priced right, “the phone won’t ring, and the door won’t swing.” That doesn’t mean that you can’t “swing for the fences” on the right vehicle. And it doesn’t mean you’re joining the “race to the bottom.” It means that you have to price it right, with age management in mind and then be prepared to defend and manage your pricing with“documentation, rather than negotiation.”
And, yes, you guessed it…within the NCMi used vehicle management training curriculum, we do teach the details of each ingredient of the above age management processes. In July, we’re conducting every one of our used vehicle management training programs, including our 1½-day class in Chicago and a brand new “Mastery” level course for those who have already taken our Principles of Used Vehicle Management I & II classes. Click or call for details at 866.756.2620.