If you’re like many dealers, your vehicle inventory may have yo-yoed over the last few years. You likely experienced a glut of new cars during the recession, while used cars generally continued to move — sometimes with not enough supply to meet the demand. Then, typically, your manufacturer adjusted production, sending fewer cars — and far fewer trucks and SUVs — your way.
Perhaps more than ever, you must stay focused on your inventory. Here are five tips to help your dealership keep its supply at a realistic level.
1. Avoid overstocks in the first place. One way is to regularly evaluate your inventory control tools and establish some best practices for sustaining a feasible volume. Consult with your technology adviser, for example, to see what new vehicle-tracking hardware and software have hit the market.
Also reassess any inventory rules of thumb you may follow. One line of thinking holds that an inventory-to-sales ratio should be about 2-to-1. If you plan to sell 50 units, you should keep at least 100 vehicles on your grounds. But which formula works best for you in today’s market?
2. Share your stock. Consider teaming up with other dealers selling the same brand to reduce your new-car stock. Just be sure these “pooling partners” are close enough geographically to make sharing practical, but far enough away to avoid direct competition.
3.Order only what you know will move quickly. Closely track pattern failures in any or all of the vehicles you stock. Meet with your CPA regularly to discuss whether you’re getting the inventory data you need and assessing it properly. And do what you can to make your inventory turn.
If a used car customer is interested in a particular vehicle that’s out of stock, for example, keep a record of the request in case the vehicle comes into inventory later. Put this document in a shared (electronic) place that all salespeople — including your auction buyers — can reference.
4. Evaluate your website and online practices. If business at your dealership is still slow, use the extra time to assess your website and overall Internet presence with the simple goal of moving more stock. Remember, most buyers do homework on the Internet first, and you want potential customers to linger on your site — not skip off to your competition’s website. Consider using video, which can be effective in getting potential customers to act. Web research firm eMarketer estimates that currently, 88 percent of all Internet users are video viewers.
Some dealerships feature sports stars or other celebrities in their videos to attract viewers. And video customer testimonials can be a powerful tool. Also be sure to evaluate your e-mail responses.
5. Do your homework. Always do your homework to make sure your prices are competitive, and that these are the prices you’re advertising. One strategy holds that you should price vehicles for subprime (and other) buyers. Some dealers, for example, look for vehicles they can buy $1,000 to $1,500 under wholesale book, believing that allows them to cover their lenders’ fee structure and still make a good gross profit.