The vehicle sales forecast for 2020 looks strong, with S&P Global Ratings expect sales to hit a relatively healthy 16.8 million units. But earning your share of this market depends a lot on how well you manage your inventory: what you stock, when you stock it and how quickly you can get vehicles off your lot. The following inventory strategies will set you up for a profitable New Year.
Clear out the old and bring in the new.
Don’t waste valuable floor space with aging 2019 models. Establish programs, processes, incentives and aggressive targeted marketing to push out the old and make way for the new. Used advanced search functions in your CRM to create a targeted list of customers who purchased a vehicle at least two years ago and make another list of every unclosed lead in the last 90 days. Send a mailer or email and follow up with a BDC call to net up to a 24 percent higher ROI, according to CJG Digital Marketing.
Lean on your inventory management solution to identify your best new vehicle sellers so you don’t overload your floor. Your solution should also offer real-time updates and market data so you can easily manage your inventory and price vehicles correctly.
Create a pre-owned stocking plan.
Focus on stocking the top 10 vehicles that move fast and have maximum profitability. To be successful at this, you must also pay attention to seasonality. For example, a 2x4 pick-up in the north won’t sell in the winter but in the south, those trucks sell all year long.
We all know vehicles are a depreciating asset. You lose money when you buy the wrong car, overpay for the right car, price vehicles too high for your market or fail to retail every unit in a predetermined time frame. Lean on your inventory management tool and market analytics to avoid these common pitfalls that cost you money.
Eliminate pre-owned “lemons.”
Every dealer has pre-owned vehicles that don’t move and become a liability. Investigate why they aren’t selling. Is the car dirty? Is there an odd smell? Is it stuck in the back of your lot with no visibility? Or is the dealership down the road offering better pricing? Solve whatever problems you can and then market aggressively. Your CRM should match current inventory to customers searching now – or in the past – for similar vehicles. Use that information to send out targeted marketing.
If a car still doesn’t move, cut your losses and sell at auction before you’re in a position of negative equity. Most importantly: Learn from these lemons. If a vehicle doesn’t move or bring in profit, don’t buy it again. Eliminate the problem up front so you don’t end up in the same situation again.
Sourcing pre-owned vehicles has become more difficult for dealers with companies like Carvana scooping up a lot of stock. Be very selective at auctions and get aggressive in your store to win trade-ins.
Equity mining is a smart way to get the vehicles you need at a cheaper price than at auction. When combined with a strong BDC, equity mining is a proven strategy that delivers an ROI of 10 to 1. In other words, for every $1,000 spent, you get $10,000 back.
Equity mining in your service lane is an especially sound strategy. After all, you see cars there all day long. You know the cars you service, the problems they have, and their service history. There are no condition surprises and no transportation costs. The benefits here are twofold – you acquire an inexpensive pre-owned vehicle, plus you move the customer into a new vehicle, giving you a sale.
Keep in mind that to reap the benefits, equity mining cannot be a part-time job. You should have a dedicated salesperson who understands what makes a customer a good prospect. A scattershot approach to boost sales at the end of the month will likely only alienate your best service customers, so make sure you implement a solid strategy to keep the process moving all month long.
This new decade holds a lot of potential for dealers. Set yourself up with a sound inventory strategy now and reap the benefits all year – and decade – long.