Presence

Proper inventory management is a fast-paced race, but it is one a dealer can come from behind and win. Case in point: Finish Line Ford in Peoria, Ill., is currently averaging 300 sales per month. When compared to the 70 per month it was averaging throughout most of 2008, it’s obvious the dealership came from about the middle of the pack and is now leading the way.

At the foundation of this more than 325-percent increase in sales was Co-owner Bill Pearson’s seemingly simple decision “to get into the used car business and quit dabbling.” When times got tough he decided it was time for the dealership to broaden its horizons and rely on more than Ford vehicles in the used department. To put those words into action, he overhauled his used car operation, and now about 80 percent of the dealership sales are pre-owned.

The dealership, which is a part of the Green Automotive Group, is now laps ahead of the competition, and that success was made possible by several factors—the appropriate use of technology, the right leadership, a strong management team, and the will to continue adapting for ongoing success.

Start Your Engines
Technology now offers dealers the V8 model of inventory management, with a number of companies offering quality products. Pearson, who also serves as the general manager at Finish Line, recognized this and has partnered with a number of technology companies over the past year and a half.

However, having a V8 under the hood is only effective with the right driver behind the wheel, and at Finish Line Ford, Pearson is in the driver’s seat. He now bases how he buys, prices and sells inventory with the help of market data from vAuto, his inventory management technology provider. He said, “Before vAuto, we [didn’t even have] a used car presence. We’d wound our used car operation down [in previous years because] we really didn’t have a hold on it.”

He summed up his old inventory management strategy as a four-step process. One, buy a few Ford program cars. Two, mark them up $2,000 to $3,000. Three, hope they sell in the next 30 days. Four, repeat steps one through three.

Nowadays, to say he has “a hold on” his used car operation would be an understatement; some would equate his inventory management to an art, or even a science. Pearson said, “We do a lot of research on days supply, cars in market like ours, which cars are selling faster than others, and utilize that [data] to tell us [what’s working well] in this market.”

Furthermore, Pearson – who’s at auction three to four days a week buying cars – uses this information to decide what vehicles to look at and the price range in which he needs to buy them in order to be competitively priced. He added, “We’re typically the most competitive within 100 miles of Peoria.”

Pearson and one other used car buyer attend five to six auctions a week – from Orlando, Fla., to Riverside, Calif., – to stock the lot with the right mix of vehicles. While he does some buying online, he needs the bulk a physical auction offers due to the variety and volume of used vehicles he stocks. With a lot that regularly stocks over 300 vehicles (sometimes more than 500), a high-volume auction is the prime place for him to buy. For example, at one auction he had access to 10,000 cars across 24 lanes.

Of course, he must go into an auction like that with a stringent plan of attack. “You have to have a serious plan on what you’re going to work, when you’re going to work it and what cars you’re looking for. You can get all that information in advance. I look at that as much as a week in advance … It’s an art because not every sale has the same consigners every week,” concluded Pearson.

The Formula One of Used Car Sales
Through research, Pearson discovered a lucrative market for pre-owned highline vehicles that are, of course, priced right. “We sold three Bentleys in the last three months. That’s kind of the extreme version, but we sell everything … We do very, very well with highline cars. We sell about 100 highlines [a month], meaning Infiniti, Mercedes, Jaguar, BMW—a very even breakout on those [with] 20 to 25 apiece,” he said.

Staying on top of this market, however, is no easy task. “One of the issues with those [highline] brands is [nice pre-owned cars are] very tough to acquire … It’s a lot of work because their sales are few and far between … The highline sales are historically only once a month and they’re all the same week [in different locations].”

One good outlet for selling the highlines is eBay. “If it’s a very unique piece, it’s immediately put on eBay, like those Bentleys. We’re not going to leave any stone unturned on a car like that because we want as many possible hits on that vehicle as we can get,” said Pearson.

And the highline vehicles are just one aspect of Finish Line’s eBay strategy. The dealership currently sells about 30 used vehicles a month on eBay. To put that into perspective, that’s the same amount of used cars the entire dealership used to sell in one month. Primarily, the cars that go on eBay are what other dealers would wholesale—aged inventory (30-plus days) and trade-ins. After a good sales month that results in several trades, the dealership will have up to 90 cars on eBay.

While the dealership moves a lot of its traditional wholesale units through eBay, Pearson won’t let a car just sit on there for too long. He takes an especially hard line on low-dollar trade-ins posted on eBay. “I want that gone by 30 days. At 30 days, it’s at a liquidation price. We also use OVE to sell cars. At 30 to 45 days, it’s liquid; it’s time to go. Turn the metal into money.” However, very few vehicles sit on the lot long enough to reach wholesale territory. On average, a vehicle is on Pearson’s lot for 36 to 43 days “depending on the time of year,” so generally speaking, the few vehicles that do reach wholesale territory each month are usually trade-ins.

Pit Crew
To help keep the number of days a vehicle is on the lot down, Pearson must rely on his team at the dealership to help with managing the inventory, since he’s on the road several days of the week. Once the cars purchased at auction reach the lot, the clock starts ticking, and several things must be done before a car goes online for sale. First, the car needs to be reconditioned. Next, pictures need to be taken and online descriptions written—both important areas to Pearson. “Price isn’t the only thing. If you don’t have the right pictures or the right car or the right condition, it still isn’t going to sell … Photos go through our detail manager and one other person whose sole responsibility … is to get those up immediately.”

Clay Hagedorn, marketing director, oversees the marketing of the used cars, as well as other aspects of inventory management that go on in-house. He said, “No matter what the car is, we try to have it online within 24 hours.” By online, he means on the host of sites that the dealership utilizes to market its used inventory, which includes FinishLineFord.net, eBay, AutoTrader.com, cars.com, craigslist, and several others.

Pearson acknowledged that Hagedorn’s position is a very important one. “With used cars, the marketing aspect of it and the marketability of cars is probably more important than anything else you’re doing.”

To ensure a smooth ride, Hagedorn analyzes numbers and reports every day. He said, “Like Bill digs into vAuto every day, I’m into AutoTrader.com, cars.com, Dealer.com reporting several times a day, checking on our SEM progress … following up on our keywords to see if we’re gaining ground or losing ground.” The majority of the dealership’s marketing is online, and what little television and radio advertising the dealership still does is pushed online. “We haven’t advertised a phone number or address in our advertising for almost three years,” he stated.

Apparently, Hagedorn’s strategy is highly effective. The dealership tracks thousands of leads back to its Web site each month, and thousands more are generated by the third-party sites the dealership is on. To handle that flow of traffic, Hagedorn said, “We have a business development center in-house that’s staffed with six people that handles all leads—all the incoming phone calls and all the incoming sales leads for this facility and our sister store down the street, which is a Chevrolet and Hummer franchise [another Green Auto Group store].”

And since the Internet never sleeps, the BDC at Finish Line keeps long hours. “Our BDC is staffed seven days a week, 12-plus [hours a day]. There’s somebody here getting phone calls and e-mails at 7 o’clock in the morning until 8 o’clock at night. Plus, it is all Web-based, so they can get e-mails and do leads from anywhere in the world,” said Hagedorn, adding that they recently sold a car to someone in Israel and often sell cars to customers overseas. “You name it; we’ve probably shipped to it.”

A New Leg of the Race
For a dealership that has grown so much over the course of a year-and-a-half, Finish Line Ford is continuing to adapt, and the latest adaptations include a new facility. The new building, which is a 95,000-square-foot warehouse, was once a major home improvement store (think Menard’s or Home Depot) and will soon house the dealership’s used car inventory. Pearson estimated that the new indoor showroom will hold about 350 units.

An added bonus of the new building comes in the form of saving on reconditioning costs. Pearson said, “Once we have those cars inside, especially highline cars, we’ll do a lot less reconditioning.” Currently, the dealership averages $400 per car in reconditioning costs, of which about $65 is for outsourced work.

In addition to lowering recon expenses, he plans to eliminate the need for outsourced reconditioning. “We hope to be able to bring that back in-house by the end of the first quarter [of 2010]. We do all our in-house used car inspections at a full retail rate through the shop, which then, in turn, keeps fixed ops very happy.” To help with the reconditioning process, the new indoor used vehicle showroom will feature a detail department less than 150 feet from the sales tower.

As mentioned earlier, the detail manager handles taking photos of vehicles for online inventory listings, and another plan Pearson has for the indoor showroom is including a new photo studio. Although the makeshift studio the photos are now taken in produces good-quality photos, he wants to lead the way in that area as well.

Always embracing change, Finish Line recently became a seller of Ford Certified Pre-Owned [CPO] vehicles. “We just got into the CPO business yesterday,” said Hagedorn in mid-December, before adding, “The first thing I did was make sure [those cars] were marked as certified cars online.”

Pearson said, “We hadn’t done [CPO] in the past, and we think it’s an opportunity to do a little bit more business with a little bit more gross, from what I read.” And he contributes a lot of his success to reading publications like Auto Dealer Monthly. He said, “If you’re open-minded and have a clue with what’s going on with the virtual or Internet side of the world, you can pick up something out of every magazine you read. Our success has been predicated on the willingness to change with what other people are doing on the forefront.”

Vol. 7, Issue 2