As a dealer, your job can get more challenging and complex with each passing day. Consumers have more ways to purchase vehicles, more information at their fingertips and competition has never been more widespread. That means profit margins are more difficult to maintain, and the negotiations for each sale are more intense.
While the overall economy remains strong, many experts wonder how long sustained growth can continue and how a slowdown could affect both new- and used-vehicle sales. In challenging times such as these, dealers need to take a close look at their business operations and ensure they have a sound plan to navigate the ups and downs of the market.
As market conditions and consumer behaviors change, shouldn’t the way you operate your business change too? Every dealer should be looking at their operations and make appropriate adjustments. Here are a few places to start:
1. Buy Right to Sell Right.
Acquiring vehicles at the right price, through auction or trade-in, is critical to driving profitable sales. With tighter margins, it’s more important than ever to pay the right price on the front end. You can’t make money at retail if you overpay at wholesale.
2. Continuously Adjust to the Market.
Don’t sit on a price that isn’t attracting interest from car shoppers. Repricing vehicles on a weekly basis will help move inventory faster and lower holding costs.
3. Have a Liquidation Strategy.
Be prepared to cut losses and move a vehicle through auction if it’s not selling on the lot. Every day that vehicle sits on your lot, it eats into profits and keeps you from investing in the right inventory for your customers.
4. Factor Time and Cost of Reconditioning.
Whether in-house or through a third-party, it’s critical to create an efficient way to recondition vehicles. Know the time and costs involved, so you can factor those in when evaluating a vehicle. Reconditioning is a powerful way to stock market-ready vehicles that sell fast. Just be sure to look at the total picture to understand what works for your business.
5. Invest in Your Digital and Physical Storefront.
Even for small, independent dealers, interactions with consumers goes well beyond the physical dealer lot. All dealers should invest in their digital presence and track click-through rates, virtual test drives, and leads through digital channels. Your digital storefront is the first point of contact for your customers today.
To ensure success, it’s important for dealers to closely watch each of these areas of their business to establish benchmarks and measure performance. Monitoring these metrics over time will highlight areas for improvement.
Are you holding onto vehicles too long? Are you paying too much for vehicles at wholesale? Are you increasing your reach through an effective digital retailing strategy?
The automotive landscape may be shifting fast, but dealers who take stock of their business and plot a thoughtful course of action can turn these challenges into opportunities.
Wendy Gill is a division vice president at NextGear Capital.