It was a striking contrast.

Outside the hotel in Atlanta this morning, I felt a stiff, unfriendly wind, and temperatures in the mid-20s.

Inside the hotel, I got the warmest welcome I could imagine from the 900 Cox Automotive Software Group team members gathered here for the Dealertrack Sales Conference.

My mission: To share Stockwave with the team, and encourage their support to bring Stockwave to their dealer customers.

Like my previous Stockwave sessions with Cox Automotive teams, the Dealertrack gang got it. They know a cool innovation when they see it.  I’m once again humbled by the commitment, priority and support Stockwave has received from all corners of the Cox Automotive family.

My sincere thanks to Dealertrack CEO and Cox Automotive Software Group president Mark O’Neil and his team for the opportunity to be here and present Stockwave.

What a way to start my day. I’m headed to the airport and Austin, Texas. I’m traveling there for a pre-launch check-in meeting with the Stockwave development team. The wave moves forward…

#justturniton

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I’ve noticed a troubling trend in used vehicle inventories for dealers across the country in recent weeks.

The problem: The average Market Days Supply for many dealers’ used vehicle inventories is creeping toward or past 100 days. Typically, this critical metric, which indicates how quickly a dealer’s used vehicles are likely to sell in a local market, hovers near 80 days.

This shift hasn’t happened overnight. It’s the result of a steady increase in used vehicle supplies, driven in large part by the return of fleet and off-lease vehicles into the market.

But many dealers don’t appear to be aware of, or directly addressing, the harmful effects that ever-rising supplies can create for their used vehicle performance and profitability. It’s like there’s a cancer in used vehicle inventories, and dealers aren’t heading the warning signs.

Even more troubling, this upward trend in the average Market Days Supply is occurring as industry analysts and observers acknowledge what many students of the market have been saying for some time—front-end margins for used aren’t what they used to be, and they’re getting worse. An AutoRemarketing article this week notes that public dealer groups like Asbury saw their front-end margins decline from 8.5 percent to 8 percent in 2015.

It’s fair to ask why dealers aren’t aggressively adjusting to these more challenging market conditions. The answer, I believe, owes to the old axiom that “volume cures many ills in the car business.” Indeed, dealers have collectively sold more used vehicles in the past few years, commanding a larger share of retail market. Analysts also predict relatively stable sales volumes for the year ahead.

But I worry that dealers will wake up to the unwelcome reality of over-age units and a less-than-satisfactory return on investment for the vehicles they do retail. The time has come, I believe, for dealers to apply an even greater focus to turning their used vehicle inventories quickly to mitigate these retail risks.

Here are three recommendations I’ve been making to help dealers tune up their inventory turn rates:

Minimize acquisition mistakes: The AutoRemarketing article includes an astute comment from Manheim chief economist Tom Webb: Dealers “can’t afford to make buying mistakes. You’re not going to get those big gross deals, because there’s not only been a narrowing (of margin), but the bell curve distribution of those grosses, if you would, has actually narrowed quite a bit.” It’s imperative that dealers appraise auction or trade-in vehicles with a clear, objective view of every unit’s market potential—and avoid the emotion/speculation that leads to bad purchase decisions.

Match pricing to market conditions: Dealers who spotted the rise in their average Market Days Supply are setting more aggressive initial asking prices and revisiting each vehicle’s price position more frequently. “We’re far more focused, frequent and precise in our pricing than we used to be,” says a Northeast dealer. “The market doesn’t seem to care that we think a car should deliver a better front-end gross.”

Reduce your average inventory age: As I’ve long advocated, today’s market conditions require dealers to retail at least 50 percent of their used vehicles in less than 30 days. To achieve this operational standard, dealers must make the proper purchase and pricing decisions noted above. In addition, dealers need to inspire collective recognition—in sales, service and parts—that reducing each vehicle’s days to sale is a necessary imperative to maximize used vehicle performance and profitability.

I think Asbury CEO Craig Monaghan, who’s quoted in the AutoRemarketing article, aptly summarizes what changing used vehicle market conditions mean for dealers: “The game for us is to get the car, get it reconditioned, get it back on the front line and move it quickly.”

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I’m pleased and proud to share news that vAuto is unveiling its latest innovation, Stockwave, this week.

Stockwave logo vAuto’s Stockwave Debuts, Gains Steam For NADA Launch

You’ll be seeing ads for Stockwave in industry publications and online, and hearing about Stockwave from Cox Automotive and vAuto teams.

I’ve very excited about Stockwave’s potential to solve the persistent challenges of acquiring wholesale inventory from auctions, and make the entire process far more efficient and simple for every dealer.

Stockwave is a unique solution in many ways—but I’d like to mention two here.

First, Stockwave represents the first large-scale example of Cox Automotive’s mission to use our expertise and resources to provide integrated innovation that helps dealers increase efficiencies and profitability. Simply put, Stockwave wouldn’t have been possible without an unprecedented degree of collaboration and cooperation between Manheim, vAuto and other Cox Automotive brands.

Second, Stockwave also fulfills Cox Automotive’s vision to develop agnostic and open solutions that, first and foremost, serve the interests of dealers. As such, Stockwave isn’t just about Manheim; rather, Stockwave brings together vehicles from Adesa, SmartAuction and other leading auctions to create what we’re calling “surprisingly simple sourcing.”

We’ll be sharing more details about Stockwave in the coming weeks as we prepare for its official launch at the National Automobile Dealers Association (NADA) convention in Las Vegas this spring.

In the meantime, I’d invite you to visit www.stockwave.com and view the video below to learn how sourcing wholesale vehicles is about to change for the better.

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4 Factors That Make Auction-Buying More Difficult Than It Should Be

01.27.2016

You might think that with rising supplies of wholesale vehicles, dealers would have an easier time as they seek out auction cars to fill gaps in their used vehicle inventories. But the reality is much different. Across the country, dealers, used vehicle managers and their buyers still struggle to acquire the cars that will appeal [...]

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A “No Barriers” Life Lives On At Cox Automotive

01.12.2016

At this time last year, I stood on the stage at the Cox Automotive annual sales meeting with Erik Weihenmayer. As many of you may know, Erik’s inspirational story brings the house down whenever he speaks. A blind guy who climbs the world’s tallest mountains, kayaks ferocious Class 5 whitewater, and skis black diamond slopes [...]

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Three Keys To Improved Performance, Profitability In 2016

12.22.2015

I have bad news to share about the upcoming year. It’s not that 2016 won’t be good for dealers. Most signs suggest we’ll have another robust year of new and used vehicle sales. But here’s the problem: Dealers won’t necessarily be making more money in 2016, even if they’re able to sell more new and [...]

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Refresher: Market Days Supply And What It Means

12.03.2015

I thought it’d be useful to share my e-mail exchange with a dealer who got stuck interpreting the Market Days Supply for a used vehicle. The dealer: “I am sitting here pondering a question with vAuto and need help to solve this in my mind. How can you have a high volume (high demand) vehicle [...]

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3 Ways To Make The Good Times In New Cars Even Better

11.25.2015

We’ve had an amazing year in new vehicles. September’s sales were very strong, spurring some analysts to raise predictions that we’ll close 2015 with more than 17 million new vehicles on the road. As the good times roll, I like to poke around behind the curtain—to see if dealers are doing as well as they [...]

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House Bill To Protect Dealer Reserves Gets Help From NADA, Dealers

11.24.2015

I caught a snippet of last week’s debate on C-SPAN around the U.S. House of Representatives bill H.R. 1737. The bill seeks two goals—to roll back the Consumer Financial Protection Bureau’s (CFPB) efforts to limit dealer reserves on finance deals, and require greater public participation as CFPB issues guidance to dealers and lenders. In the [...]

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How To Turn Your Hiring Into Competitive Advantage

11.11.2015

On November 23rd, I’ll be on a panel webinar hosted by Automotive News and presented by Hireology. Please join me to hear advice on how to turn your hiring process into a competitive advantage. You can register here.        

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