NADA 100 logo 300x198 NADA 2017: A Milestone Moment For Our IndustryIt’s fitting that this year’s National Automobile Dealers Association convention will occur in New Orleans.

What better place to celebrate NADA’s 100th anniversary than the city where “laissez les bons temps rouler!” is the order of any day?

The anniversary is an important milestone for our industry. If it weren’t for NADA, the enduring strength of the franchised dealer network would be nowhere
near where it is today.

For me, this year’s event will mark my 48th NADA convention. I’m a little humbled to realize that I’ve been around the car business nearly half as long as NADA has been in existence.

But I also confess that I’m just as excited about this year’s convention as I was when I made my first trip as a 10-year-old.

For me, NADA is the single-most important dealer event on the calendar. It’s the one time where you can connect, and reconnect, with long-time dealer friends and their families. Everyone’s focused on the year ahead, and looking for ideas and insights to help them get ahead.

I especially relish my conversations with dealers at NADA. It’s like a four-day immersion school on automotive retail.

I suspect much of the discussion will center on whether 2017 will bring yet another record-setting pace of new vehicle sales. I think we’ll get there, or at least come fairly close, in terms of volume.

I am concerned, however, that the vehicle volume gains will come at the expense of dealer margins, in both new and used vehicles. I sense other dealers understand this emerging reality, too, judging from pre-NADA interest we’re seeing from dealers to demo Stockwave, and vAuto’s Conquest and Provision systems. These dealers recognize it’s ever-more important to have the right new/used vehicle inventory, priced and promoted properly, on their lots to achieve their goals for profitability and sales volumes.

I’m also curious and excited to see what new technology and tools will be available to help dealers connect their sales and service teams more effectively and efficiently with today’s customers, as well as each other.

All in all, I’m sure the good times will roll in New Orleans. I suppose the key question will be whether they keep on rolling through the remainder of the year.

I’ll be spending my time at the Stockwave and vAuto booths (#1719 and #1737, respectively). Please stop by and say hello if you have the opportunity at NADA.

Safe travels to everyone headed to New Orleans. I look forward to seeing you there!

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I was struck by several parallels in a Chicago Tribune story this week that highlighted how hiring and retention is a big concern for the nation’s top retailers.

The article highlights sentiments from top executives attending the National Retail Federation’s annual convention are grappling with the convergence of sales processes that occur both online and in brick and mortar stores, sometimes simultaneously. The piece also noted how these executives are coming to terms with the idea that persistent turnover is really a problem, and better, more personalized training is part of the solution.

Sound familiar?

On one hand, the article should give dealers a sense of solidarity. You are not alone in the struggle to hire and keep good employees, particularly as the role of sales associates is undergoing an evolution, thanks to the Internet.

On the other hand, the article exposes a risk for dealers. You will be competing for the same employees against companies who are increasingly committed to offering more compelling career paths and compensation packages. Such efforts effectively raise the bar in terms of what it takes to attract and keep qualified people.

The good news, of course, is that the car business, and the entrepreneurial nature of dealers themselves, gives us the ability to offer compelling career, employment and lifestyle options that the larger retailers can’t match.

Therein lies the opportunity for dealers with the conviction and courage to seize it.

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It’s pretty cool to imagine dealers donning white lab coats and analyzing the inventory metrics I shared in my last Pop Quiz post.

Five dealers took the time to diagnose why Group 1, the dealership group with the undeniably poorer used vehicle metrics in the quiz, is suffering compared to Group 2.

With Market Days Supply, the dealers correctly noted that Group 1 appears to be stocking less-desirable vehicles. As one commenter noted, Group 2 is “paying more attention to market demand” as they stock their inventory.

With Cost to Market, the dealers also astutely spotted a striking disparity. “Group 1 for some reason acquires their vehicles on the high side,” a commenter notes. Another writes, “Group 1 pays more and stocks slower moving units.”

With Price to Market, all the dealers sensed Group 1’s problem—a pricing strategy that probably combines wishful thinking with too-little/too-late adjustments to bring their inventory in line to the market.

With Inventory Age and Inventory Turns, the commenters correctly correlated Group 1’s performance as reflective of other factors—less desirable inventory, improper pricing, a less-than-strict aging policy and suspected problems with descriptions, photos and related merchandising. One adds, “a higher (turn) number is the result of doing all of the above correctly.”

All in all, the dealers offered sound, Velocity-based diagnoses of Group 1’s performance. Their assessments are a gratifying testimony to their skills and smarts as Velocity students and retailers.

I’m absolutely certain that with a little more background and time, the dealers would have sniffed out the principal, root-cause reason for Group 1’s poor performance—a $1,000 pack applied to every used vehicle they retail.

The issue isn’t necessarily the presence of the pack, it’s the size of the pack that’s the problem.

In effect, the $1,000 pack sets off a chain of less-than-desirable decisions:

  • Appraisers and buyers choose not to acquire more desirable, in-demand inventory because the cars, when saddled with a $1,000 pack, don’t offer the front-end gross profit the dealer expects. The end result: Higher Market Days Supply and Cost to Market metrics than Group 2, which charges a $250 pack/car.
  • The $1,000 pack effectively forces Group 1 managers to initially (and subsequently) over-price their less-desirable vehicles, given their market appeal, to achieve the front-end gross profit the dealer expects.
  • Group 1’s inventory age and annualized turn metrics are direct, symptomatic summaries of how the $1,000 pack slows the pace of sales and the overall performance and profitability of the used vehicle department.

I’ve long argued that today’s market is too efficient and too transparent for dealers to continue charging vehicles packs the way they have in the past. Packs, by definition, amount to a tax on every used vehicle. They do not add or enhance the value of the vehicle. They are a surcharge that costs dealers, like Group 1 in this quiz, a lot more than they think.

My sincere thanks to the dealers who took time to answer the quiz question.

Looking ahead, I have a hunch that packs will become a more frequent (and heated) topic of conversation as dealers struggle to understand how competitors, like Group 2, can pay more for used vehicles, price them higher, sell more cars and make more money.

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Used Vehicle Pop Quiz: Why Is One Dealer Doing So Much Worse?

01.06.2017

Take a moment to review the following used vehicle inventory-level metrics from two similarly sized and geographically located dealer groups. Then, I’d welcome your answer to the quiz question below. Inventory Market Days Supply Dealer group 1: 85 Dealer group 2: 73 Cost To Market Dealer group 1: 90 percent Dealer group 2: 84 percent [...]

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4 Ways To Increase Profitability In 2017

01.03.2017

It’s not a very pretty picture when you open the hood on dealer financials in new and used vehicles. Consider the following data from the National Automobile Dealers Association (NADA): New Vehicles: At the end of 2013, dealers had averaged 818 new vehicle retail sales, with an average gross profit of $1,174/car (3.7 percent of [...]

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3 Areas Of New Vehicle Performance Improvement For 2017

12.16.2016

When the temps hit single digits in Chicago, I start thinking about places where it’s a whole lot warmer and more pleasant. This daydreaming led me to think about sunny beaches, and the big wave of success dealers have been riding in new vehicles in recent years. Actually, it’s more like a consistent swell, with [...]

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4 Used Vehicle Fundamentals To Help You Stay Strong As Fall Unfolds

12.15.2016

There appears to be good news and bad news on the horizon in used vehicles. The good news first: The healthy pace of used vehicle sales, particularly in near-new segments with good-credit buyers, that many dealers have enjoyed for much of this year may continue this fall, according to analysts. If true, the used vehicle [...]

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A Market-Minded Path To Improved New Vehicle Inventory Profitability

11.17.2016

It’s here—the slowdown in new vehicle sales that many dealers and industry observers have expected to arrive for some time. As one analyst puts it, “the new car market is no longer growing, which means automakers now have to measure success in terms of market share, transaction prices, incentive levels and profitability.” This no-growth environment [...]

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Front Line Inspiration From vAuto’s Performance Management Team

11.08.2016

Committed. Loyal. Driven. Persistent. Scrappy. Family. Aggressive. Blessed. Humble. Competitive. Grateful. Energetic. Integrity. Passion. These words came from individual members of vAuto’s Performance Management team as they introduced themselves to open their annual meeting today near our Chicago-area headquarters. The introductions required each of the nearly 150 team members to describe themselves with a single [...]

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3 Reflections On The Car Business and the Chicago Cubs

10.28.2016

Like most other Chicagoans, I’ve been paying close attention to the Chicago Cubs this year. After a record-setting season, the team made it to the World Series, raising the hopes of many that 2016 could be the year that ends a 108-year title drought. As I’ve tuned into the World Series games, I’ve been struck [...]

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