I had a rough, and pretty scary weekend.

This past Friday night, my son Alex called from the emergency room at Emory University Hospital. He was suffering from severe abdominal pain. I did my best to comfort him over the phone, and we exchanged messages through the night as the medical team conducted multiple tests to determine the cause of the problem.

By Saturday morning, Alex was still in the emergency room, and we still didn’t know the reasons for his pain. I headed to the airport, full of worry that something serious was happening with my otherwise healthy and hearty 23-year-old son.

When I arrived at the hospital, Alex seemed fine. The pain was gone and he was ready to go home. Both of us thought the pain must have been caused by a fast-acting virus or something similar.

But the resident doctor thought otherwise. While still uncertain about an exact cause, the emergency room medical team recommended surgery. An MRI had shown an abnormal bulge on Alex’s small intestine, and there was concern that an infection could cause other problems like gangrene.

I was freaked out, to say the least. All of Alex’s cell counts and vitals were normal. Surgery seemed too invasive and potentially unnecessary. I also wasn’t satisfied that the medical team had done everything possible to make sure that surgery was, in fact, the best option. I needed better information and more answers, rather than what-ifs.

I started making phone calls. I rang my brother, a doctor, who shared my concern that surgery might not be necessary. Later that evening, I called my boss, Cox Automotive president Sandy Schwartz, thinking he might know someone at Emory who could help my situation.

The sequence of events that followed blew me away.

alex hospital pic 225x300 When Family’s On The Line, Cox Really ShinesBy early Sunday morning, with Sandy’s help, a team of senior specialists at Emory evaluated our situation. Joe Luppino, Cox Automotive’s senior vice president and chief corporate development officer, showed up and stayed through the day to make sure I was OK and provide counsel and support. I also received dozens of e-mails and calls from other Cox executives and employees offering their best wishes, prayers and thoughts.

By noon, we had the answers we needed. The medical team determined Alex had a rupture in his small intestine, much like appendicitis, and surgery proved to be the best course of action.

The surgery occurred at 3 p.m., and I’m happy to share that everything went well. As of this moment, Alex is recovering at home, after his discharge from the hospital yesterday—an exit that proved a bit challenging given all the balloons and flowers we received from Cox employees across the country.

As I reflect on a challenging weekend, I can’t help but feel an immense amount of gratitude, love and respect for my Cox colleagues and the team at Emory. It’s apparent to me that Cox and its employees really live up to the values its founders put in place decades ago—when family’s on the line, it’s time to shine.

 

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I was fascinated by a column in the New York Times that suggests that too much positive thinking can be a bad thing.

The author, psychology professor Gabriele Oettingen, has studied the effects of positive thinking and concludes that it “fools our minds into perceiving that we’ve already attained our goal, slackening our readiness to pursue it.”

1962 Lesovsky Indianapolis Roadster 8 300x125 A Look At The Perils Of Positive Thinking And Selling CarsShe recommends a different approach, one that combines optimism and realism, which she dubs, “mental contrasting.” Her explanation of how it should work:

“Think of a wish. For a few minutes, imagine the wish coming true, letting your mind wander and drift where it will. Then shift gears. Spend a few more minutes imagining the obstacles that stand in the way of realizing your wish.”

This process, Oettingen asserts, gives us a sharper, more realistic sense of the next steps necessary to achieve a goal, as well as the energy and stamina needed to take those steps and achieve the objective. She also believes “mental contrasting” helps us establish goals that we’re more likely to reach.

As I read the column, I couldn’t help but think of the high hopes many dealers bring to their new and used vehicle inventories. In fact, the column helps explain why dealers put too much positive faith into specific new and used vehicles, and stick with pricing and retailing strategies that amount to symptoms of false expectations and hope.

I also thought of the best Velocity dealers. For them, “mental contrasting” is a daily exercise that relies on market data to define the potential obstacles each new and used vehicle may encounter. With these insights, the dealers are able to correctly assess each vehicle’s prospects as a gross-generating retail unit, as well as the steps necessary to maximize the unit’s profit-making potential.

Oettingen’s closing lines seem useful to help dealers temper their typically optimistic outlook as retailers:

“Positive thinking is pleasurable, but that doesn’t mean it’s good for us. Like so much in life, attaining goals requires a balanced and moderate approach, neither dwelling on the downsides nor a forced jumping for joy.”

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For the past several years, I’ve been a vocal advocate of the Velocity Method of Management—a market-based inventory management strategy that pushes dealers to turn their used vehicle inventories to maximize return on investment and minimize risk.

My advocacy flows from a firm belief that today’s market penalizes dealers who do not make a concerted effort to sell more used vehicles in less time. In today’s market, the longer a dealer futuristic car wallpaper 110155 300x160 3 Reasons A “Turn And Earn” Strategy Eludes Some Dealers hangs on to a vehicle, the less likely it will generate a sufficient return on investment. This reality owes to a combination of competition, pricing transparency and volatility—all of which contribute to margin compression.

My faith in a “turn and earn” retailing strategy also flows from the successes of dealers who adopt this approach. In a matter of months, the best “turn and earn” dealers double their monthly sales volumes and see record-setting levels of profitability in their used vehicle, service/parts and F&I departments. The big pay-off comes a bit later, when the higher level of performance and profitability become standard operating procedure, and dealers achieve a level of financial return and reward they hadn’t considered possible.

But for every Velocity success story, there are dealers who can’t successfully adopt a “turn and earn” inventory management strategy. I’ve seen enough of these implementation failures to identify three key reasons the dealers came up short:

1. They lose faith. A few years ago, I coached a New York dealer as he adopted a “turn and earn” strategy. His first course of action: Take accountability for all the aged vehicles in his inventory. This wasn’t easy because it required taking a $500,000 loss in the early months as the dealer retailed cars that had sat too long to offer a positive return.

This day of reckoning is a prerequisite for dealers who adopt a Velocity strategy and, for some, it’s too painful to accept. These dealers will blame the “turn and earn” strategy for the loss and ditch the strategy altogether. Of course, the strategy didn’t create the loss; rather, it exposed a “water problem” the dealer would rather ignore.

I compare the initial stage of Velocity strategy implementation to the experience anyone undergoes as they try to rid themselves of an addiction. At first, it feels terrible and, for some, this initial pain proves too much. But those with more persistence realize that, over time, they actually feel better as the addiction loses its grip.

The same is true for dealers adopting a “turn and earn” strategy. Their addiction is aged vehicles, and it’s a difficult habit to break. Those who have the faith to withstand and work through the initial pain, often wonder why they ever thought an aged unit was OK.

2. They can’t break the resistance. When dealers adopt a Velocity strategy, all the goal posts move closer. Dealers must put used vehicles online as soon as they purchase them. Likewise, reconditioning/detailing must be completed in day or two, not a week or more. Appraisals and asking prices must continually align and re-align with the market. Managers must make speedier decisions about each vehicle’s exit strategy.

In other words, a true “turn and earn” dealership requires a much higher level of collaboration among dealership departments, and everyone must understand that efficiency and speed drive the size of their paychecks and the dealership’s success. It’s not uncommon for dealers who adopt a Velocity strategy to find their skills as coaches and leaders put to the test.

“At times, it felt like I was herding cats,” says a Midwest dealer who adopted the Velocity strategy two years ago. “It’s tough to get everybody on the same page and we lost a couple people who couldn’t make the adjustment.”

3. The old habits never really go away. It’s common to hear dealers say that their average front-end gross profits decline as they adopt a “turn and earn” strategy. I address this complaint by showing dealers how their average gross profits have really normalized to the market. I also encourage them to focus on the “total” gross profit each vehicle, and their inventory as a whole, now generates for the dealership.

But some dealers have a hard time seeing the whole picture, and they end up undermining the “turn and earn” strategy with decisions that draw from a more traditional average front-end gross-focused playbook.

For example, dealers will set used vehicle asking prices well above the market in an effort to maximize average front-end gross profits—irrespective of whether the unit deserves the asking price, based on market data. This knee-jerk, control-the-gross impulse inevitably puts the dealer’s vehicles at a price disadvantage and slows their rate of sale.

Some “turn and earn” dealers also see diminished front-end profitability due to sales process “leaks.” This scenario occurs when dealers set market-competitive asking prices, and then allow sales associates to discount the price by $500 or more. The solution, of course, is a compensation plan that rewards sales associates when they stand firm on price and help sustain each vehicle’s front-end profit potential.

I advise dealers who want to adopt a “turn and earn” strategy that the transition will be a difficult, sometimes painful journey. I let them know they’ll face each of the challenges noted above, and probably a few more.

I also note that every successful Velocity dealer has been there. They’d be the first to tell you that adopting a “turn and earn” strategy isn’t easy. They’d let you know it takes an extraordinary level of commitment and courage to confront and contain the adversity that inevitably arrives.

But they’d also say the journey, for all its pain, has been well worth the gain.

 

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Drilling Down Into Overlooked Used Vehicle Opportunities

10.21.2014

  A quick test: What percentage of your used vehicle inventory do you retail in the first 10 days or less? OK. Time’s up. Do you know the correct answer for your inventory? Relax. I wouldn’t necessarily expect that you’d be able to ace the test. In fact, only a few dealers actually monitor their [...]

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Access: Velocity Wrap-Up: Dealer Take-Aways For The Not-So-Distant Future

10.16.2014

We’re still getting feedback from last week’s Access: Velocity conference here in Chicago. So far, the vast majority of dealer attendees consider the two days spent here as well worth the effort and expense. We also gained insights to make the next Access: Velocity event even better—with a particular emphasis on the real-life dealer-led workshops [...]

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Access: Velocity Day 1: Integration, Insights and Inspiration

10.10.2014

I spoke to a couple dealers as yesterday’s Access: Velocity sessions ran down. A key sentiment: They, like me, felt a touch of information overload from today’s agenda. The following are some of the high-level take-aways I gleaned from today’s sessions with Cox Automotive executives and our dealer speakers, as well as in-the-hall conversations: A [...]

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Access: Velocity Kicks Off Tonight!

10.08.2014

I’ve just spent the past two hours with the vAuto team at the Peninsula Hotel in Chicago, working out final details for tonight’s kick-off of the second Access: Velocity event. I’m extremely excited. Two years ago, we hosted our first Access: Velocity, and this year’s gathering is bigger and better. We’ve brought together nearly 175 [...]

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Two Used Car Lessons From The Secret Service Snafu

10.07.2014

I wouldn’t think that I’d ever find commonality between used vehicles and the U.S. Secret Service. But last Thursday’s news of the White House security breach brought used vehicles to mind. To be sure, losing one’s focus on used vehicle management processes produces less dire potential consequences than lapses among the elite corps of men and [...]

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Say Hello To ListingLogic—A Tool That Drives Better Online Used Vehicle Performance

10.02.2014

Most dealers understand that today’s used vehicle business is an Internet business. That is, buyers size up your cars, prices and reputation online—before they get to your dealership. This reality has led the smartest dealers to recognize that the online performance of their used vehicles provides the single-best indicator of each vehicle’s appeal with potential [...]

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A New/Used Vehicle Parallel: The Devil (And Your Gross) Is In The Details

09.23.2014

Astute Velocity dealers have understood that the “car is the star” in used vehicles. That’s why they go to great lengths to make sure they acquire vehicles with the color, equipment and trim levels that market data affirms will matter most to potential buyers. To be sure, they still acquire and retail “bread and butter” [...]

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