I suspect everyone who attended Access: Velocity had the same feeling as we left the Peninsula Hotel on Friday—my brain needs a little break.

We had a busy day-and-a-half of general sessions and workshops. I took a bit of time to mull the dealer conversations and session take-aways. Here’s a rundown of things I thought I’d share:

Age Management Shortcomings. We spent a fair amount of time at Access: Velocity discussing what I consider to be a critical finding—that our reliance on the calendar as a measurement of a used vehicle’s profitability is fundamentally flawed.

To be sure, time still matters in used vehicles. Depreciation happens every day, and inventory turns are still important. Selling cars remains the single-best way to drive a dealership’s intra-departmental “wheel of fortune.”

But our research shows that, as margin compression continues to erode profitability, there needs to be a better way than simply checking off days on a calendar to manage each vehicle to its maximum investment value and return.

We discussed two primary reasons why the calendar doesn’t really work as a measurement of each vehicle’s investment value.

First, the calendar doesn’t recognize on Day 1 that some vehicles represent a better investment value than others. From the calendar perspective, every car’s a “fresh” car. But, as we’ve come to understand, some cars are really “fresher” than others on Day 1. The calendar simply can’t, and doesn’t, know if you over-paid for a vehicle, or it’s the wrong car.

Our research also found that this “fresh car” perspective often results in merchandising and pricing decisions that diminish returns from vehicles with high investment values, and expects unrealistic returns from vehicles with low investment values.

Second, the calendar assumes that every passing day exerts the same downward pressure on profitability for every vehicle. But we now know that, in fact, the investment value of some vehicles is more resistant to the advance of time than others.

At Access: Velocity, we talked at length about how dealers will need to shift their thinking from the number of days they hold a vehicle to the profit potential each vehicle holds.

It was exciting to see how these investment value insights played out at Access: Velocity, and how they represent a path beyond Velocity that will help dealers mitigate margin compression.

These investment-focused conversations reaffirmed my sense that, when NADA 2019 arrives, vAuto will be leading the way to a better way of used vehicle inventory management.

Inventory Investment Accountability. We had a rich discussion about how dealers can and should maintain more discipline over the amount of money they invest in their used vehicle inventories.

Today, it’s not uncommon for dealers and managers to “buy more cars” without regard for the investment return they’re getting from the current inventory. This mindset often contributes to distressed inventory—the cars that often should have been addressed before buying more inventory.

I liked one dealer’s solution to this problem. He maintains a strict $3 million cap on his inventory/reconditioning investment, and requires managers to deliver at least $300,000 in gross profit (a 10 percent return) every month. Managers face a penalty if they don’t meet the requirements, which help maintain a collective focus on minimizing distressed inventory.

“Predictive” and “Private” Inventory Sourcing: As we discussed how new technology and tools can help dealers reliably predict the investment value of used vehicles, several dealers asked about what I’d call predictive vehicle sourcing, as well as ways to mine private seller acquisition opportunities.

On predictive sourcing: Dealers asked if there’s a way, when a vehicle in inventory gets a sufficient level buyer attention (e.g., VDPs, calls, e-mails, etc.), that they could know it. Through an alert or some other notice, their sourcing team would know, in advance, about an imminent retail sale and begin working to find a replacement unit. The concept makes good sense, and merits attention.

On private sellers: Some dealers shared how they mine private seller listings on Autotrader and other third-party sites to find, and pursue, vehicles that match their inventory needs. The effort follows frustration with the seemingly ever-rising costs of acquiring auction vehicles. The dealers suggested that these listings might be integrated into inventory sourcing tools to drive greater efficiencies and time savings.

Private, Public Dealer Advantages: Access: Velocity special guest speaker Alan Haig, president of Haig Partners, noted how today’s dealership buy/sell activity is primarily driven by private dealers looking to grow and scale their operations. He also noted that while public dealer groups have grown through acquisitions, they haven’t “figured out how to acquire share from competing stores” when they enter a market. At the same time, Haig suggested that public groups may have a long-term advantage if/when vehicle buyers seek out brands, and the experiences they offer, more than specific dealerships.

Quotable Quotes: I’ve always had an ear for what Reader’s Digest once dubbed, “Quotable Quotes.”  I picked up a couple at Access: Velocity:

On change management in a dealership: “You have to be stronger about your vision than people are about their resistance. If you are, you’ll outlast them. But your vision has to be right.”

On discounts to customers who insist they should get one: “Make it symbolic, not significant” and “Don’t be confused by the opportunity to negotiate and getting a good deal.”

On today’s competitive marketplace: “Every morning you wake up, you better be running.”

A Higher Purpose: In addition to providing a unique forum for Velocity dealers, our Access: Velocity event serves a higher purpose—we donate 100 percent of attendee registration fees to charity. This year’s event raised $252,500 for the Juvenile Diabetes Research Foundation—an impressive sum that speaks to the generosity of dealers and their desire to help those less fortunate.

My sincere thanks to all the dealers who attended Access: Velocity and shared your insights, perspective and time with me, the vAuto team and your peers.

I have a feeling that this year’s event will be remembered as a first step toward positive, profit-focused change that will pay dividends for dealers in the years to come.

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I heard the same thing time and time again from dealers at Access: Velocity.

After all the effort, energy, money and time invested in retailing new and used vehicles, there just isn’t as much profit left on the monthly income statement as there used to be.

The proceeds from all the activity and sales amount to “profit dust” these days compared to the returns dealers once derived from their dealerships.

This reality emerged in our Access: Velocity workshops that addressed how dealers could sharpen their operational processes to reduce inefficiencies and drive more sales, and profitability, from their new/used vehicle departments and wholesale acquisition efforts.

But here’s the thing: When you take a collective look at the best practices and ideas shared in the workshops, they amount to a lot of small, incremental steps on the road to performance and profit improvement.

That’s because today’s car business is really a game of inches, where it’s imperative that dealers pay greater attention to the data and details of their businesses to be successful. The business calls for a higher level of operational discipline that, quite frankly, puts the very nature of many dealers, particularly those who came up through sales departments, to the test.

The good news is that most dealers here realize, or at least recognize, the need for seeking out every advantage they can. They understand that technology and tools will play a role. They know, or at least sense, that what guest speaker Jason Stein, publisher of Automotive News described as the “digitization” of dealerships is quickly gaining steam.

This backdrop probably accounted for a lot of the enthusiasm from dealers around vAuto’s latest innovation, which we discussed in the opening general session.

Beta test dealers shared how the innovation helps them instantly identify a vehicle’s investment value and use the insight to drive appraising and pricing decisions.

One dealer reported a $300 lift in front-end gross profit as managers worked to maximize gross on vehicles that deserve it, and minimize time in inventory for their more troubled investments. This is good news at a time of unprecedented margin compression.

We closed the day at a Chicago icon, Lou Malnati’s, where some of the conversations were deeper than the pizza.

It was a fitting end to a nearly perfect, and highly productive day at Access: Velocity.

More to come from Day 2….

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Another Access: Velocity Begins

by dpollak on 10/18/2018 · 0 comments

I really am blessed.

For most of the day and evening yesterday, my Facebook and Twitter feeds were dancing from all the dealers traveling to Chicago for vAuto’s fourth, Access: Velocity event.

It’s a little like old home week here at the Peninsula Hotel. I’m hugging and shaking hands with dealers from across the country, some of whom were on the ropes nearly a decade ago, and now they’re worried about how to bring a newly acquired store up to speed.

The kids are here, too. I said hello to the sons of dealers who, not so long ago, were wearing jumpers and Velcro-strap shoes, and making it hard to hold a conversation.

Today, the kids are standing a whole lot taller and listening close. It’s pretty special to see the car business bug biting the next generation of dealers.

Ah, the memories.

Beyond re-connecting with friends, there’s also a palpable sense of anticipation here at Access: Velocity.

To be sure, some of the anticipation owes to what we’ve promised attendees will get: Today, we’ll unveil a new way to manage used vehicles that goes beyond Velocity.

It’s a moment that feels eerily like the earliest days of vAuto—when dealers’ need for a better way of doing business, and the ability of a company like vAuto to offer it, came together.

Speaking of coming together, I couldn’t help but suggest that I grab a photo of three vAuto team members who are here for Access: Velocity. They work in separate offices and get together less frequently than the probably should.

But each of these guys—Randy Kobat, vAuto’s vice president and general manager, Chris Stutsman, senior director of product innovation and Lance Helgeson, director of industry analysis—plays drums.

It was a unique moment for any company. We took the photo.

Even though we couldn’t come up with a clever caption, the moment didn’t pass without recognizing that if vAuto was a band, we wouldn’t have trouble filling the drum chair like Spinal Tap, and we’d need more space on stage than the Grateful Dead.

I’m excited for Day 1 of Access: Velocity.

More to come…

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Independent Dealer Realizes His Car Business Dream

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How To Fix The Collapsing Ceiling In Used Cars

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If you had the unfortunate experience of living in a house where the ceiling was slowly collapsing, you’d face one of two corrective choices. First, you could prop up the ceiling. I imagine this would involve using 4’ by 4’ posts, or maybe a metal beam, in the spots that sag the most. Second, you […]

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