A quick test: What percentage of your used vehicle inventory do you retail in the first 10 days or less?

Infiniti emerg e 300x160 Drilling Down Into Overlooked Used Vehicle OpportunitiesOK. 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 inventories at this level of granularity.

I’d also submit that one could make a case that dealers don’t really need to know how many vehicles you retail within the initial 10-day timeframe. If they’re paying attention to other, broad inventory metrics—like Market Days Supply, Cost to Market, Price To Market and Average Age (in days) of Inventory—they’ll do just fine in terms of inventory turns and profitability.

More and more, however, “just fine” really isn’t enough to maximize used vehicle department performance, not to mention the “total gross” potential of the dealership.

This realization has spurred bright-minded used vehicle managers to drill deeper into their inventory data.

Here’s an example shared during this month’s Access: Velocity event: Trent Waybright, director of used vehicle operations for Kelley Automotive Group, Fort Wayne, Ind., took a close look at his 10-day-or-less tally and found less than 20 percent of the group’s used vehicles sold in this timeframe. No surprise, the cars in this segment also produced the highest average gross profit when they sold, and they had the lowest average cost of all inventory units.

Next, Waybright calculated what his departmental gross would look like if he sold 5 percent more units in 10 days or less, a task that would require a 1 percent lowering of the transactional Price to Market average for vehicles in this age segment to 99 percent, and pulling forward sales that typically occur after 30 days. His exercise revealed an opportunity to increase departmental gross by $36,000/month.

Waybright is currently looking to address the challenges beyond price changes necessary to realize the improved results, with tighter reconditioning times first on the list.

I believe other dealers would benefit by examining how/why their inventory performs when it’s fresh and isn’t. Between these two poles, I suspect you’ll find opportunities that can make a “just fine” performance in used vehicles even better.

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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 that address current management challenges for all dealers.

Not surprisingly, as I think ahead to the next event, I’m reminded of some of the insights I gleaned from the final-half day of this year’s Access: Velocity:

Retail margin coAccessVelocity 200x300 Access: Velocity Wrap Up: Dealer Take Aways For The Not So Distant Futurempression. Dealer presenters Dan Hodges and Joe Humphrey of the Scott-McRae Automotive Group detailed their top-to-bottom efforts to deconstruct their traditional dealership structure to address a problem all dealers confront—declining margins. “We had to push cost out of the system, given the margins we found ourselves operating with,” Hodges says.

The deconstruction, which began in January of this year, included elimination of store GMs, new/used vehicle managers, F&I directors and separate Internet departments. The new structure now features centralized corporate management, with two vice presidents focused on fixed and variable operations, working directly with team leads in individual stores, and a centralized inventory acquisition team and business development center. The new structure also compensates corporate and in-store personnel on meeting volume targets at each location.

Hodges says the structure and compensation allow the execution of consistent processes across the platform, and emphasizes ongoing mentoring/training to create the same experience for customers, no matter the location. Rather than focusing on maximizing gross profit on a per-deal basis, employees in the dealership “are totally focused on how much business can I do today. The team leaders are focused on coaching and efficiencies.”

Humphrey shared how the centralized inventory acquisition team helps each store meet its goals by acquiring and distributing used vehicle inventory where it makes the most sense, based on current market data and recent sales trends. As stores sell more, they get more cars. “We’re trying to maximize our gross profits and inventory turns,” Humphrey says.

Perhaps most striking, the team has essentially eliminated auctions as it sources used vehicles, acquiring less than 15 percent of its inventory from these traditional wholesale outlets. “We’re buying from RV parks, estate sales and probate courts,” Humphrey says. “We’re trying to buy where no one else is buying.”

The results of this transformation are impressive—a 32 percent increase in used vehicle volume, a 33 percent increase in used vehicle gross profit and a 5 percent increase in “net to gross” for the four-store platform.

Sales process optimization. Panel facilitator John Malishenko of the Germain Auto Group asked a really sharp question to leaders of Cox Automotive’s business units. He wanted to know what three things the executives would do if they were given the keys to a dealership. I thought AutoTrader.com president Jared Rowe offered a good answer.

In addition to ensuring a consistent messaging across all channels and integrating sales/service to seed customer loyalty, Rowe said he would “attack the time it takes to sell a car.” He correctly noted that the industry average of 2.5-plus hours to complete a transaction is a top source of customer dissatisfaction.

I also thought Duncan Scarry, founder of Haystak Digital, made a good point about optimizing the typical sales process. In today’s market, customers only visit one, maybe two, dealerships after they’ve done their online shopping and research. He shared a comment he heard from a dealer friend, “The only reason we don’t sell a car to a customer is because we got in their way.”

This year’s Access: Velocity raised $250,000 to aid the Foundation Fighting Blindness, an achievement that makes me humble and proud. It also provides inspiration and motivation to make sure the next Access: Velocity event is even better and more impactful. We certainly have much work to do to achieve this objective.

Thank you to all who participated this year’s Access: Velocity and helped fulfill its mission to deliver unprecedented access and insights for top-performing Velocity dealers.

 

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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 fulfillment of Cox Automotive’s responsibility to dealers: One of Access: Velocity’s objectives is to provide shared access and learnings from Cox’s leadership team, and to provide attendees a glimpse of how the company is tackling the challenge of providing better services and solutions to help them be more successful. The panel discussions addressed the future on both the wholesale and retail sides of our business:

1. Auctions “will look very different.” Cox Automotive CEO Sandy Schwartz made this point in discussing how Manheim will move from a largely physical, “event-based” marketplace to one where digital sales can occur 24/7 and vehicles aren’t necessarily sold from Manheim facilities. The company is also exploring ways to make the transport of vehicles to/from auctions, and the sales themselves, more efficient and less-costly for dealers. “We can drive your bottom lines up by driving your costs down,” says Joe George, senior vice president and chief strategy office for Cox Automotive.

2. A greater degree of integration. Cox Enterprises CEO John Dyer discussed a “cradle to grave” strategy that would include an array of digitally based, integrated solutions to help dealers derive more value from their investment in Cox Automotive solutions. Other executives highlighted the new ListingLogic tool for AutoTrader.com dealers, and efforts to link VinSolutions CRM and vAuto Provisioning data as examples of the broader strategy.

Used vehicle pricing as science. I was impressed by dealer speaker Trent Waybright’s efforts to make non-emotional, data-based decisions for pricing used vehicles at Kelley Automotive Group in Fort Wayne, Ind. His efforts, which effectively tie pricing decisions to Vehicle Details Page (VDP) views, ROI and past Price To Market transaction data for specific vehicles, have helped him achieve a 50 percent increase in the number of VDPs/vehicle his inventory receives, and consistently turn his 300-plus vehicle inventory 18 times a year.

The ETF&M formula. Dealer Adam Arens of Patriot Subaru, Saco, Maine, shared some of the reasons why his dealership won top honors in last year’s Automotive News’ Best Dealerships To Work competition. Part of the success owes to his efforts to teach managers how to find and hire candidates who fit the dealership’s culture and demonstrate initiative, leadership and organization in past positions. His team looks for employees who will be Enthusiastic, Trustworthy, Friendly and have a high-running Motor

Perhaps the highlight of the day, at least for me, came when our special guest speaker, Eric Weihenmayer, brought tears to many Access: Velocity attendees as he described the challenges and triumphs he’s faced after going blind as a teenager. He was inspiring as he described how he strives to live a “No Barriers” life that includes record-setting mountain climbs and whitewater rafting adventures. I especially liked this quote: “What’s inside of us is stronger than what’s in our way.”

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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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3 Reasons A Front-End Focused Strategy Falls Short In Used Vehicles

09.19.2014

I’ve been hearing more disenchantment and doubt from dealers about the value of a turn-and-earn strategy for retailing used vehicles, which I call the Velocity Method of Management. The most vocal detractors are typically dealers who have long taken pride in the average front-end gross profit they achieve in used vehicles. The dealers like seeing [...]

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A Look Ahead At Selling Tomorrow’s New/Used Vehicle Buyers

09.16.2014

Consider the following research findings about the up-and-coming generation of car buyers, known as Milennials or Generation Y: Theirs is a “kinship economy,” according to J. Walker Smith, chairman of The Futures Company, a marketing research firm. As Millennials engage retailers, a positive experience is paramount. “It’s all about how we resonate with people,” Smith [...]

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Germain Group Makes Finding Talent A Top Priority

09.08.2014

There’s a lot of talk in our industry about the difficulties dealers face finding—and keeping—good employees. Much of the discussion often focuses on ways dealers and the broader industry can change the less-than-favorable reputation of automotive retail careers as a “last resort”-type option for people who, for one reason or another, can’t find work in [...]

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