Buy Low, Sell High and Turn Fast Retail Fundamentals
In most automotive retail markets across the country, the days of clearing $3,000+ profit per copy for all pre-owned deliveries are history. The fundamentals to maximizing profit per copy haven’t changed: buy low, sell high and turn fast. But since the market dictates vehicle demand and you do your best to match supply to that evolving demand, what’s a hard working retailer to do to maximize the “buy low, sell high and turn fast” profit fundamentals?
Ensure your team utilizes these eight best practices to turn fast for maximum profit per unit.
- Stock Locally, Sell Everywhere: While a few individual retailers have evolved to sell the majority of their inventory nationally, the overwhelming majority of dealers still rely on their local market area for the majority of their monthly vehicle sales. Analyze your leads vs. deliveries annually to ensure your entire leadership team retains a balance between in-market vs. external demand. Focus your vehicle acquisition strategy on meeting that local demand first to ensure you’re always competitive in your back yard, and then list and advertise on online shopping sites to constantly expose your supply to demand in, around and outside your market area. Hone your team’s skills related to understanding where the more profitable deliveries will occur for the different types of vehicles in your portfolio and plan your 2014 vehicle acquisition processes and online advertising strategy to match supply to demand.
- Price to Profit: a vehicle’s price leads to its profit. Same as it ever was. But if gas station retail chains and airlines have implemented technology-driven, dynamic pricing like Yield Management (which essentially prices a product/service differently to different shoppers to maximize the total revenue collected for each local station or departing flight), ever wonder why some vehicle retailers are still expecting shoppers to ask for the vehicle price? Implement an inventory pricing strategy that’s data driven and that will scale. Retailers may not need to completely automate pricing (like a Yield Management strategy), but you neither want to reinvent pricing when you lose tactical department managers over the years, nor do you want to inadvertently create a few employee experts who can dictate the tempo of the entire business. Pricing to profit is about a strategy, not a few experts.
- Customer-focused Prices: Vehicle price is almost always reviewed first, before the shopper then consumes vehicle photos, video or product descriptions when shopping vehicle listings. Clearly the price itself dictates if a given shopper will convert into the purchase cycle for a given vehicle. duh, right? But research shows that displaying only the equivalent of List Price (i.e. $34,995.00) in each listing is less effective than displaying prices that reflect the affordability of the vehicle. Solution? If possible display multiple price values like an estimated monthly payment in addition to your MSRP or List Price for the vehicle. And if you can automate the presentation of a cash, loan and lease price for certain units, you can differentiate your listings and convert more low-funnel shoppers for over-age units or units nearing your company’s liquidation threshold (i.e. 45 - 60 days).
- One Man’s Trade-in is Another Customer’s Next Vehicle: said another way, one demographic customer’s trade is another demographic customer’s next vehicle. Connect one to the other and you profit. Many dealers who once wouldn’t touch secondary finance and buy-here-pay-here clients are now making money in this marketplace with vehicles taken on trade that they would historically have liquidated immediately in the wholesale marketplace for less profit per unit. Why not advertise some of the vehicles on online auction sites, buy-here-pay-here focused sites, CraigsList, and similar consumer oriented sites? The final price paid for vehicles on such sites often exceeds wholesale prices earned, and advertising automation can keep costs low to achieve this listing strategy. Obviously some units should still be wholesaled immediately (anything over 100 - 150k on the odometer, frame damage, questionable history, major repair costs, etc.), so leverage vehicle history reports, your historic sales data and market analysis to assess which units to liquidate vs which units to prep and list for 30 - 45 days.
- Automated Inventory Advertising Segmentation: advertising certain vehicles in certain places is not a new idea. 20 years ago dealers manually hand-picked vehicles from inventory for placement in the full-page weekend newspaper ad or to advertise in the monthly, local trade rag. But being able to use tech to automate the placement of an ad for every car in inventory every day is new. We call this “Automated Inventory Advertising Segmentation” and it refers to the ability to segment your inventory by stock type, model, series, trim, mileage, price(s), age, popularity, etc. to advertise segments of your inventory on specific sites. While dealers will always have certain sites where listing every inventory vehicle makes sense (their own website, etc.), there’s an increasing number of highly focused listing sites where advertising every vehicle in inventory either isn’t possible or doesn’t make business sense (wheelsofitaly.com, highlinesale.com, etc.). Take advantage of these sites to promote inventory to niche audiences and demographics who will pay more for certain vehicles.
- Differentiate your Inventory Listings: The essence of marketing and advertising competition is differentiation. And people are hard wired to notice only what’s different, whether they be vehicle listings or something in their environment. Every vehicle listing website out there (i.e. your website, branded shopping sites like CarSoup.com, OEM sites, etc.) all have two basic web pages on their sites that present your inventory: the Vehicle Listing Page (VLP), where multiple vehicles from one or more sellers appear in a single list or grid, and the Vehicle Detail Page (VDP) which presents “all” the advertising content about a discrete vehicle. Your mission is to differentiate each vehicle on those two pages to make your advertisements stand out in a crowded and “noisy” Internet. Start with a meet up with your website provider. If they can’t provide innovate ideas for product advertising differentiation (both on your site and elsewhere online) it’s time to do some shopping of your own.
- Vehicle Video Trumps Static Photos, and Photos Crush Listings without Images: It’s common knowledge that a picture is worth a thousand words; OK, so photos of a vehicle are better than written content alone. And the average video likely has a frame rate around 25 frames per second (basically an approximation for 25 images per second). Then even a 10 second video would be worth a few hundred photos! The point is a shopper can get more out of a video in less time than she can read and click through. Walk-around Vehicle Video is changing the shopping experience online, allowing retailers to quickly differentiate their vehicle ads, to engage & convert shoppers, and this is possible with an added organic SEO boost (vs. search results without video) because search engines rank video content higher than static pages with video. Investigate and upgrade to a video solution now to ensure that you capitalize on these trends when advertising vehicles online.
- Real-time Vehicle Content Improvements: From the moment it’s stocked into inventory, both the vehicle itself (i.e. prep improvements, service work, etc.) and your advertising content (i.e. prices, video, photos, comments, etc.) constantly evolve week to week. The point is, that asset is not a static, immovable object. That unit is a dynamic product. And the marketplace won’t wait for you to perfect it all; in the time it takes to really have a vehicle ready for sale you are already missing opportunities. For these reasons, your inventory management tech (vehicle capture, editing and data distribution) must support real-time, automated data exchange from you (the source of the improvements) to the marketplace (everywhere you list each discrete vehicle). List vehicles online as soon after the stock-in date as possible regardless of prep and detail requirements or available space on your primary lot (even if it’s sitting in detail, get it listed online). And review your inventory management tech to ensure everyone in the organization responsible for inventory vehicle content (that will be used to differentiate your vehicles) is using a single system or application to aggregate (internally) and distribute (externally) your constantly improving vehicle data and content. In summary, get ‘em online fast to sell ‘em fast, and keep that differentiating content flowing in real-time.
These eight best practices are a progressive approach to the “buy low, sell high and turn fast” profit fundamentals. While the market will ultimately dictate your costs for vehicles that you acquire at auction and on trade, the practices above will give you a competitive advantage that will ensure your team advertises vehicles to maximize turn. And the faster your turn, the more money you make. Volume is vanity, profit is fact. Just sayin.