RPM TRICKS FOR MANAGING GROUP PERFORMANCE ACCELERATORS: 5 ESSENTIAL TASKS FOR HELPING DEALERS TURN INSIGHTS INTO ACTION A PUBLICATION BY

Transcription

1 5 SIMPLE TRICKS FOR MANAGING RPM ACCELERATORS: GROUP HELPING DEALERS TURN INSIGHTS INTO ACTION PERFORMANCE 5 ESSENTIAL TASKS FOR MANAGING GROUP PERFORMANCE A PUBLICATION BY A publication of

2 5ESSENTIAL TASKS FOR MANAGING GROUP PERFORMANCE The primary competitive advantage for a dealer group lies in their ability to leverage the collective resources, knowledge, and insights of every store across the group. However, in order to take advantage of this intellectual capital, groups require deeper visibility - ANALYTICS - across their entire pre-owned retail operations process at each store. This paper will highlight 5 daily tasks performed by Used Car Directors from some of the most successful, and most profitable dealer groups in the country. These daily tasks combine cutting-edge practices and centralized analytics to enable greater visibility and decision making across the entire group. In addition, this paper will illustrate how these dealer groups also use FirstLook s state-of-the-art Group Command Center - a single dashboard that provides centralized visibility across the entire dealer group and insight into the effectiveness at each store in areas of Appraisal, Pricing, Stocking and Time to Market.

3 1 HOW WELL ARE WE RETAILING ACROSS MY GROUP? After properly stocking, pricing and merchandising the vehicles across all stores, the most important numbers to manage are those pertaining to retail success. We found that the top dealer groups benchmark their stores on Sweet Spot Sales (Cars Retailing between days 1-30), Retail Sales Efficiency (Vehicles Retailing between days 1-60), and how much profit they are giving back in True Average Gross. The benchmarks these groups strive for are 65% of vehicles selling in the Sweet Spot and 85% Retail Sales Efficiency. Additionally, they compare the top 3 Retail Performance Management benchmarking metrics with the average front end gross profits being achieved. With this insight group level executives can quickly identify which stores have opportunities, as well as sponge off the top performing stores in the group. It also gives a true sense of each store s cash flow per unit, rather than FEG which can be manipulated. FirstLook ranks stores by Retail Sales Efficiency, and also highlights average front end gross, and average immediate wholesale profit/loss.

4 2 HOW EFFECTIVE IS OUR GROUP AT CLOSING TRADE APPRAISALS? Appraisal closing rates impact all departments in the dealership - from new car sales, used, F&I and service. It s nothing new, all dealers know that trade-ins make significantly more gross profits than purchased cars, and effective Trade Acquisition. For many of the dealerships we work with they are making nearly double the front end gross on trade-in vehicles versus vehicles purchased. Dealer groups performing best in Retail Performance Management stack rank each of their stores based on how well they are closing appraisals. The benchmark for everyone is 60%. This may seem like a tall order but with consumers visiting less than two dealerships in person, you ve got to do everything possible to maximize your odds of winning. Additionally, top performing groups measure each store s immediate wholesale profit on trade-ins. Breaking this metric out from the entire wholesale bucket indicates how accurately stores are bidding trades to market, and consequently, this is the key driver behind appraisal closing rates. For example, a high immediate wholesale profit number indicates potential underbidding, and therefore leading to a higher rate of missed trade opportunities. We recommend dealerships benchmark at $300. Hitting this target suggests you are accurately bidding cars and you will not lose due to underbidding. FirstLook measures the effectiveness of the trade acquisition process across the entire group.

5 3 HOW EFFECTIVELY IS THE GROUP PRICING CARS? With the level of competition today, pricing strategy has never been more important. The key is value-based pricing. This means identifying the difference between high margin and low margin cars, and pricing, selling, and desking those cars appropriately. The top dealer groups rank their stores based on who has the highest percentage of potentially over-priced cars versus the market. In addition, they also analyze which stores have the highest percentage of potentially underpriced vehicles so they are not giving away gross profit unnecessarily. Lastly, they factor individual store history on each unit to identify high and low performing models. The use of proactive pricing alerts will help you take immediate action on changes in the marketplace and stay ahead of your competition. FirstLook provides indication of how competitively positioned your inventory is in the market.

6 4 ARE WE MAXIMIZING BOTH GROSS AND TURN? As vehicles age, they obviously bring in less gross profit and incur additional holding costs each day they sit on the lot. Stack ranking each store based on their aging profiles gives Group Level Executives key insight allowing them to make swift adjustments to correct potential problems. FirstLook provides visibility and immediate access to potential aging opportunities in each store.

7 5 ARE WE MAXIMIZING OUR INVENTORY THROUGH IN-GROUP VEHICLE TRANSFER? With increased competition and an expensive wholesale market why would you ever want to sell your hard earned vehicles to your competition at the auction? While it can sometimes be difficult to convince stores why they should put this process in place, the financial windfall for the group can be Auction fees, transportation costs and sunk reconditioning can put you 15% or more in the hole on EACH unit. In addition, you move the aging units to stores where they are most optimal to sell quickly for a good gross profit. With the right tool in place a group level person can facilitate an in-group auction or simply move cars to the stores where they are the best fit. FirstLook identifies redistribution opportunities within the group based on where cars are most optimal.

8 In summary, top performing dealer groups across the country rely on these 5 daily tasks to reduce risk, identify opportunities, and improve the overall performance of each store across the group. 1. How well are we retailing across the group? Benchmark their stores on Sweet Spot Sales and Retail Sales Efficiency to expose risk and reduce aged wholesale losses. 2. How effective is our Group at closing trade appraisals? Stack rank stores based on their Appraisal closing rates to help identify each store s immediate wholesale profits on trade-ins and help determine which stores are under or overbidding. 3. How effectively is the Group pricing cars? Identify how effective the group is pricing cars by looking into which stores have the highest percentage of potentially over-priced cars versus the market. In addition, they also analyze which stores have the highest potentially under-priced vehicles so they are not giving way gross profit unnecessarily. 4. Are we maximizing both Gross and Turn? Determine if the Group is maximizing both gross and turn by simply sack ranking each store based on their aging profiles. This insight will help you to make swift adjustments and correct potential problems. 5. Are we maximizing our inventory through In-Group vehicle transfer? Facilitate an in-group auction or simply move cars to the stores where they are the best fit. This helps reduce aging risk, and keeps hard earned inventory in the group.

9 About Firstlook. For more than a decade, FirstLook has been working with thousands of Automotive Retailers across the country to address these challenges, and in doing so, have identified critical innovative retailing practices designed to improve both gross and turn. These cutting-edge practices have since been incorporated into our on-demand software solution, Retail Performance Management (RPM). Unlike conventional Inventory Management Systems, Retail Performance Management is designed to drive your numbers through the combination of advanced analytics and embedded cutting-edge practices from the best retailers in the industry. Contact Us sales@firstlooksystems.com