There are natural ebbs and flows to all businesses and the car industry is no exception. When it comes to our new car inventory, we are subject to the whims of our manufacturers. Sure, they want us to be successful and sell everything we can, but let’s face facts: we are not in control of production.
There are times when we have too many cars, but that’s a problem for another time. I’m concerned right now with the lack of new cars because of factory shutdowns. Unfortunately, this happens from time to time and we have to figure things out. Fortunately, we have seen this before (UAW strikes, earthquake/tsunami/other natural disasters, supplier problems) and we can navigate these waters. What to do?
- Take a look at what you already have. Before you worry about your ideal inventory, take a good, hard look at what’s on your lot. What is selling and what is not? And do not use your gut to tell you. Data is what you need to help make decisions right now. A good inventory analysis tool like Conquest from vAuto can give you lots of insights, right down to which colors are hot in your market.
- Dive into the market. Now that you know what you have, dig into the data further to make sure you’re maximizing profit on each piece you already have. Our natural inclination is that our cars are priced too high, but sometimes we’re priced too low! We’re giving away profit when we don’t have to. Here’s a gut check: when a customer drives past three or four of your competitors because they saw your price online, your car is priced too low.
- Time to play mix & match. Back to your analysis, can you swap cars with other stores to get a better mix on your lot? Don’t get me wrong, this is not a game of one-upmanship. You want to collaborate with your competitors here. This also runs counter to what we’ve been taught, I know, but follow me. Your manufacturer inventory site and a tool like Conquest can help you spot and fill holes. Maybe you have 5 of something in the same color/option combo and you could trade one or more of those to broaden the options on your lot. It can be mutually beneficial for both stores and it even helps the customers because they don’t have to traipse all over town looking for the car they want (it is about the customer, right??). Bonus: if you’re part of a group with multiple stores of the same franchise, can you swap internally to get a better mix? It’s a simpler solution than going outside, for sure.
- Be a team player. This one actually starts BEFORE we have inventory issues. What’s your relationship with your manufacturers like when it comes to inventory and ordering? Are you the one who moans and complains all the time about what they’re NOT building and how you never seem to get the “good” cars? If so, you’re going to have issues with this one (and there’s not much I can do to help you). However, you’re probably used to those emails and calls from your sales rep trying to get rid of that last purple sedan with the green polka dot interior that no one wants. Do you ever raise your hand for that car? Saying yes (while holding your nose) hopefully buys you some goodwill with him or her and their superiors. Become known as the person that will take that car and find a home for it. Then, when lean times hit, it’s much easier to call in favors and try to get a product. Will it double your allocation? Most likely not, but it will help you get those few extra cars that can make a difference in your inventory. Trust me, it’s worked out multiple times in my career and I’m glad I did it.
- The other side of your lot. You know there’s a whole bunch of cars in your inventory that aren’t from the factory, right? That’s correct, your used cars are your new car inventory’s best friends. There are always people in the market for a car, and if they can’t buy new, they may be open to buying something that’s been gently used (and manufacturer certified). Stock up (smartly) on what is selling in your market (here comes more analysis) and push hard on merchandising those cars online. They’ll get noticed and potential customers will be calling and emailing to make appointments.
In essence, this is a situation that takes a multi-pronged approach to solve rather than one “magic bullet.” And it has side benefits as well. When you get good at managing your new car inventory in lean times, it leaves you better equipped to manage it when things get back to historical levels. Having the discipline to do the above steps when times are good is the true mark of a professional in our business.
So what say you? How do you manage a shortage in your new car inventory? I’d love to hear your stories and tips.
Make it a great day!
Dan
