Enjoying what you’re reading? Sign up now.

Subscribe
Search

Work Smarter When Selecting Inventory (4 Tips)

Vehicle lot
Article Highlights:

  • Find vehicles you can sell quickly for a profit.
  • Prevent vehicles from sitting on your lot for months collecting dust.

Last month we looked at the decision-making process for advertising in dealerships. This month we turn to the inventory decision-making process, which is often a problem area in the dealerships I visit.

There are two major problems:

Finding vehicles you can sell quickly for a profit.
Avoiding vehicles sitting on your lot for months collecting dust.

Selecting the correct inventory isn’t just a matter of preference; dealers have a lot of money tied up in inventory, often millions of dollars, depending on the size of the dealership. Since most dealerships floorplan their inventory, every additional day a vehicle sits on the lot unsold is one more day you have to pay the finance expense.

In my experience, I’ve seen many sales managers choose their inventory based on gut instinct, on what they think will sell, instead of on hard data. When this happens, they’re really just guessing, and those guesses are almost always the reason for excessive unsold inventory.

If that sounds too much like the process at your dealership, here are four things you can do to better match your inventory with real demand in your market:

1. Use Historical Data

Your DMS and your manufacturer are both goldmines of information about what sells in your specific market. It’s usually not hard to find an inventory age report telling you what models and equipment packages sell quickly for the highest profits. Pull these reports regularly.

2. Define an Inventory Selection Process (and Stick to It)

Every sales department needs a documented process for how to make inventory purchasing decisions. It should include a regular review of the reports mentioned above, along with the criteria important to your specific dealership.

3. Analyze the Market Data from Beyond Your Dealership

A tool like Used Vehicle Management will give you a window into what’s happening outside your specific dealership. It will automatically analyze your sales and market history and show you what’s been selling in your area. It will also make recommendations for what vehicles to take in on trade, how much to offer for them, and what to purchase at auction.

4. Let the Data Lead You

Whatever your process, your management team should be using data, not just gut feeling, to make purchasing decisions. You need to look at the numbers, analyze the trends, and use that information as the primary driver for your inventory decisions.

Conclusion

As I was writing this article, I couldn’t help but notice how similar the ideas here are to last month’s article about advertising. Whether I’m talking to a dealership about advertising choices or about the inventory on their lot, too often the story is the same. They’re making both decisions based mostly on gut instinct.

Bottom line, your managers (or you, if you are the one making the decisions) need to be committed to a data-driven approach. If you’ve got aged inventory cluttering your lot, data-driven decisions are the best way to rid yourself of it.

Next month: We’ll look at another problem area for many dealerships: the hiring and promotion process.

Share this Article

Scott had 12 years of automotive retail experience as a Finance Manager, General Manager, Sales Manager, and sales associate. He joined Reynolds Consulting Services in 2012 and was qualified to consult on CRM processes and Retail Sales Operations.

Related Articles:

Soft Credit Pulls – a Win-Win-Win Opportunity in Sales and F&I

Shopping for a vehicle comes with all kinds of stressors for a consumer – some of which can affect their relationship with the dealer and

Whether for Halloween or a New Ride, Accessories Make the Difference

With Halloween quickly approaching, many people are starting to pick out their costumes. And more importantly, what accessories they need to elevate their look. As

tech reading someone's thumbprint

Protecting the Omnichannel Buying Experience with Effective Verification…

The US economy entering 2023 was much more strained compared to even the early days of the pandemic just a few short years ago. Inflation

Robot hand fist bumping a human hand in a collaborative way

The Benefits of AI: Perfecting the Chat-to-Sales Hand-off

Over the last year, artificial intelligence (AI) has made headlines; and although it’s not necessarily new, it’s worth revisiting every so often to really consider