Dealership Inventory Management Is Key in an Uncertain Market
- Tips to help your dealership ride out fluctuating demand for vehicles.
- How key management helps you move aging inventory.
In 2022, the automotive retailing industry navigated record-high inflation, rising interest rates, and supply chain issues. As consumer demand fluctuates along with market conditions in the coming year, how do you ensure you don’t get stuck with rapidly depreciating inventory on your lot? Follow these three tips:
Know Your Inventory to Stay Fresh
With new cars selling out faster than they can be made, many dealers are quick to snap up trade-in deals to bulk up their used vehicle stock. Customers are able to get more bang for their buck in these transactions as dealers are more willing to pay higher prices for used cars. This is only possible because of the overall rise in vehicle prices, ensuring dealers can maintain their profit margins despite paying more for the car. But what do you think will happen when the market value for these vehicles returns to normal before you sell them?
The moment the market shifts back to normal, your dealership could be stuck with an inventory filled with older vehicles that are losing their value quickly. Knowing your inventory allows you to plan optimal marketing strategies to better appeal to changing consumer behaviors and minimize profit loss.
Don’t Rely on Your Waitlists
Do you have a lengthy waitlist? Don’t count on that business. Dealers face false demand from customers who put down deposits at multiple dealerships, only intending to do business with the dealership that has the vehicle first. Once they have the vehicle, they’ll cancel the rest of their orders. This scenario may not seem dangerous with current high demand compensating for these lost sales, but you risk facing margin compression the moment your dealership is left with sitting inventory.
It’s important to maintain effective marketing even in times of high demand, as customers can easily overlook your dealership with so much competition online. Now is the time to improve your marketing and push your dealership ahead of the pack. Customers won’t buy your vehicles if they don’t know you have them. It’s imperative for your dealership to have a strategy to market vehicles at most risk of losing value from lower demand before you’re forced to pay the price of keeping an aging inventory.
Plan for Customers to Drive Their Vehicles Longer
Despite current high demand in new and used cars, the general trend of the average age of vehicles has increased in recent years, mainly due to improved vehicle quality in the past 15 years. People are holding on to their vehicles longer and longer, with the average age of vehicles on the road in the United States hitting a record 12.2 years. Nowadays most customers prefer repairing their vehicles rather than replacing them.
Even when the market stabilizes, consumers aren’t guaranteed to jump back into purchasing vehicles, leaving your dealership at risk of having a stock of unwanted vehicles.
The Importance of an Effective Inventory Management Process
To stay agile, take the time to ensure your dealership’s inventory management process includes vehicle reporting features to help you identify aging stock. You should be able to quickly determine which vehicles have been sitting on your lot for long periods of time.
For example, when a customer comes in for a test drive, you could use your key management system to look up the vehicle that matches a customer’s request. Then, you could also run a report displaying lists of similar vehicles that have been in stock longer.
Your system should compare the days a car has been in stock with the rest of your inventory, giving you the chance to prioritize selling aging inventory to customers most likely to buy. The last thing you want is to be stuck with a lot full of unsold cars when demand drops again. With the right system, you can set up your dealership for future success.