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Trader Talk: Data key to quick turnover of stock

datakeyimageMOST used car dealers will tell you that the vehicles they stock are in demand and will retail quickly to generate much-needed profit.

But how can that be true when recent research found that out of more than 425,000 used cars offered for sale, 125,000 were in low demand in the area where they were being sold.

That means, on average, nearly a third of vehicles in used car dealer forecourts throughout the country are the wrong cars in the wrong place.

If you believe that you are stocking what is in demand locally but 30 per cent of your stock is in low demand, the chances are that most of your competitors are in exactly the same position.

Which means that whoever identifies that unwanted 30 per cent, and replaces those vehicles with cars that people actually want to buy, will reap the benefits.

Having the right cars (that are in demand) in the right place (where that demand is and where the potential profit margin is highest) is critical.

But how can you determine if the used car in your showroom or the one you are just about to take in part exchange or buy at auction is in demand locally and is worth stocking?

The answer can be found in the wealth of market data available and the intelligent use of that data is fundamental to the success of the used-car operation.

If you try to buy cars without using the available market data you will find it a haphazard process at best. The right market data will confirm if your used car stock is actually in line with what is in demand locally. Stocking a selection of Fiesta, Astra, Clio and A4 models when local consumers are looking for a 3-Series, Focus, Corsa or Golf could compromise your stock turn and undermine the gross profit potential.

However, if you use the right market data in the right way you will not only be able to identify what’s in demand in your area but will also ensure that you pay the right price to be able to sell at the right price to maximise your gross profit potential.

The data will include metrics that track consumer supply and demand, measure stock turn and identify the potential gross profit margin. These metrics will enable you to make business-critical decisions such as whether to hold stock, reprice stock, purchase new stock or dispose of vehicles and how to assess the potential of a part exchange.

Combining these metrics with a retail mindset will result in the right cars being in the right place. Given there are 125,000 cars in the wrong place there is a huge opportunity to win in this environment.

However, many dealers are still either unable or unwilling to use the data, and some don’t even trust it.

If you didn’t make a new year’s resolution why not make one now to use the data available, make more money and beat your competition. What have you got to lose?

 

About Tim Peake

Tim is group strategy director at Trader Media Group, publishers of Auto Trader, the UK's largest car marketplace.