How can you buy, manage and sell stock effectively this season? Sean Kemple of Close Brothers Motor Finance has some answers.
THE summer period is often cited as a low point in the year for retail sales. However, the used car industry statistics actually tell quite a different story.
Over the past four years, July and August have seen an increase on May and June’s figures, with a similar number of used cars sold in high summer as in the springtime months of March and April.
So the good news is – we’re in a particularly strong period of the year, with plenty of opportunity for dealers to boost their profitability.
The key to success is simple – it all hinges on buying the ‘right’ stock. If you get that right and manage that stock effectively, the cars will sell themselves!
Let’s run through a few of the secrets to summertime sales success.
Understanding your marketplace is the most crucial stage of the purchasing process, whether that’s wholesale, part-exchange or from trade sources. You need to know where the demand is – and, equally, what makes and models your market might be saturated with.
Understanding what price the car you’re buying will retail at and what will shift it from the forecourt will allow you to buy the right stock at the right price.
Consider a ‘retail back’ approach instead of the traditional ‘trade up’ method. Just in case ‘retail back’ is a phrase that’s new to you, it involves a bit of mental maths when you’re sourcing stock.
If you like the look of a particular car and are considering buying it, think about how much you would retail it for before getting your hands on it. Is there enough of a margin to secure you a decent return? Try it! It works for many of the dealers we talk to on a daily basis.
There are a number of tools to help you buy and obtain stock – make sure you’re using them.
Once the stock has arrived on your forecourt, ensure you have an effective pricing strategy. Don’t become emotionally attached to the vehicles (it’s easy to do!) – you need an absolute black-and-white approach to managing your stock.
For example, consider adopting the ‘profit-turn-release’ approach:
Profit: Maximise your potential profit on a vehicle by shifting it in the first 20 days. Only understanding the demand in your target market (and availability of similar stock in your local area) will allow you to achieve this.
Turn: If the vehicle doesn’t sell in 21-40 days, review the price to take into account any market shifts and amend accordingly. Vehicles move faster when priced at 98 per cent of the retail market price.
Release: If the vehicle still hasn’t sold in 41-60 days, take the same approach as the ‘turn’ phase and explore potential trade-outs.
It’s important to remember that consumers don’t necessarily search by price, they search by perceived value. It’s a leading indicator in the purchasing decision journey.
Maximise your digital and physical forecourts and do all you can to promote confidence in your business with your customers.
Online, you could include reviews, images and videos of the vehicles you’re selling, while social media activity will help you reach even more people. Make sure you explain how potential buyers will be able to purchase a vehicle. Provide information about point-of-sale finance, cash payments and other options.
Try to maximise the value of the vehicles you are selling. Make sure you are focused on attention-grabbers when using third-party classified sites. Tell the story of the vehicle, ensure you’re pulling out the key selling factors/USPs and utilising all digital real estate.
Acknowledge that your customer will know the value of the car you’re selling better than you do because of all the research they’ve done. Your customer will be aware of your competitors selling similar vehicles.
If your online activity is effective enough, you’ll find that customers actually arriving at your dealership are in the main ready to buy.
If your physical forecourt looks as sharp as your digital forecourt, a summertime sale should be within your grasp!
An effective strategy for buying, managing and selling stock is crucial in today’s world of automotive retail.
Large retailers in other industries will select products to display on their shop floor and measure profit per square inch. If products aren’t selling, they will move them off and replace them pronto – the same approach should be applied to automotive retailing.
This all seems just like best practice and is probably sub-consciously how you already run your business day to day.
Be mindful of getting the basics right and you’ll enjoy a successful summer.
Sean Kemple is director of sales at Close Brothers Motor Finance, one of the UK’s leading providers of motor finance. The company works with over 8,000 dealers and provides finance for new and used cars, LCVs, motorcycles, caravans and motorhomes. Go to closemotorfinance.co.uk to find out more.