Use the Power of the Internet to Improve Inventory Management

October 2010, Auto Dealer Today - WebXclusive

by Jason Ezell - Also by this author


In the aftermath of our most challenging economic stretch in recent memory, we are all trying to find new ideas and new ways to save/stretch/bend every dollar. We scrutinize purchases much more than ever before. We look more closely at value for every dollar spent, and the large ticket items? Well, they require a little more research and thought now before signing on the dotted line.

In a business where inventory is the backbone of sales, the car industry doesn’t lend itself very well to cutting costs. It’s difficult to justify ridding ourselves of the helium balloons and fresh Saturday popcorn that made this business what it is today, much less scale back inventory and floor plan numbers to try and cut those huge costs. A lower inventory, while it might save money, might also cost you more in lost sales. So what’s the answer? Have the right inventory at the right time. Offer cars you know people are looking for or ones you know will bring them to your dealership. How is this accomplished? Through the use of consumer data that is available at our fingertips.

What about days in stock? Previously, we’d watch a vehicle age in our inventory and try to determine when to wholesale that car and not lose money. I remember my used car manager coming around asking salespeople, “Are you working anyone on that Red Malibu?” or “When was the last time the doors were cracked on that Blue Altima?” This was his way of determining when a vehicle had run its course on the retail side and needed to be done away with.

Better idea, look at your Web site’s “hit report” and look at how many views your pre-owned cars are getting. I can almost guarantee you that if a vehicle has not received a click in 15-20 days, it’s not going to! And chances are no one is going to walk in off the street and buy that vehicle at the last minute. Cut down your days in stock from 60 to 45 and see what happens to your costs and losses at the auction.

Take a vehicle into inventory and keep watch over the traffic that car gets online. The minute the hit count starts plummeting; use this as a sign to get rid of that vehicle. You can evaluate every car in stock the same way within a 30- to 45-day time limit. On day 30, if that car is at the bottom of your hit list, you have a week to put it on your “specials” page at a discounted price. After that, it’s off to the auction, still under 45 days.

Another key plan to help manage inventory is to stock the right vehicles. Now I know this sounds elementary and obvious, but the problem I see over and over is that dealers stock their lots based on what sold, not what will sell. This is old school, but frankly it’s all we had to go on until Internet shopping became the primary way for people to shop. We now have a clear view of what people are shopping for in real time.

Today, we can see exactly what cars are most popular and this will tell us what will be selling over the months to come. Knowing the most popular vehicles being shopped on your own Web site is great info, but even more important is to compare this list to what’s being shopped for in your region, district or competitive area. This way, you can see if your inventory mix matches the current shopping demand in your area. Without knowing how you compare, your own Web site statistics could lead you in a false direction or give a false sense of security

Inventory mix should be much easier to gauge now with the data available to us. No more inventory predictions using sold reports. Find out what people are looking for today. Then, stock those units, and arrange the lot so that those units are featured. Use your online shopper behavior data to learn more about current auto shoppers than ever before. Knowledge is power. Power up!

Vol. 7, Issue 8 

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