October 2011, Auto Dealer Today - WebXclusive
As the saying goes, “When the going gets tough, the tough get going.” In Toledo, Ohio, at Grogan’s Towne Chrysler Jeep Dodge, Marc Ray (partner and general sales manager) knew it was time to get going when the recession hit. Pre-recession, the dealership normally sold between 50 and 70 used vehicles a month, but that number dipped to 30 to 40 a month amid the recession.
“In late ‘08, we were backed up against [a wall], so we had to find a way to move our inventory faster,” he said. Then, someone gave him “Velocity,” a book on used vehicle inventory management by Dale Pollak, chairman and founder of vAuto. Reading that book “made the bulb go off in my head that you can’t just take a car for $10,000 and … mark it up $3,000,” said Ray. “I was that guy that didn’t look at the inventory, didn’t look at what other people had out there [or] what the market price was on it.”
At Grogan's Towne Chrysler Jeep Dodge, Marc Ray, GSM and partner (left), and Denny Amrhein, managing partner (right), saw used-vehicle sales dip as low as 30 a month during the recession. After implementing an inventory management tool in early 2009, Ray transformed the store's used vehicle operation, which is now averaging 134 sales a month.
Armed with information and the approval of the dealership’s managing partner, Denny Amrhein, Ray set out to transform the store’s used inventory, and since February 2009, when he implemented an inventory management tool, the store has experienced a steady increase in pre-owned sales. So far in 2011, the dealership is averaging 134 used vehicles a month.
In addition to implementing an inventory management tool (he currently uses vAuto), he beefed up his vehicles’ visibility on AutoTrader.com. He signed up for the company’s Alpha program, which showcases the dealership’s information and vehicles atop search results pages and on other pages consumers see while searching for used vehicles.
Now, vehicles from Grogan’s Towne are the first cars searchers in the store’s market see. He didn’t want to limit his success with the Alpha program by just signing up for Chrysler, Jeep and Dodge searches. He also pays to stand out on searches for Saturn, Cadillac and Hummer, which is especially helpful since he’s diversified the used vehicle inventory mix to incorporate more vehicles outside the Chrysler Jeep Dodge moniker.
Today, about 40 percent of the used vehicle inventory is Chrysler, Jeep and Dodge vehicles, compared to 90 percent before the dealership put the microscope on inventory management. He admitted that shelling out the cash for the program and the additional makes was a bit of a gamble, but it is a gamble he says is paying off. He noted Cadillacs, in particular, are a good pre-owned seller for the dealership.
Making sure the vehicles are visible is only one part of the equation. Ray also had to make sure he had the right cars at the right price. His inventory management tool helps him research his market to determine which vehicles customers want, compare vehicles to buy at auction, price vehicles and market used vehicles. “It’s just a huge amount of data that … really allows you to see where you’re at in the market.”
When stocking the lot now, 90 percent of vehicles are purchased via online auctions. He said, “My buyer used to drive three-and-a-half hours to go to the auction. We buy [almost] everything online now.” vAuto helps him compile information from various auctions to help determine the locations of the vehicles he needs. He said, “In the old days, it would be tough for you to … search auctions lists, print off 20 different auctions [and] look at them.” Now, he can generate a buy list that displays vehicles from several auctions, along with when they’re running through the auctions, and he or his buyer can place proxy bids through the auction sites. The used vehicle buying process at Grogan’s Towne has become much more efficient.
The dealership’s now buying vehicles from auctions as far away as New York and Florida. They usually arrive at the dealership in less than a week and then spend a few days in the reconditioning process. While it takes around a week-and-a-half for a vehicle to be front-line ready, Ray has most of the vehicles online with photos much sooner than that. “My photos go up when I buy a car online. I take the auction photos and those go right to the [website] that day. I’m online within hours with price, comments and photos.”
"Guaranteed, every seven days, a car gets touched and re-priced, so in the first 15 days that I own a car, I've looked at it twice."
- Marc Ray, GSM and partner, Grogan's Towne Chrysler Jeep Dodge
Once the reconditioning process is complete, new photos are taken and loaded online. The store has a similar process for trade-ins kept for retail. They’ll take photos immediately and put them online, then load new ones after recon. He explained, “Your traffic really goes up so much more on a car [with] photos. If you don’t have the photos, your chances of selling that car go down dramatically.” Granted, there are some vehicles that require reconditioning before pictures can be loaded (for example, those with cosmetic damage that need to spend some time in the body shop).
The next aspect of successful inventory management, pricing vehicles correctly, is what trips many dealers up, said Ray. He understands how important price is and re-prices cars every week. Each day he looks at which vehicles haven’t been touched by shoppers in seven days and re-prices them. “It’s addicting … because once you see the results, you want to stay on top of it. Guaranteed, every seven days, a car gets touched and re-priced, so on the first 15 days that I own a car, I’ve looked at it twice.” His starts every morning at work the same way: he logs into his computer and checks for vehicles that need re-priced.
A competitive price helps him stand out, and even if he’s not the lowest, he can justify his prices and effectively market vehicles with a tool called RealDeal. It’s an online tool that allows him to email customers about a particular vehicle they’re interested in. The email contains a link to a Web page that’s unique to the vehicle at Grogan’s Towne. The page displays comparative information on other like vehicles in the market. Ray said, “I’m going to show [customers] that my value is there and why my cars are good deals. Maybe [another vehicle] has 8,000 more miles … [or] a bad CarFax. Maybe mine’s cleaner.”
Making sure the price is right on vehicles fosters a faster-turning inventory. “I like to stay at the 25-or-under [mark] with my days in inventory … Once I start getting to that 31 to 45 days, that’s where my risk starts going up and it’s time to start thinking about how to get rid of the car,” he said. When he began proactively managing the used car inventory, his goal was to achieve a 60-day turn. As of late June, he’d achieved that and set a new goal to get the inventory on a 45-day turn. He plans to do this by simply adhering to process. “At 40 days, we’re going to start getting rid of our cars,” he said, estimating that the store would achieve a 45-day turn by the end of September 2011.
Other dealers in his market use inventory management tools, but he said they haven’t quite figured it out (and he hopes they don’t). “A lot of guys on vAuto still can’t get over the fact that you have to price the cars right.” They still want to make $3,000 or more a car. “Are the days of making $3,000 a car … gone? I believe so,” said Ray. Grogan’s Towne makes up for less gross by selling more cars. The gross per vehicle is down by a third, but the store is selling double the vehicles. He added, “The math makes sense, and we’re making more money than we ever have.”
Amrhein added, “We also don’t have $15,000 to $25,000 worth of wholesale loss because we turn our cars so quickly … Our wholesale loss is gone.” He said the store used to “take some huge losses because we’d hold onto a car” for too long. “We don’t do that anymore. Those cars are turned and you just go for the volume.” He’s extremely pleased with what Ray’s done with the used car department, saying, “It’s totally amazing. I’ve been in awe of what he’s done with this department … He’s taken this department and turned it into the most profitable department we’ve got.”
Today, about 40 percent of the used vehicle inventory at Grogan's Towne in Toledo, Ohio, is Chrysler, Jeep and Dodge vehicles, compared to 90 percent before the dealership put the microscope on inventory management.
In addition to improving the used car department, proper inventory management has also benefitted the service department’s numbers. Ray said 50 percent of the dealership’s internal service business is attributed to the used car department. “There’s been a huge increase in our service business just because the volume of the cars that they’re servicing.” While the service department experienced some “growing pains” as a result of the increase in volume, he made sure to steadily increase the flow of cars into the service department. “I don’t want to jump from 100 to 200 cars in a month. I want to have progressive growth every month, so we stay successful and … everybody can keep up with it.”
To keep more money in-house, the store now completes all details in-house and pays door rate. He used to outsource detailing and pay $120 a vehicle. “Now, I have guys that do it here. I charge the car $120 and I credit my inventory maintenance $120.” The next step is to add more service technicians. Ray and Amrhein devised a plan to move body work out of the service department and open a quick lane, which will open up more bays in service to allow for additional techs.
With proper goal-setting and controlled growth, Ray has managed to double sales in the used car department without overtaxing service, and his next feat is to put a computer on Amrhein’s desk. They have a wager: If Grogan’s Town Chrysler Jeep Dodge sells 175 used vehicles in July 2011, Amrhein will be the proud owner of a new computer. Ray said, “Denny’s been in the car business a long time, but doesn’t know how use a computer. So after I hit that number, he’s getting a computer on his desk and he’s going to learn it.” Teaching him how to use it will be “a team effort at Grogan’s.”
Both Ray and Amrhein seemed confident that Amrhein would soon have a new computer. Amrhein joked, “My computer is in my head … People come in my office and say, ‘Where’s your computer?’ I point to my head and they start laughing.” Computer or no computer, he’s smart as a tack and understands that technology is changing the industry—so much so that he had faith in Ray’s vision and allowed him to significantly increase the store’s AutoTrader.com spend and add the expense of an inventory management tool.
The future for Grogan’s Towne Chrysler Jeep Dodge is bright thanks to two strong leaders at the helm with the right mix of experience and savvy. Ray took matters into his own hands when the market got tough, and as a result, the store is in growth mode and more profitable than ever.
Vol. 8, Issue 8