Wednesday, 28 September 2011

Understanding the Impact of Inventory Turn

"Speed to market results is the key to rapid inventory turns. “If your car isn’t online, it’s not for sale.” –  Bill Pearson, Owner of Finish Line Ford and prominently featured in Automotive News and Dale Pollak’s book, Velocity 2.0

It is quite refreshing to hear great speakers and industry experts like Dennis Galbraith, author of Sales Integration, talk about the evolution of inventory turn in the automotive industry.  Recently at the Seattle stop on the PCG Pitstop circuit, Dennis and I had the chance to discuss this topic in depth and it became very apparent that I needed to share some of my industry expertise when it comes to understanding the impact of Inventory turn.  Now I am sure, that most franchised dealerships and independent dealers are aware of the importance but have yet to really adopt a focus when it comes to the impact of turning vehicle inventory as fast and as many times as possible in a fiscal year.

Disclaimer - In my previous career I managed the wholesale remarketing department and new car acquisition team for a rental car fleet for 12 years. The fleet averaged 8500 units at all times, mainly comprised of current model year cars, 12 month old cars and used vehicles purchased through auctions. Within my duties, there was a steep responsibility of monitoring past values and forecasting future values of every vehicle running in the fleet, placed on my shoulders.  

So it comes to say that the most influential factor in every decision we made was based on - THE MATH!!   A direct responsibility of my acquisition team was to decided the level of equipment packages, color, delivery dates and optimal residual cycles for each and every car. On the back end, when it came time to sell off the fleet, each and every buy/sell decision was scrutinized with the MATH. A simple rule to follow was - Sell them before they drop!!!!

To explain this statement I will show the numbers of real Manheim Market Report data on 2011 Ford Fusion prices in Kansas City. If you were one of the fortunate dealers to have a strong focus on "Same day Online Merchandising", you would have avoided a seasonal market fluctuation that really hurts the bottom line. 

In the graphic below, you will see a drop in value of $1500 from August 23rd to Sept 14th (21 days).  Some industry statistics point out an average delay of nearly 12 days by dealers in getting the car to their website after the car has been purchased.  Quick math shows (if you use the Ford Fusion data below) most cars have dropped $856 during the same 12 day period. Obviously the August to September market drops are a little more dramatic than other times of the year, but none the less they are real and impactful. 

A more stable market in July (below) shows the same 2011 Ford Fusion values dropping $268 during the 12 day period of delay or $425 over 21 days.  Either way you look at it, the values are dropping every day, making "SAME DAY ONLINE MERCHANDISING" an absolutley must do. 


cDemo Mobile Solutions announced August 22nd, 2011 that their Mobile Inspector (Mi) App is available for an update from the Apple App store. It now includes video functionality. The vehicle data collector now can do everything related to the vehicles condition from one device. No more tedious data entry or re-keying, no more trying to read horrible hand writing and no more trying to remember the vehicles options. In addition to being able to capture standard data and photo points, you now have the option to capture short video clips and narration during the data collection process. Once the data collection process has been completed you can stitch the video clips into a virtual walk around which can then be uploaded directly from your iPhone to your YouTube account, your website and any other listing site you chose to display your inventory.  

With this type of tool in your digital merchandising strategy there are no excuses for a delay to the online market.  Avoid the painful losses in value by delaying the data capture process and enjoy a whole new way of merchandising your inventory. 

"When you’re selling cars this fast, you don’t have time for dirty data or multiple devices. The best and easiest vehicle demonstration process is cDemo, bar none."
       – Dennis Galbraith,
      author of Sales Integration

written by Jay Radke – cDemo Director of Business Development can be reached by email, on Twitter as @JayRadke or by phone at (780)977-5341

© Jay Radke 2011