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Inventory Sourcing focused Discussion

Discussion in 'Vehicle Merchandising & Inventory Software' started by basemmr, Feb 22, 2019.

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  1. basemmr

    basemmr
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    Noob

    First Name:
    Sam
    Dealer or Company Name:
    Greater Chicago Motors
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    I think it's safe to say that any UCM, GM, or Owner will I agree that successful dealership starts with successful buys. That being said, many (if not most) of the dealers I interact with are so busy whining about all these new consumer resources (i.e. Carguru & KBB); That they, in-turn, end up neglecting all metrics and resources that have been specifically made "For Dealers, By Dealers" in order to combat this new Nationalized (Global) marketplace.

    During my brief time as an independent wholesaler, I would have dealerships I did business with refuse vehicles for reasons like: "It was the wrong color" or "They had been burnt on one in the past" or my favorite "We don't do well with those here"......Never understood that mentality, but it suggests (to me) an old school style of thinking that refuses to comprehend the vastness of our automotive retail environment.

    Long story short, this outdated style of thinking doesn't allow me the opportunity to constructively discuss buying habits like: How to use MMR to identify trends, MDS and its legitimacy in a marketplace as large as ours, MSRP vs Depreciation %, among many more sourcing centered ideas/thoughts.

    I believe that now more than ever the saying "There's an ass for every seat" proves to be the mantra of our industry (from a buying perspective). Especially when that ass doesn't even have to get up off their couch to make that buy.
     
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  3. Tallcool1

    Tallcool1
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    Clint
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    I don't know about this.

    There are software packages available that clearly identify what cars to buy, what to pay for them, what colors to buy, what trim levels, what miles need to be, and what to price them at. Is it not possible that a dealership actually DOESN'T do well with a certain Model?

    Then it seems, when a user gets stung by these software packages or doesn't get the result that is desired...the rebuttal becomes something along the lines of "A software package is only as good as the person using it"...whatever the fuck that means.

    So respectfully Sam, I have absolutely no idea what your post is trying to say. Please elaborate.
     
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  4. basemmr

    basemmr
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    Sam
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  5. basemmr

    basemmr
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    First Name:
    Sam
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    I guess the first half of my post was me griping a bit, I apologize for the lack of clarity. Let's see if I can summarize my point a little more effectively.

    Ideally my goal behind this post was to find like minded technology/metric driven dealers/buyers/managers/owners; In order to then start a conversation on a topic that doesn't get discussed much (sourcing). Problem is not many individuals are utilizing those metrics to make decisions, and instead rely on "experience" to dictate that aspect of their business.

    Perfect example lies within your response. Can you logically give me a reason why in today's retail environment a store just "Doesn't do good with a unit?"

    ** I can further elaborate my point but it will become clearer through conversation rather than me typing a novel.
     
  6. Tallcool1

    Tallcool1
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    Clint
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    Hey Sam

    Now, this makes sense! I see where you are going.

    There is some logic regarding certain vehicles being strong or weak in some dealerships due to geography. An example of that would be the obvious such as 2 wheel drive pickups in northern Montana. Perhaps another example would be a rural dealership that doesn't have a Saab Franchise within 300 miles of them...probably not hard to see how pre-owned Saab vehicles wouldn't fly off the lot. Those are the obvious common sense examples.

    In my case, I am an Independent dealer in a rural market. I have to go out in a 50 mile radius to reach a population of 40,000. For whatever reason, there are some vehicles that we just don't do well with, and Sam...it drives me crazy trying to figure out why. Late model Toyota sedans would fit that. We have tried late model Corolla and Camry models in various trim levels. We buy them for what we believe to be "on the money". We take them home and price them at what we believe to be "to market", and they just don't sell. I will take 100% responsibility for this fact. However, when it is time to replace them (after they have sat here for 120 or 150 days) we are very hesitant to buy another one.

    Generally speaking, I tend to agree with your statement of there being an ass for every seat. I will say that it all depends upon the price. In our rural market, we actually sell some Mercedes, BMW, Lexus, etc...and there isn't a Franchise dealer for these makes within 100 miles of me. But, when we buy these things we buy them way below the market therefore we sell them well below market. But we do make some money along the way.

    I will absolutely listen to any and all advice or pointers that you can offer. I appreciate anything you can give me!

    Clint
     
  7. C Dorman

    C Dorman
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    Assuming the software package and the data that drives it is accurate, think of a software package as a high quality, sharp, chef's knife. In the hands of a skilled user, that knife can do wonderful things really fast. In the hands of an average user, they stand the chance of slicing off a finger. For amateur cooks, learning basic knife skills is the one thing that would improve their results and shorten their meal preparation times the most. But most amateurs will never take 5 minutes to watch even a basic YouTube video to learn how to use one properly, and safely. And if the average cook does watch a training video, they will most likely immediately abandon the new techniques because they are different from all of the bad habits they have acquired, require a little thought and a little practice.

    And just like there are many different sizes, weights and configurations for chef's knifes to fit the individual chef's hand and preferences, there are different software packages for the same reason. One size doesn't fit all.

    Both also require periodic maintenance to keep them operating at peak performance.

    That's what the fuck it means.

    It's also why pros with software and in the kitchen get frustrated with amateurs. Yes, there's a little bit of a learning curve. But if you're willing to put in just a little bit of effort, you can enjoy a lifetime of improved performance.
     
  8. C Dorman

    C Dorman
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    That being said, there are markets where some makes and models do great, and some don't. But, if your inventory sourcing software and data are accurate, then that should be plainly evident before the buy. Obviously, the more data points available for your market, the more reliable the predicted buy, sale and profit should be.

    But nothing is perfect, so this is where experience comes into play.

    I would talk to dealers in one part of the country that couldn't understand why we sold the heck out of one model but not the other, while their results were the exact opposite of ours. Having driven both models, I couldn't explain it either. For whatever reason, buyers in one part of the country just preferred one over the other hands down.

    But again, if your software package and data are accurate, you should know this before the buy.

    With very few exceptions, I can't imagine why you would ever want to attend auctions in person and/or limit your vehicle sourcing to buying in person. Unless of course you want to kill a day, meet old friends, and go out for golf, dinner and drinks afterwards.

    One person, with the ability to buy from 14 auction lanes at once, can source so many cars of higher quality and at better prices from their desk than one man at one lane it's not funny. In our store I had our used car manager use the software. He freaked out a bit at first, but within two weeks he couldn't imagine doing it any other way. At our sister store the GM insisted the old way was better and he was determined to prove it.

    Within two months we had to stop their salesmen from selling our inventory.

    What was worse was the cars we had to take from their store when we did a store to store trade. They were shit and over priced. We didn't want them and couldn't sell them because they were crap compared to the inventory we purchased. They were so bad we couldn't even wholesale them without taking a loss.

    I said look, we don't want your trades. If you want to sell out of our inventory, that's cool, we can buy all the cars we want and we'll make a little money on the recon and the owner will make more money in both stores.

    Man, did that totally humiliate and piss off the GM at the other store.

    We totally kicked his ass and the old ways.

    Did we have the occasional whiff?

    Sure, but they were few and far between. We cut our loss fast by wholesaling them and replacing them with inventory that would sell.

    Did our transportation costs go up? Yeah, a little bit, but they were more than made up for with reduced recon costs, faster sales and bigger grosses.

    Biggest surprise?

    When it was getting to the end of the year and I asked our CFO if we needed to make any moves for tax purposes. He looked at me and it dawned on him, unlike with the old ways, there was no inventory that needed to be written down.

    He asked me if there was anything my departments needed, and I had to tell him no, our MarTech stack was solid and on pace to actually last a little longer than our projections. That gave him the ability to do some real financial analysis and devote some of the increased profits to some big ticket items fixed ops could use to significantly increase their profitability.

    Which also lowered my recon time and costs :)
     
  9. Tallcool1

    Tallcool1
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    Great Analogy! And now...I know what the fuck that means!! :):):)
     
  10. Tallcool1

    Tallcool1
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    This is a great story that really makes me sit back and think.

    I don't know if you are speaking to vAuto or another software package, but it really doesn't matter. I have sat down with the area vAuto rep on a few different occasions. I understand the vAuto theory fairly well, and used it years ago with the dealer group that I oversaw. I believe that I likely need to re-visit this. I know that there is significant cost associated with their platform but also understand what mistakes cost.

    Thanks for taking the time to write these posts. I appreciate it.
     
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  11. basemmr

    basemmr
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    First Name:
    Sam
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    So I'll begin by saying this in total I have about 5 years of experience within the industry. I started off as a vendor and got to understand more of the industry from an outside looking in perspective. But even prior to working for that company my automotive knowledge in general was very limited oh, don't kill me for saying this but it wasn't as if cars were something I saw on my Horizon right after college. It was more so one opportunity leading to the next landed me where I am. The only reason why I mentioned that, is to establish the the fact that from an "experience" standpoint some people wouldn't necessarily look at me and assume I would be a good buyer let alone know much about that side of Industry. It's just not the traditional path for a wholesaler, or corporate buyer. Again so that being said I'd like to think that I'm probably one of the strongest stores within my region not only from a gross perspective, but also in terms of turnover and efficient Marketplace utilization. However due to what I said earlier we know we can't necessarily attribute the success of my store wealth of knowledge. Instead I understand my success stems from the amount of resources available too quickly educate yourself. So in that regards I'm probably more along the same lines as most stores we're trying to not only keep up with the current market, but adapt as well. That combination
    Regardless of your geographic we all pay to utilize the same tools on a national scale, the internet itself isn't limited by radiuses and so technically neither is your clientele to an extent. We are a high line dealer essentially smack dab in the milddle of Chicago so it may seem as if we have it good from a foot traffic perspective. Despite our "prime" location, and I think you can agree, foot traffic in general has drastically declined & rightfully so. I mean not only are there not enough hours in a day for consumers to shop from dealer to dealer physically, more importantly a quick scan over you google reviews & a couple clicks onto a carfax and a few pictures from your VDP essentially serve the same purpose for the consumer. Furthermore one of my good buddies ows a store where he barley has just enough room to store 15 cars at a time...His turnover is about 300% at the moment with an average gross around 2k per unit....ready for the best part....his average inventory cost is right around 5500/unit. Even more impressivley, with an average retail unit sitting around $5,500, 40% of his business is out of state & sight unseen (usually have the vehicle inspected at the most). So this guy not only figured out how to balance selling his cars as quickly as he's sourcing them, he also is grossing just about as much as stores in his region that have an average inventory approx. double the cost of his (double the risk!), and he's somehow also taking $5k units and retailing them out of state like he's a Porsche store. Essentially he's able to provide his clientele enough peace of mind to spend their limited income on a 10-15 year old car wihout ever seeing it. I have to imagine his efforts sourcing quality unit's combined with his amazing online presence (reputation) are what do the trick.

    Now how do I think this correlates back to you? His lot is considered to be located in one of the more rural suburbs of Chicago, so he struggles with foot traffic and street presence as you do. That being said, in my eyes, both of you are actually a head of the game from an overhead perspective, and should now be utilizing the energy and resources that were once associated with providing "An In-Store Experience" to now providing them with absolutley no reason to click elsewhere once they've come across your vehicle. Invest the time into finding the 2006 Camry with 35k miles and 1 owner, then invest those resources into making sure it's the best damn looking Camry on the internet in all aspects (Vehicle History, Recon, PICTURES/DESCRIPTION.). Of course I'm only assuming here, but I think the predicament you found yourself in stemmed from the market saturation your unit's were contesting against. Camry's are good inventory and will always be in demand because of their affordability and realiability, but none of that truly matter's when your one among hundred's of extremely comparable competitors. I want to be careful with how I phrase this next part....Low miles are obviously great on any car, no duh. But high miles (compared to the average) can also leverage a vehicle's value in almost the same manner. Without prying too much I can almost guarantee you probably still made money on those Toyota's even with the amount of time they spent on your lot, your problem was that you weren't making it quick enough.. How you combat that is through sourcing outside of a vehicle's most saturated market segment (i.e. Avg mileage is 65k, you want 30k or below or 90k or higher because of the lack of supply to compete with) Furthermore, Toyota's that age didn't come optionally equipped "A-La Carte" like a C-300 or 3 Series do. So the only real way you could have stimulated a quicker turnover would have been to price yourself out next in line so to speak.

    This lead's into my next point. You only focused on one analytic P2M or C2M, and ultimately that's why you'd still gross + after 70 days. Where you could have focused a little bit more attention was: 1)The price variance, which was probably very low which suggest's very similarly priced competition across the board due to a lack of wholesale supply. 2)I can almost guarantee your MDS was probably screaming near 80-100 days due to a large amount of like miled competitor, without a huge surge of market demand from consumer's. Ultimatley low miles would have saved the day unless you could steal the average mile unit and undercut everyone else by a considerable amount.
    Now I think your not giving yourself enough credit, and in turn you're downplaying the complete control you had of your inventory that was granted by you obtaining a very solid understanding of the metrics and their relationship to one another. More specifically, it sounds like you were much better than most at being able to correlate the metrics into the real life marketplace, rather than just seeing it on some computer screen.

    Even more importantly!!! it seems as though you truly understood the trends behind the figures. AND THAT! is where most dealers are fucking up now-a-days it stems from store's putting their blinders on to either focusing predominantly on a stat like Market Day Supply or C2M respectively and individually. Ultimately then 30-45 days have come and gone with out the anticipated result's which causes frustration and a further misunderstanding of the data.

    Furthermore, I do also have to say that experience is extremely relative when your utilizing "time in service" as the main determining factor. I'm not claiming to have reinvented the wheel by any means, however, I personally went from a naive vendor with no true understanding of the automotive industry at all. Fast forward 2.5 years and here I am a buyer. The resources for success are out there, and are far more accessible today than ever. Sourcing inventory has become less of an emotional/opinionated process, and more of a scientific one factually driven one.
     

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