For any dealership, managing inventory properly is one of the most important tasks.
- You need to acquire the right vehicles to attract people to your lot and showroom.
- You need to understand the profit you are likely to make on every vehicle you look to acquire before you submit a bid.
- You need to be able to look at vehicle aging and understand what pricing and/or wholesale strategy to implement to minimize loss.
For many years, inventory management was more of an art than a science. But advances in “big data” have shifted the paradigm.
I argue that, as a result, truly mastering inventory management has never been more critical. A number of developments in 2017 fuel this belief.
Market demand has shifted regarding the types of vehicles consumers want most. Specifically, we’ve seen interest change from sedans to SUVs and light trucks.
This shift caught the industry off guard and led to dealerships being stuck with a lot of less desirable inventory on their lot.
Second: Off-Lease Vehicles
A flood of off-lease vehicles hit the market in 2017 and drew great interest from consumers.
These 2-to-3-year-old vehicles had strong appeal with consumers, especially when they were SUVs or light trucks. Used car lots (both franchised and independent) saw an up-tick in traffic and sales. The 2-to-3-year-old used car could become a major obstacle to new car sales.
Market-based analytics are now available AND affordable for most dealerships.
Dealerships have access to near-real-time information regarding which vehicles consumers are buying in their area, as well as what the local competition is selling and at what price.
Dealerships also have better insight into supply conditions and how both excess supply and supply shortages are impacting the marketplace.
Dealerships with this information have come to realize that inventory management is no longer simply about pricing and marketing. Rather, it involves acquisition price, speed to market, and inventory turn as well.
Inventory management, nowadays, requires more analysis and strategic planning. It has become a true science—with just a little bit of art and gut feeling mixed in.
So, Where Is Your Dealership on the Inventory Management Mastery Scale?
The ability to utilize, analyze, and synthesize data needs to become a core competency for every dealership.
Going forward, it may be the most important skill a dealership needs to succeed. In the right hands, stocking, acquisition, and pricing analytics can greatly enhance dealership success. Your dealership must be able to understand your potential profit and exit strategy for any possible acquisition before purchasing a vehicle.
For more on the topic, we invite you to download our latest whitepaper, “The Ongoing Technology Evolution of Dealership Inventory Management.”