I am sitting at my desk, on Sunday, a day that we are closed, alone in an otherwise empty dealership, drinking reheated coffee.
We didn’t sell many cars yesterday. I’m thinking it’s my fault, although like most ego-driven retail types, I would rather point the blame elsewhere. Maybe it was the weather or just one of those days. Certainly, the sales gods smile or frown on any given store randomly. Don’t they?
Actually, I’m sure they do. But this go-around I have what you might call an attitude about new-car inventory. I can’t shake the feeling I’m supposed to know better.
I don’t know whether it’s smart of stupid to have this much, more, or less new inventory. Factory programs and pricing schemes over the past 18 months have stung me so often I can’t tell where the line is between a blind throw of a dart and smart math.
Then there’s the question of whether any of the calculations that I used to believe in still work.
Historically I would chart my sales by vehicle type (sport utility, minivan, compact, etc.) and thought I was smart when I added categories like color, trim level and price. I knew my customers favored mid-priced Jeep Grand Cherokees, expensive Chrysler 300s and cheap Jeep Wranglers, for example.
My used-car matrix was even more detailed. There was a time when, with the help of my charts, I felt smart ordering levels of inventory for the spring season that winter sales could not support. Today I wonder if there will be a spring market.
Have I seen the last of tiered pricing and trunk money? Will order-bank incentives and captive-finance schemes once again kill the margin of standing inventory?
There’s nothing like a pricing advantage on the next one you buy to keep the one on the lot still there. We jokingly called this accounting alternative to LIFO (last in, first out), FIST (first in, still there).
The only thing worse than the economics of FIST was the doubt it cast on ordering inventory.
So here I sit, trying to regain a confidence that came from proficiency with a calculator, an Excel spreadsheet and a 20-group composite. Confidence is slowly returning. Armed with math tools, I go beyond what otherwise would just be a hunch.
I’m calculating the potential of Saturday spiffs, Sunday newspaper ads and extra inventory and dividing the costs of facility upgrades and payroll increases. That way, trying to dodge the bullet of a dollar in sales costing $1.10.
I’m ready to talk with my factory rep about real numbers.
For a time, I counted on the safety net of a captive finance company. Whenever my inventories swelled a bit, I prayed they would buy a bit deeper. The partnership between them and my manufacturer was solid, and, it wasn’t just a matter of dealer support. They knew that they needed to clear my lot to refill it with newer product.
But today, a lot of captives are spinning off and becoming independent. I can’t expect the new owners to share my pain.
Whining about ended relationships will not fill my showroom with opportunity. So, here I sit, Sunday auto section in hand, computer screen flickering, studying the marketplace.
For what it’s worth, here’s what I think I see:
The health of a franchise, is driven by dealer confidence. Confidence is made or broken by the accuracy of our predictions. When those expectations meet reality, we are strengthened by the sense of well being it inspires.
Inspired, we take risk. In the car business, that risk is inventory.
Domestic-brand dealers will not take on loads of new-vehicle inventories this year. Instead, they will learn how to sell a multiple of used vehicles.
I know that that the spread between what I pay for inventory and what customers pay me for vehicles is changing weekly. Gone are the days when I might order vehicles, new or used, months at a time. Today’s dealer must be inventory nimble, proficient in the use of market reports and pricing software.
I sit here alone, but energized by a renewed belief that I matter and that the work that I do, once again, is more important than anything else in the equation of profitability.
Over the next few years, dealers will distinguish themselves the way our industry founders did: with a personal knowledge of the market and a keen understanding the will of the public.
Trusting this, I am confident that tomorrow will be a better day, and perhaps next Sunday I’ll go fishing.
Peter Brandow is a veteran dealer in Pennsylvania and New Jersey.