As MAXDigital customers know, we have been warning about a shift in the industry since late 2015. Now it’s been confirmed. This month, J.D. Power reported that after years of climbing used-car prices, they’ve fallen into what analysts are calling “the first material decline we’ve seen since the recession.” Read more about what we expect to happen next, and how dealers can overcome continued pricing and profit pressure.
Over the past year, used-car prices have declined about 4 percent on average compared with 2015. Not just in one or two categories: J.D. Power’s Used Car Guide found that 14 out of 16 categories were affected.
How did we know it was coming? At the onset of the recession in 2008, consumers were holding onto their cars when they ordinarily would have bought new ones. This created scarcity in the used-car market, pushing prices higher. It was only a matter of time for the recession to ease and the pendulum to swing back.
Add to this the growing popularity of new-car leasing. According to Experian Automotive, the auto industry’s increased willingness to offer leases with low monthly payments helped fuel a rise in leasing from 20% of the new-car market in 2011 to nearly 35% currently. This, in turn, has led to a wave of late-model, recently-leased vehicles flooding into used-car lots—according to Manheim Consulting, about 570,000 more than in 2015.
So here we are, in a flooded used-car market with correspondingly depressed prices. And the future, as forecast by us and other industry watchers, is no better: all signs point to prices continuing to drop for at least the next couple of years. With gross margins tighter than they’ve been in years, how can any dealer profit or even survive?
The key is in not letting your gross margin drop any lower. That may not sound like an easy thing to do, as pressure increases to move vehicles at lower prices. But you can target one of the leading causes of margin erosion: consumer haggling.
Today, consumers spend hours researching vehicles before they set foot in a showroom. They know what you’ve got, they know what your competitors are charging for similar vehicles, and if your sales team isn’t equipped to answer all their questions, they’ll negotiate hard—cutting into your already-low gross margin.
How can MAXDigital help you “stop the drop?” By demonstrating to consumers that your prices are fair. When they see your customized Value Report complete with MSRP and OEM package information, and trusted third-party evaluations from the likes of Kelly Blue Book, NADA and Edmunds, consumer haggling is reduced or eliminated. So instead of being negotiated away, maintain your profits through communicating quality and value. Start protecting your margin by setting up a demo today.
CHICAGO — January 26, 2016 — MAXDigital, a premium end-to-end software provider for automotive dealers, announced today a number of software innovations including a newly re-designed MAX Digital Showroom mobile experience, added recall alert features for appraisals, and an enhanced mobile application.
The re-designed MAX Digital Showroom features an updated user interface with larger photos, interactive map, native phone features, a photo carousel, and a singular scrolling screen, resulting in a better user experience for both dealers and consumers.
“Our mission is to identify opportunities that make our software more convenient and easy to use for auto dealerships,” said MAXDigital CEO Steve Fitzgerald. “This re-design provides an outstanding user experience and better functionality. It will empower dealers to increase gross profits by selling the value of each individual vehicle and avoid additional discounting. The end result is a more satisfied customer because they have a better overall customer experience.”
Other notable enhancements include:
• Recall Identification & Remedy: Allows users to quickly learn if a vehicle has any open recalls, and if there is a remedy, during the appraisal process. The inventory management software pulls data from multiple sources to provide the most accurate recall information on each vehicle.
• Mobile to Desktop: The MAXDigital mobile app now includes two-way communication allowing information to synchronize between the phone and desktop. It also features an improved design and appraisal functionality.
• Group View in Digital Showroom: The inventory of all dealerships within a group can now be viewed in Digital Showroom. By having all inventory in one location, a salesperson can keep a customer from shopping with a competitor if the desired unit isn’t on their lot, but is located at a sister store. New group reporting has been developed to allow side-by-side store performance, so best practices can be duplicated.
MAXDigital provides cloud-based software and mobile applications to the automotive industry. As the industry’s premium end-to-end software solution for automotive dealers, MAXDigital empowers thousands of dealerships across the U.S. to manage inventory, increase gross profits and sell more cars through digital retailing. Founded in 2001 with the FIRSTLOOK inventory management product, the MAXDigital suite of products now includes the innovative MAX Ad®, a content generation and distribution system, MAX for Website®, a vehicle value and content creator for dealer websites, and MAX Digital Showroom®, a real-time inventory and pricing tool for desktop and mobile that builds trust and transparency with customers. For more information visit MAXDigital.com.
Car buyers are becoming more educated in the way they shop. They are more informed about prices, terms, and car values than ever before. So it’s imperative that dealerships keep pace with this knowledge race and learn as much about their customers as their customers know about them.
One dealership in particular that displayed this desire to learn was Rainbow Luxury Imports in Covington, LA. Rainbow acquires higher-end models such as BMW, Infiniti, Lexus, and Audi at auctions and reconditions them before displaying them on the lot. The only thing missing with this business model?
General manager Mark Rose didn’t know how many cars to buy, how much to buy them for, how long to keep them on the lot, or how to price them. All of these metrics are critical influencers of a dealership’s bottom line. And Rose had no proven method of figuring them out.
Rose sought out help from MAXDigital and implemented the FirstLook Inventory Management Platform and the MAXDigital Marketing and Sales Platform to help acquire, price, merchandise and sell vehicles more efficiently and cost effectively. Rose is now able to utilize valuable data to validate prices, create focused advertising and generate vehicle information listings for every step of a buyer’s journey.
“What MAXDigital did for me was to put all the marbles on the top of the table so that I can deal with one champion partner to help me have a holistic look at my business,” Rose said.
Selling Vehicles the MAXDigital Way
Luxury Imports is just one of many dealerships that have benefited from MAXDigital’s suite of solutions. We help dealers everywhere in the four critical areas that make up a successful and profitable dealership:
- Acquire. Acquire and stock your inventory with the right type of cars for your market and perform accurate cost-to-market appraisals.
- Price. Properly price vehicles to remain competitive and profitable while still allowing for discounting.
- Merchandise. Improve the online shopping experience for your customers in a way that will sell the vehicle before the customer ever sets foot on your lot.
- Sell. Improve your Customer Relationship Management to differentiate your vehicles from the competition.
Schedule a free demonstration of MAXDigital’s solutions today and become our next success story.
If you haven’t made plans to attend the 2017 National Automobile Dealers Association (NADA) Convention and Expo, now’s your last chance.
The convention, commemorating the 100th anniversary of NADA, will be held Jan. 26-29 in New Orleans. Among the many attractions at this year’s event will be the keynote speakers. Included in the lineup are:
- Jeff Carlson, NADA Chairman. Carlson is president of Glenwood Springs Ford and Glenwood Springs Subaru in Glenwood Springs, CO, as well as Summit Ford in Silverthorne, CO.
- Jim Gaffigan, comedian. Automotive dealers will no doubt recognize Gaffigan from his hilarious television commercials for the Chrysler Pacifica as well as The Jim Gaffigan Show.
- Mark Fields, President and CEO, Ford Motor Co. In less than three years at the wheel, Fields has driven Ford’s growth and investment in its design, manufacturing, marketing, financing, and servicing while also making a commitment to Ford Smart Mobility
- Mark N. Scarpelli, Incoming NADA Chairman. Scarpelli is president of Raymond Chevrolet/Kia in Antioch, IL, and represents metropolitan Chicago’s franchised new car dealers on its board of directors.
- Amy Purdy, adaptive snowboarder. Purdy overcame the loss of her legs at age 19 along with a 2% chance of survival to become a three-time World Cup Para-Snowboard winner and a 2014 Paralympic bronze medalist.
In addition to the keynote speakers, the following two guests will engage in an intimate conversation with Keith E. Crain, Editor-in-Chief of Automotive News, Autoweek, and Automobilwoche.
- Roger Penske, Chairman, Penske Corp. Anybody in the car business is familiar with Penske Corp. and its retail automotive, truck leasing, transportation logistics, and motorsports success.
- Hélio Castroneves, professional race car driver. A three-time winner of the Indianapolis 500, Castroneves is one of the most accomplished drivers of all time and the face of Team Penske.
Visit MAXDigital at Our Booth for a Chance to Win Prizes
In addition to catching the guest speakers, be sure to swing by the MAXDigital booth where you can fill out a survey for a chance to win a $250 gift card or receive a $100 gift card just for participating in a product demonstration.
We’ll also be giving away framed autographed jerseys of Joe Montana, Dan Marino, and John Elway, and hosting a pop-a-shot tournament with prizes. Visitors can enjoy a drink and watch games on one of 10 televisions in our sports bar.
Come to the expo for the guest speakers. Stay for MAXDigital. We hope to see you there.
Dealerships face a constant struggle to sell in a digital marketplace that continues to grow. The vast majority of consumers research vehicles online before ever stepping foot inside a dealership. On average, they spend 12 hours researching vehicles online, and many times are still researching while in your showroom. This new buying process means it is time to reevaluate and adapt your sales processes to make sure you win over today’s digital consumer. Where to start?
MAXDigital SVP of Strategy and Innovation, Patrick McMullen, will outline how to understand today’s consumer. How do consumers search? How do consumers buy? Can they be separated? Today’s consumers purchase based on a combination of quality and value and consequently want to know they are buying the vehicle at a fair price, but they are not buying based on price alone.
Building trust with your consumers is a crucial step to winning them over and you can only do this by being fully transparent across all information sources.
To hear more from Patrick about how to sell in an increasingly digital marketplace, attend his NADA session:
Thursday, Jan 26
Everything from professional sports teams to retail stores to news organizations are using analytics to gather data, measure performance, and make decisions that will influence their bottom line. Even Netflix uses analytics to determine which movies it will drop into the queue of a given subscriber.
A car dealership shouldn’t be any different. In fact, the nature of a car dealership’s business should place it at the forefront of analytics use. Here are just a few ways that analytics can help your car dealership.
Are You Making the Most of Your Dealership’s Data?
Get a detailed measurement of your online marketing efforts.
Analytics can be used to see a page-by-page breakdown of how your online listings are performing. Which listings are generating the most traffic? What details are online shoppers most interested in? Analytics can answer these questions to help you shape your online marketing efforts accordingly.
Learn which models in your inventory are performing — and which ones aren’t.
Different models sell better in different markets and car dealerships can use analytics to identify which models are moving off their lot and which ones are taking up valuable space. This information can be used to invest in the right kind of inventory for your dealership’s demographic.
Calculate the impact of discounting on your bottom line.
Discounting can help you sell a car, but at what expense to your bottom line? An analytical report can pinpoint which types of discounts are beneficial and which ones are leaving your profit margin in the dust.
Improve your time to market.
The right analytics can track the average time it takes for a vehicle to get online and help dealerships better manage their inventory.
Know your cost per click.
Dealerships can use analytics to find out the average number of Vehicle Details Pages viewed as it correlates to the number of leads generated to help you better understand your true cost per click and how you should allocate your online investments.
Get Analytics from MAXDigital
MAXDigital provides powerful analytics to help car dealerships optimize their online marketing and merchandising efforts to maximize sales and profit margins. Schedule a demonstration today to see how our analytics platform can change the way you do business.
The automotive retail business has changed a lot in recent years. People don’t shop for cars the same way they did a few years ago, and dealerships don’t sell cars the same way (or at least they shouldn’t). Dealers have also changed how they make business decisions, too.
You and your sales managers probably spend a lot of time considering your inventory turnover. You’re looking at annual inventory turn, quarterly, monthly. Maybe even on a smaller timescale than that, and this goes for your new and used vehicle inventory.
And when you look at inventory turnover, you’re comparing it to your bottom line and you’re probably wondering “Does this add up?”
Right now, ask yourself instead: “How should I calculate my inventory turnover ratio?”
How to Find Your Inventory Turnover Ratio
Given that it’s expressed as a ratio, finding your inventory turnover is a matter of doing some basic math. You’re dividing one number into another, the Cost of Goods Sold by your Average Inventory.
Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory
Now you would need to do some additional math to get the values for those variables. To find your Cost of Goods Sold, just add up the total value of all the inventory you moved in the given period.
To find your average inventory, total up the number of cars in your inventory at the beginning of the period and the number of cars in your inventory at the end of the period and divide those by 2.
Cost of Goods Sold = (Beginning Inventory + Ending Inventory) / 2
This is how you can change the timescale for the turnover you’re looking at, be it weekly, monthly, quarterly, and so on.
Some dealers also like to consider their Days Sales of Inventory, or the number of days it takes to sell a given inventory. The formula for that is as follows:
Days Sales of Inventory = (Average Inventory / Cost of Goods Sold) x 365
Days Sales of Inventory = 365 / Inventory Turnover Ratio
If you’re interested in these numbers, as any car dealer should be, it means you’re concerned about how efficient you and your sales managers are at managing your inventory. Are you stocking as many cars as you should be? Are you overstocking?
These are the right questions to be asking, and if you have the right tools, you should come to the right answer even faster.
Inventory Management Is More Efficient with MAXDigital
We use calculators because they’re easy. You can do math in your head no problem, but when you can punch some numbers into a calculator and get the answer instantly, that frees up your brain for more analytical thinking. It’s just a way of reducing friction.
MAXDigital’s Inventory Management Platform does the same thing for your inventory. Sure, you could commit those equations to memory, but you’re better off using that mental real estate for more important details.
Our software does all the calculations for you. We’ll give you inventory turnover ratio in an instant, over whatever period you need. And then we go a step further.
The MAXDigital Inventory Management Platform also offers you sophisticated stocking and appraisal tools so you know what cars to buy and at what price. You can streamline your internal processes, improve your inventory turnover, and maximize your gross profits.
If that’s not enough, we also offer you tracking tools that will help you assess your performance on the group level and by individual store. Our detailed online analytics also keep you on top of that all important digital performance – the key to surviving in today’s auto retail market.
Does this sound like something you want to learn more about? We’re happy to fill you in on all the details. Get in touch with MAXDigital today to schedule a product demonstration about any of our solutions. We’re looking forward to hearing from you.
In the meantime, good luck crunching those numbers.