Competition in the automotive industry is at an all time high, so dealerships have to find ways to boost profitability, in order to ensure long-term success. They face several challenges from fluctuating market conditions to rising costs and changing customer expectations. However, a common hurdle is how to protect profit margins while switching suppliers.
What is dealer profitability?
Profitability is essentially the ability of a dealership to generate profits from its operations. It is the measure of financial success that determines the viability of a dealership. It drives growth, attracts buyers, and guarantees sustainability, or else a business won’t be able to survive in today’s competitive landscape. Dealer profitability is the lifeblood of any dealership. It enables dealers to invest in top-quality inventory, hire and retain skilled staff, provide excellent customer service, and expand their business. Maintaining profits means a business can also weather economic setbacks (common while changing suppliers), while investing in new technologies and marketing efforts.
How to protect profit margins while switching suppliers?
Be smart about how much you pay for inventory
This is where it gets tricky, because if you overpay, the potential for profit sinks, but offer too little, and you send the trade somewhere else. Inventory management software can help figure out exactly how much you should shell out for vehicles and parts. But market prices are aggregate and don’t include every detail about what makes one piece of inventory more valuable than another. Balance supply and demand, and you can increase inventory turnover, while reducing carrying costs. Analyzing market trends and customer preferences can help optimize inventory levels and ensure an adequate supply of vehicles that sell quickly.
Consider original factory window sticker data. Which features and packages are included on a particular vehicle? Does it have upgraded technology? Nowadays, it is possible to access window sticker data using the right software. Thus, managers can calculate offers quickly and confidently so that you can obtain more vehicles and parts at the right price, setting you up to make a healthy margin.
Implement effective sales techniques
A structured sales process is necessary to guide the sales team through every step, starting from the initial greeting to the point when the buyer drives off with the vehicle from the lot. This ensures consistency and professionalism in the sales approach, while also providing a framework for sales representatives to follow. Consistent training can refine sales methods and boost conversions. Keep up with latest trends and developments in the automotive industry. Even if you switch suppliers, staying informed about new technologies, safety features, and industry advancements, ensures your vehicle sales don’t fall short.
Push for upselling and cross-selling
Switching suppliers will definitely have an initial impact on sales, but upselling and cross-selling techniques can significantly improve the average transaction value, thus protecting profit margins. Sales staff have to be trained to identify opportunities to upsell accessories, extended warranties, and service packages. Apart from upselling, cross-selling works wonders too. Based on the customer’s purchase, additional products or services can be recommended. For example, sales personnel can suggest a package that includes regular maintenance and inspections so vehicles can be in prime condition for longer, while generating more revenue for the dealership. Focus on providing value and meeting the customer’s requirements, which helps in creating a positive buying experience and building a long-term rapport.
It is important to keep driving sales, no matter what, because that is what ultimately helps to keep an auto dealership afloat. Leverage technologies such as Modera’s Dealer Sales & CRM software, which facilitates automated inventory management to reduce manual errors and optimize stock levels. Understanding the dynamics of dealer profitability ensures that dealerships can thrive even if they change suppliers.
