Access: Velocity Wrap-Up: Dealer Take-Aways For The Not-So-Distant Future

October 16, 2014

We’re still getting feedback from last week’s Access: Velocity conference here in Chicago. So far, the vast majority of dealer attendees consider the two days spent here as well worth the effort and expense.

We also gained insights to make the next Access: Velocity event even better—with a particular emphasis on the real-life dealer-led workshops that address current management challenges for all dealers.

Not surprisingly, as I think ahead to the next event, I’m reminded of some of the insights I gleaned from the final-half day of this year’s Access: Velocity:

Retail margin coAccessVelocitympression. Dealer presenters Dan Hodges and Joe Humphrey of the Scott-McRae Automotive Group detailed their top-to-bottom efforts to deconstruct their traditional dealership structure to address a problem all dealers confront—declining margins. “We had to push cost out of the system, given the margins we found ourselves operating with,” Hodges says.

The deconstruction, which began in January of this year, included elimination of store GMs, new/used vehicle managers, F&I directors and separate Internet departments. The new structure now features centralized corporate management, with two vice presidents focused on fixed and variable operations, working directly with team leads in individual stores, and a centralized inventory acquisition team and business development center. The new structure also compensates corporate and in-store personnel on meeting volume targets at each location.

Hodges says the structure and compensation allow the execution of consistent processes across the platform, and emphasizes ongoing mentoring/training to create the same experience for customers, no matter the location. Rather than focusing on maximizing gross profit on a per-deal basis, employees in the dealership “are totally focused on how much business can I do today. The team leaders are focused on coaching and efficiencies.”

Humphrey shared how the centralized inventory acquisition team helps each store meet its goals by acquiring and distributing used vehicle inventory where it makes the most sense, based on current market data and recent sales trends. As stores sell more, they get more cars. “We’re trying to maximize our gross profits and inventory turns,” Humphrey says.

Perhaps most striking, the team has essentially eliminated auctions as it sources used vehicles, acquiring less than 15 percent of its inventory from these traditional wholesale outlets. “We’re buying from RV parks, estate sales and probate courts,” Humphrey says. “We’re trying to buy where no one else is buying.”

The results of this transformation are impressive—a 32 percent increase in used vehicle volume, a 33 percent increase in used vehicle gross profit and a 5 percent increase in “net to gross” for the four-store platform.

Sales process optimization. Panel facilitator John Malishenko of the Germain Auto Group asked a really sharp question to leaders of Cox Automotive’s business units. He wanted to know what three things the executives would do if they were given the keys to a dealership. I thought president Jared Rowe offered a good answer.

In addition to ensuring a consistent messaging across all channels and integrating sales/service to seed customer loyalty, Rowe said he would “attack the time it takes to sell a car.” He correctly noted that the industry average of 2.5-plus hours to complete a transaction is a top source of customer dissatisfaction.

I also thought Duncan Scarry, founder of Haystak Digital, made a good point about optimizing the typical sales process. In today’s market, customers only visit one, maybe two, dealerships after they’ve done their online shopping and research. He shared a comment he heard from a dealer friend, “The only reason we don’t sell a car to a customer is because we got in their way.”

This year’s Access: Velocity raised $250,000 to aid the Foundation Fighting Blindness, an achievement that makes me humble and proud. It also provides inspiration and motivation to make sure the next Access: Velocity event is even better and more impactful. We certainly have much work to do to achieve this objective.

Thank you to all who participated this year’s Access: Velocity and helped fulfill its mission to deliver unprecedented access and insights for top-performing Velocity dealers.