Dealers Achieve An Industry First for Inventory Efficiency
It’s almost a tired saying these days: We all must learn to do more with less.
But I’d like to point out what amounts to a true-blue, and potentially historic, example of dealers doing more with less as the COVID-19 pandemic disrupted retail automotive.
For the first time in my 40-year career in the car business, and perhaps in the history of the business itself, dealers have collectively proven that you don’t need to stock more inventory to sell more cars. In fact, some dealers went a step further and proved for themselves for the first time that you can stock fewer cars than you sell, and still retail more vehicles.
This achievement has profound implications for dealers who acknowledge what they’ve achieved and do their best to replicate the experience in the weeks and months ahead. I’ll talk more about the implications in a moment. First, however, let’s look at the data behind dealers’ incredible achievement.
After a steep fall in April, dealers saw retail sales of used vehicles climb back in mid-May to 100 percent of the retail sales levels they achieved in mid-May in 2019. By mid-June, retail sales were running 117 percent above their levels in June 2019. Sales have since softened a bit, but as of July 20, retail sales remain 107 percent above year-ago levels.
Given all the headwinds and uncertainty, the retail tailwind has been good for dealers. But here’s what’s even more impressive—dealers achieved these better-than-before sales levels with far less inventory than they would normally (and probably preferably) carry. For example, at the same time retail sales began heating up in May, dealer inventories were running 100 percent of their levels in May 2019. By mid-June, dealer inventories were 88 percent of their levels in mid-June of 2019. As of this week, dealer inventories are 87 percent of where they were this time last year.
We can also view this achievement through the lens of dealer days supply: The first week of April, dealers collectively had an overall inventory days supply of 103 days. By mid-May, the overall inventory days supply average for dealers ran 40 days, and the days supply average has hovered below 35 days ever since. In normal conditions, the dealer days supply of used vehicle inventory would be close to 45 days this time of year.
I should note that I’ve seen numbers like these before, posted by dealers who have always worked hard to maintain their inventory levels at or even below their rolling 30-day total of retail sales. But I have never seen such inventory efficiency writ large, effectively occurring at most, if not all, dealerships across the country.
That, my friends, is an amazing achievement. It means that, for at least the past several weeks, dealers managed their way past and through the perpetual problems of aged inventory, retail net profit losses and sub-optimal profit outcomes that typically follow a stock-more-to-sell-more perspective.
We should all take a moment to acknowledge, if not celebrate, this achievement. It should serve as a reminder to dealers that, intentional or not, you have proven that you can sell more cars with less inventory and, when you do, it means really good things for the bottom of your used vehicle department and dealership.