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Successful dealers rely on vehicle inventory best practices to succeed in a highly competitive market. They maximize profitability by implementing strategies that improve inventory management, such as keeping an accurate record of available vehicles and knowing what vehicles arrive in upcoming shipments.
However, what were straightforward strategies in years past have evolved and become increasingly complex in today’s post-pandemic world. Consumers have become accustomed to remote business dealings, inventories are running low, and demand is harder to anticipate.
Dealerships are now adopting new, digitally-driven vehicle inventory best practices to address these advanced challenges and meet customer demand. This article outlines four of those strategies.
4 Vehicle Inventory Best Practices
Dealerships should consider adopting the following four best practices when looking to optimize inventory revenue in the current market environment:
1. Conduct a Comprehensive Inventory Analysis
Improving vehicle inventory management starts with understanding what inventory sits on the lot. Accurately capturing this data requires a comprehensive analysis to collect the information necessary to make knowledgeable and profitable decisions.
Dealers should consider conducting these regular inventory analyses with inventory management software and evaluate every lot vehicle, including incoming deliveries and vehicles scheduled for disposal.
By the end of this review, dealers should be able to understand and identify the following critical data points for the vehicles in inventory:
- Pricing factors
- Purchase and sale times
- Acquisition and disposal times
- Turnover frequency
2. Optimize the Pre-Owned Vehicle Inventory
High pre-owned prices in 2021 prompted some dealerships to unload more vehicles at auction than in prior years. However, declining sales and inventory shortages forced dealers to reconsider that method and retain older models.
This new strategy, combined with growing consumer demand for pre-owned vehicles and lower overhead than in an auction process, becomes valuable to dealers who can accurately identify which trades pose ideal reconditioning and retail sale opportunities.
However, dealers must consider several factors when determining which vehicles to retain. Those factors include (but are not limited to):
- Accident history
- Evolving consumer purchasing behaviors
3. Identify the Critical Data Points
While dealerships must remain adaptable in today’s volatile environment, they should not get caught reacting to the market. Instead, they might consider leveraging data from regular inventory evaluations to plan future buying and selling strategies.
The information available for review is extensive, so identifying and focusing on the relevant data is not always straightforward. However, a proactive dealer strategy might always consider using the following:
- Comparable quotes in the local market
- The average cost of sale
- Gross profit
- Average turnover time
- Seasonal patterns
- Proper valuation and appraisal methods
- Vehicle age
4. Make Data-Driven Inventory Decisions
Innovative dealers can then use the above-referenced information to adopt data-driven strategies to predict reconditioning costs and market demand (i.e., behavior prediction) more accurately, helping maximize pre-owned inventory profitability.
Behavior prediction technology serves two critical purposes:
- It allows dealers to track and reach out to in-demand vehicle make and model owners.
- It empowers dealers to anticipate demand and proactively connect potential buyers to their inventory, minimizing how long vehicles remain on the lot and maximizing inventory turnover and profitability.
Dealers should ensure that salespeople regularly analyze this customer data to identify localized trends and market demand. This process should include identifying makes and models that have sold consistently well over the previous 30-90 days and which vehicles have been on the lot the longest.
Make Sure the Right Customers Find Your New Inventory
Properly following a list of vehicle inventory best practices can make or break a dealership. Your inventory is by far your most valuable asset, and you must protect and nurture that asset in the right direction via practical data analyses and optimization strategies.
However, collecting the correct data and designing effective strategies alone will not fully maximize inventory profitability. You also need the appropriate customers – those looking to buy what you have – to discover your dealership, which requires the right marketing software.
Contact us today and discover how Affinitiv’s Audience Activator can help you generate high-quality leads by matching potential buyers to your specific inventory based on user searches.
All | September 19, 2023