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Jeremy Wiggell

Jeremy Wiggell Owner

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New metrics for success in velocity used car retailing

In the old days of used car retailing, measuring sales performance was relatively easy. There were a few key performance indicators (KPI's) such as retained profit per unit, average preparation cost, units sold, number of over-age units and a few others. Measuring these at the end of each month told a reasonably accurate story of what sort of job the department was doing.
Measuring key performance indicators in used car velocity 
But, let's face it, many dealers operated like this: they ran for the month, delivered all vehicles and closed all the deals in accounting about a week into the following month and released the finalised management accounts by about the 10th of the following month. By the time the management teams sat together to review all this, it was history and they were already half way through the next month so probably too late to fix anything that they found went wrong last month. Sound familiar?
 
 
 
As with the accounting KPI's above, the sales activity KPI's were once simple as well. Number of up's, phone calls, internet leads, presentations, test drives, writes, deals done and delivered just about covered it all.
 
For dealers practising velocity management principles in their used car retailing today there are new metrics. True velocity management means taking steps to monitor and control a new set of key performance indicators and what's more it is important to monitor these far more frequently than before. Now, everything is much more immediate. The  rate of change is greater  and the old saying" If you don't monitor it you cannot control it" is as true as ever. Fortunately, the technology of today amplifies our ability to measure and control and the best dealers have procedures in place  to do so.
 
 
 
The new metrics for used car velocity
 
 Let's look at what we need to inspect. On top of the traditional measures , below is a list of the new metrics . I am sure there could be others to add so if you wish to contribute to the list please add on with a comment on this blog article. Some will be more important than others but,  be sure, all will be contributory factors to success as a velocity dealer.
 
 
 
Total units in inventory
 
Ageing profile
 
Inventory profile by Age bucket
 
Inventory profile by Price bucket
 
Inventory profile by Vehicle Type bucket
 
Percent of total units on display for sale on lot
 
Percent of total units  priced
 
Percent of total units on internet
 
Percent of total units with pictures
 
Overall `cost-to market` price
 
Overall `price-to-market` retail price
 
Overall Average  Days in Stock
 
Percent Trades in total inventory
 
Percent Purchases in total inventory
 
Overall Average margin ( $ spread)
 
Discount  $ amount (%) on sold units
 
Sales rate units per day/week/month
 
Inventory turn rate
 
Average appraisal value cost-to-market %
 
Appraisal value cost-to-market% by appraiser
 
Average inventory preparation cost
 
Average preparation cost by Price bucket
 
Average days to sell by Price bucket
 
Average days to sell by Vehicle Type
 
Purchase to delivery lead times.
 
SEO results / Google analytics.
 
Search Results Pages shown
 
Vehicle Detail Pages viewed
 
Online leads - OEM website
 
Online leads - Dealer websites
 
Online leads - Social
 
 
 
The above are key measurements that contribute to used sales performance in the current climate. Bear in mind that the rapid rate of change in the market means reporting procedures for these must in place and be readily accessible, easily produced and frequently reviewed. That said, all this needs to be done without taking one's eye off the ball and ensuring the end result of getting the job done is the main focus. The secret is to  allocate responsibilities and accountability and to have daily practices and reporting procedures in place which allow access to this with ease.
 
Too much analysis? Remember, a fighter always gets knocked down by the punch he does not see coming!
 
 
 
And I am sure there are omissions and additions you can think of and  I apologise  to any dealers  who may use different terminology to the above. This post is not meant to be the definitive guide but more a thought-provoker  to assist you with your implementation of velocity principles. That said, a definitve guide would be a useful resource. If you have any additions or other suggestions please email me and I will publish updates later.

 

Should you need any further information or explanation please add a comment or contact the author at www.conceptconvert.com or email info@conceptconvert.com.
 

Dennis Galbraith
Nice post Jeremy. I'd add the average amount of time from vehicle acquisition to online listing and the average amount of time from vehicle acquision to full-merchandised online listing. This metric has a big impact on the Average Days to Sell. I like where you are going with this!
Ed Brooks
Can't forget Market Days Supply!
Jeremy Wiggell
Thanks for the input Dennis and Ed. Dennis, your points are implied in the 'Percent of total units on display for sale on lot' metric but most certainly warrant a separate statistic due to their importance to turn rate. Thanks for pointing that out! There can be some issues in measuring this of course which could be a separate discussion in itself. Thanks Ed for adding the Market Days Supply which is an essential factor to the provisioning process. I will maintain this listing as a guideline for reference.

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