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From: Jared Hamilton
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Len Critcher

Len Critcher President & CEO

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Taking Control of your Merchandising: The TRUE Cost of Outsourcing

I often speak to groups about the importance of owning the merchandising process.   It amazes me that in this increasingly competitive environment, dealers still feel they cannot take their own pictures, write descriptions, and properly list all non-standard options and features.  Why are so many determined to drag their feet to change?

I think we can all agree that the primary function in your dealership is still the acquisition and disposition of inventory.  You must master this process.  Can you imagine a manager of a Neiman Marcus waiting for days for some outside individual to show up to re-fold the sweaters and hang the sale tags?  Really?  Of course not, they will delegate this critical function to internal staff.  Merchandising for them is everything – why isn’t it for you?

Our most successful dealers embrace the "do-it-yourself process".  They know the importance of quality photography, time to market, great pricing and more.  They monitor their inventory health daily and embrace good merchandising technology and process.

Some of you are still not with me.  You say it’s too hard.  You can’t manage your staff.  Your staff is too lazy, etc…   Let’s simply look at the true cost of using an outside firm.   Here are the results of an internal study performed by staff at eCarList on the TRUE cost of outsourcing.  Could a negative affect on your bottom line change your mind?

We looked at 20 dealerships with similar sized/style inventory.  All dealerships use eCarList for inventory management, syndication, and websites.   10 take photos in-house and manage the merchandising process internally.  The other 10 use a myriad of “lot service” companies.  We monitored photography, time to market, and sales turn for each dealership over 90 days.  Here is what we found:

In-House Merchandising on average:

  • Decreased “time to market” by 4.2 days
  • Decreased “days in stock” by 10.7 days
  • Increased average monthly turn rate by 25%
  • Increased average monthly profit by $24,000
    (based on average gross profit assumptions of $2,000)

On average, the “do-it-yourselfers” will make an additional $288,000 per year.  What does another "porter" cost to employ?  Do the math and get on board.  Can you really afford not to?

Marc McGurren
Very interesting article Len. As we move forward with our own "in-house" process I will be curious to see how our stats compare to your study. This is something we have been pushing towards for quite sometime and will be getting it kicked off here in the first of March! Here's to looking at quicker turns, less days in stock, and in turn greater profits!
Brian Pasch
Len Great data and thank you for sharing. Speed to market and quality of photography make a difference. Can you tell me if the quality of the in-house was better than the outsourced? Meaning, did the in-house dealers setup a better photo booth, better showcasing the cars?
Len Critcher
@Brian Our experience has shown that any dealership choosing to "own" their online merchandising process will produce better photography and has an overall better internal process for online marketing. Simple correlation – the dealer cares to be better, it shows. However, more than just the quality of photography, the number of photos matter as well. Third party "lot service" providers generally will not take the number of photos that is now argued to be necessary these days for effective online marketing. Our most successful online retailers are consistently taking anywhere from 30-60 photos per vehicle. An eBay Motors study in years past showed that 40+ photos impacts performance. I think we should continue the research and look at how the number of photos correlates directly to leads and turn rate. I believe dealerships will be surprised at how important this really is.
Brian Pasch
Great point about the number of photos. So dealers who are passionate about quality and quantity will win.
Brian Pasch
Maybe you could say "Paschonate"

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