by Tracey Schelmetic
How Do You Plan for an Unknown Future?
One of an entrepreneur’s most important functions is planning for the future. They predict sales, allocate resources, create budgets, hire the right number of employees, and plan their marketing. Unfortunately, most companies are finding the planning efforts they made last year have had to be scrapped due to the global COVID-19 pandemic. Most organizations are now finding they need to innovate on-the-fly, with little data, few ideas about what the future will hold, as well as no experience in planning for a pandemic. (Unfortunately, a study of the auto industry circa 1918 won’t hold many lessons for today.)
In a recent Dealer News Today podcast interview with Randy Kobat, VP of operations for Cox Automotive’s Inventory Management Solutions, Dave Cantin noted that a high level of agility is required today.
“What we need to really understand…is how to redirect that long-term plan,” said Cantin. “How to stop and understand [that] we need to disengage and re-engage.”
How Do You Strategically Plan with So Many Unknowns?
The big question becomes, how do you plan for the future when you don’t know what the future will look like? Dealers are finding it more challenging than ever to forecast. One major wrench in the works is that it’s unclear what inventory will look like for the rest of the year — and even into next year — both for new and preowned vehicles. One thing is certain, however: it’s not a great idea to have too much of it.
“Dealers are used to having more inventory than needed,” said Cantin. “Today, for the first time in a long time, it’s the exact opposite. So how does a dealer strategically plan long-term today?”
Kobat recommends that dealers shorten the window in which they’re keeping inventory on their lots.
“A 30-day rolling average of sales is about how many pieces of inventory you should have on your lot on the used car side,” he said. “That minimizes the investment the dealer has exposed and allows them to more quickly change as the market changes.”
Additionally, smart dealers are looking for ways to streamline their sales process. This might involve having a single employee as the point of contact for buyers rather than the usual collection of salespeople, managers and F&I personnel. Doing so will put the business in a better position to move and change quickly in response to unknown industry elements.
“They’re really looking at how they can streamline that process, and potentially make it a better consumer experience by only having to deal with one person,” noted Kobat. “Obviously, the other added benefit is perhaps less expense for the dealership. Operational efficiency has really rung out loud and clear as an opportunity.”
A Time to Reinvent and Share Knowledge
Some dealers are taking the time to pause and rethink their business. This allows them to create a better consumer experience that is more operationally efficient, which will make the business nimbler. Kobat said that to do this, companies need more data, and a better way to stratify and apply it as well as share it so they can learn from the experiences of others.
“Having access to better market data is allowing companies to use insight from their partners to help them make better business decisions, and even manage their inventory like they would an investment portfolio,” he said.
In doing so, dealers can better understand the true value of a vehicle the moment they bring it onto their lot.
As the market froze in the spring, the traditional insights and data that dealers were using to make decisions on what vehicles were really worth essentially stopped working. Kobat noted that Cox pivoted to create additional options for dealers to use to be able to assess the true value of vehicles at auction.
What Mistakes Are Being Made?
As online customer interactions grow during the COVID-19 crisis, many dealers may be assuming that things will “go back to normal” after the pandemic wanes.
“[Some] dealers are thinking [digital interactions] might be a fad or a blip,” said Kobat.
What’s clear, however, is that consumers want to transact in more efficient and effective ways, and they like having a full portfolio of digital options. The pandemic has induced forward-thinking dealers to determine ways to continue the trend.
“It’s not a fad,” said Kobat. “It’s here to stay, and it’s only going to grow. We want to make sure we have the opportunity to give our customers the best tools available so we don’t see an entrant like Amazon come in and buy a big dealer group like they did in the grocery market.”
Cantin agreed with Kobat’s assessment of customer preferences.
“There won’t be any return to the old way of operating,” he said. “That would be a huge mistake. Consumers have been begging for decades to take the process and chop it in half. Dealers have had to quickly learn to how to get that done. That’s the new future.”