How to… Improve stock management

In this article: Six tips to keep your business moving and stop stock sitting on your forecourt

Managing your used car stock correctly so they spend the minimum amount of time in your possession is the best route to a good profit.

To get the best advice on improving your stock management, Motor Pro has spoken to a host of experts to provide six tips which you can put into action today to boost your bottom line.

1. Buy the right stock to start with

Stock management is 80% about picking the right cars in the first place and 20% is everything else, claims Auto Trader’s Chris Penny.

“If you go back five, 10 or 20 years, buying used car stock was an art form. In the past two to three years, that has changed thanks to the data that’s available which means you can buy using science.

“Dealers don’t need to stock what everyone else selling, they just need to stock cars that people are going to buy in their area,” said Penny.

Get the right cars and they will sell much days quicker which equals more profit. The UK average days to sale is 48, according to Penny. “The UK average stock turn is 8 times a year, the upper quartile of retailers is 12 times and we know the best are looking at 16 times, although this is for the largest, most efficient dealers.”

2. Cast a wide net

Finding the right stock is the next challenge. Many used car dealers go to the same local auctions over and over to buy their stock. This invariably means at some point you won’t buy the right car.

Technology is the solution here. Use the online buying systems from the auction firms so you can shop nationally and then have the cars shipped to your site; something that’s been made easier in recent years thanks to falling transport costs.

Online buying can be done from your phone too. The BCA Buyer app means “users can search for and track vehicles with real time running orders and notifications and view all the vehicles they want to bid on in one screen”, according to BCA’s Dene Jones.

3. Appraise cars correctly

As sourcing good quality stock becomes ever more competitive, identifying and retaining those retail quality part-exchange cars is essential, according to BCA’s Stuart Pearson.

Use the systems and software that’s already available to guarantee consistency.

4. Price correctly

Pricing is one of the most contentious areas of stock management because it’s a balancing act between low margin higher turnover and higher margin and slower stock-turn.

The best pricing strategy is the one where you deliver your stocking targets while maintaining a desired profit margin, according to Glass’s Anthony Machin.

“This is where using data is incredibly helpful. If dealers buy stock at the right price through auction or through trade in, then price it at a point that delivers their stock turnover target they will make the desired profit margins,” said Machin.

5. Think digital to find new customers

Customer engagement is often something that falls to the wayside in preference to advertising as cheaply as possible, according to Cazana’s Rupert Pontin.

“These days with the explosion in social media there are many more ways to find new customers and these methods can be very cost effective.

“Do the research and see what the likes of Facebook, LinkedIn, Instagram and others can do for you. Consider taking advice from digital marketing experts who can often help you rejuvenate your customer reach.”

6. Control over-age vehicles

Always keep an eye on vehicles that are getting toward being over-age.  A vehicle walkaround is crucial, according to Cap HPI’s Mark Bulmer.

“There are lots of reasons a car isn’t selling such as condition or position on the forecourt. Most forecourts have a ‘hotspot’ and a sales manager will know where that is. The usual thing to do is put your best car there, but actually the best car will probably sell no-problem, so how about putting the harder to sell cars in that spot?”

He adds: “Don’t penalise sales staff for selling overage stock. Often you find that overage stock has a smaller margin, so sales staff will put less effort in to selling them.”