What Happens in Vegas Should Not Stay in Vegas

Special Coverage

NADA Convention & Exposition

Commentary

LAS VEGAS – Smart dealers traveling here this weekend are hoping what happens in Vegas does not stay in Vegas.

Yeah, we know it’s a party town, but when the approximately 15,000 dealers (not including the additional 10,000 related industry professionals) come to Sin City this weekend for the annual National Automobile Dealers Assn. convention, many of them will have work on their minds.

Several dealers are concerned with profitability – and it’s not a stretch to say some are worried they may not survive the next couple of years.

So while there may be some partying and gambling going on, savvy dealers will be more concerned with finding ideas and products to take back to their stores to help them sell more cars.

There will be plenty to find. Used cars and fixed operations are two areas dealers tell Ward’s they are looking at to help offset the declining profitability in new-car sales. As the margins on new-car sales continue to get squeezed – gross profit was down 2.6% in 2006 according to NADA – dealers have to get creative, especially if they’re selling certain domestic and Korean brands.

On the other hand, the average used-car price at the dealership increased 4.4% to $15,508 in 2006, NADA says, as did overall sales and profits from that category.

NADA economist Paul Taylor believes that’s because people are buying better used vehicles today, mostly due to the success of the certified-pre-owned programs.

Profits on used vehicles also are up because of the growing popularity of inventory-management systems.

These systems are fairly new – the first ones, developed by American Auto Exchange and now owned by JM Family Solutions, hit the market nearly two years ago – but there now are about 12 companies offering such tools. They likely will be a hot item here.

Inventory management systems are supposed to take the guesswork out of determining what inventory to stock by analyzing the past sales history of various models. That’s the simple definition. Several of the products offer much more.

Having better control of inventory should allow dealers to increase sales and their margins, while reducing floor plan expenses and the number of vehicles wholesaled.

Most of the products focus on used vehicles and claim to significantly reduce the number of vehicles dealers have to wholesale. Typically, those vehicles tend to be sold at a loss because they’ve sat on the lot too long.

Customer-relationship management will continue to be a hot topic. But this year, instead of all of the focus on sales tools, the conversation will be on how to implement CRM in the service departments, which many experts believe is the one area that can make an immediate impact on dealers.

Dealers also should take a look at some of the advancements made in body-shop management. Nearly 70% of dealers have exited that part of the business in the last 20 years because it was difficult to keep them profitable. But now there are several firms streamlining the body-shop operations and helping dealers turn them into profitable departments.

The point is, this is one of those times – just like the mid-1970s and early 1990s – when dealers have to find avenues other than new-car sales to survive. The dealers who get stronger this year are the ones who won’t let what happens this weekend in Vegas stay in Vegas.

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