Jim Fitzpatrick sat down to talk with Dennis McGinn of Rapid Recon and Jasen Rice of Lotpop at the NADA 2019 Show to discuss inventory management and what you can do to improve your dealership’s process.
VIDEO TRANSCRIPT:
Jim: For the dealers that are out there listening right now to us that are not as familiar with Lotpop as perhaps we are, kind of give us the 101 on Lotpop.
Jasen: Well, you know, what we do is … And it’s more of a strategic, accountability partner. Second set of eyes for dealerships. We do used … Primarily used car inventory management. Also new and internet. Those aren’t as primary as used. I think dealers have more control of used. So, what we do is we pull data out of their systems like a V-Auto or Inventory Plus, and their AutoTraderCars.com. And we put trends to it. And we meet with them every week, go over their data and their trends. But we also go through their inventory, slice and dice it, and find out what cars are causing issues. And actually change prices with you.
We’re meeting with stores every week, week in and week out to make sure that they’re making adjustments each week to get to the numbers. To get them both gross and volume. We can add both. You don’t have to choose one or the other.
It’s a process and we’re helping them stay on top of that.
Jim: So they’ve got a full consultation with you each week.
Jasen: Correct.
We’re just not coming in and telling you, “Hey, here’s the best practices.” We’re actually going to implement them at your store and then stay on top of them with your team. And change prices with you, you know? So our team do thousands of price changes a week, hands on, with stores across the country. They’re one of the most in depth, retail knowledge of what’s going on with individual cars and how the market is moving.
Jim: And it’s so sophisticated out there today that dealers need that, don’t they? I mean, to try to navigate it themselves is a very difficult task, isn’t it?
Jasen: Yeah, I mean sites like Cars.com have a great back end tool with all these reportings, but a lot of the dealers don’t have time and understanding how to read all that stuff.
So when we can combine those data points and know that if something is wrong, we know the fives reasons that’s causing that, and we’ve got the data to show those trends, and then we can help and guide them to straighten them back out this week. But a lot of times, as we get dealers’ volume stuff going, and that’s why I’m here with Dennis … We can get dealerships’ inventory cleaned up and moving, but then the next challenge is keep feeding the beast and turn around time. That’s our crutch. I can’t help a store on that. It’s the leg work. That’s stuff that happens at the store. We can get the dealers cleaned up and more profitable, but that’s the other process. That’s the missing link is that whole turn around time.
Jim: All right, so Dennis, let’s talk about that for a minute. When he gets it to the point where you’ve got the vehicles, you’ve got the marketing, you’ve got the pricing, but now we’re having a hard time getting through Recon. So that’s where your company comes in right? And you guys are leaders in that. So talk to us about that.
Dennis: So, our job is to help them organize the flow of work. So they know where everything is all the time. They know what the numbers really are. So they can’t fake it. And we get all the people using the system comfortable with pushing their button, saying, “Okay, I know what I’m supposed to be doing and I’m done now. And I’ll push my button on my phone and everybody knows. I’m not holding anybody up. Nobody is going to point a finger at me.” And things always work better. So, really lubricates the whole thing. But that’s just the starting point. In the thousands of situations I’ve been able to get involved in, and put systems up for dealers, and groups, and so on, the general managers want all this to work. But, they don’t have the … There’s a lot of noise. They have so many things to deal with. They need ongoing help to continue to train, retrain people who think about it.
It’d be nice if you could do that nice and everybody would get it. And they’d always push the button. But there’s so much reactivity in dealerships. They have kind of been reacting for son long and the best thing for them is to be proactive. It’s easy to talk about. But, we have to help them do that. People like Lotpop, that’s what they do. They come in and they hold their hand. And they pay for that. The dealers pay for it, which is part of the value proposition. If they pay for it, they tell their people, “Hey, this is really important. I’m willing to pay for it.”
And, so, we’re going to make a commitment to his, even if it takes us months and months, maybe a couple of years to get it right. And then, something is always going to go wrong. But, if you don’t know where you are, you don’t know what to do about it.
The idea is, let’s figure out where we are and then let’s watch it. And get better every week. Let’s figure out what we’re doing well, what we’re not doing well, and continue to improve that process. Just like [inaudible 00:04:29]. Just like Toyota did back, post World War II. It’s the same exact kind of thing. We’re applying that to a dealered environment now.
Jim: And now dealers need that more than ever. They’ve got to run an efficient dealership. They can no longer have the luxury of just going, “Hey, when the cars get done they’ll come out.” And meanwhile you’re already 22 days into the age of that vehicle. And you’re in hot water, already.
Dennis: Yes. And, after five million cars and all the processing, if you don’t have this, if you don’t have a workflow system, if you don’t have time to line organize, and you’ve got about three to four hundred dollars profit per car that is just not getting done, because you’re getting out past that 21, magic 21 days from the day you own the car.
It’s simple math.
Jasen: And while we’re helping dealers, our best performing stores, and I’ve seen it for over a decade … The best performing stores will sell 60-70% of their sales in the first 30 days. We all know that’s where the gross is
But, in order to do 60-70% of your sales in those first 30 days, you can’t have them all come on your 15-30 day old cars. They’ve got to come from five, 10, 15, 20 day old cars. So, if it takes 14, 21 days to get through, you’re cutting that off. Again, that’s where most dealers are struggling. They don’t get to that kind of level. And again, we can clean a dealership up, get the aged gone, but until they’re there …
Jim: So, do you see that from your perspective when you go into a dealer group and they say, “Tell us what we’re doing wrong here.” I mean, you’re readjusting the prices on a weekly basis and working with those management teams. So you must recognize, “Hey, we’ve got a whole bunch of cars here that are stuck and we’ve got to get them out.”
Jasen: Exactly. We’re looking at what we call “lot ready.” I’m looking at cars that you have on your inventory. But how many are fully photoed, ready for sale? I don’t even give them that. A lot no photo reports will include cars that … if they had three or five temporary photos, it’s not on their radar because it has photos. So, we only count them if it’s 10 or more photos. And we’re tracking and trending that out. If you don’t have 80-90% of those cars there, it’s killing your SRPs, your VDPs, the searches. And you’re paying tens of thousands to AutoTrader, Cars.com, Car Gurus, and not getting all your bang for the buck, ’cause 20-30% of your inventory is missing. And at the prime of the most gross profit.
It’s crucial. An example I give is, we’re like a dietician. We can clean you up and make you look slim, but you might not be able to run a mile or do 10 push ups because you haven’t worked out your muscles. And that’s where turn around time comes in. That’s where you become a beast in the market. Where you can do strength and cardiovascular. Those are the big guys. Those are the guys that are going to be profitable here and in the future.
Jim: Sure. I know that your company has had some huge success stories. Share some of those with us where you’ve gone into a dealer group and found just a … I want to say a disaster but it’s probably the average scenario out there among dealer groups. And how you’ve shortened that time to be lot ready.
Dennis: Yeah sure. So, for instance, one example. We work with Pansky. They are central region stores. I can’t go into any detail because I don’t want Roger mad at me. But, the fact is, they have some really high producing Toyota stores. We went into one about 18 months ago. They were at 12 days, average.
Just in recon. Just the days in recon. We’ve worked it down now and they’re under three now.
Right under three days. So, every two days, or two and a half days, another turn. So, that’s a lot of money.
That’s huge.
And they’re selling 170 or 80 used cars a month.
Oh my gosh.
It’s a big number. You’re talking about millions now. What the impact of that … Once the word gets around in a group, they don’t … No general manager wants to be the guy that’s not pulling the weight.
Especially when it’s Roger’s money or whatever. You want to make sure that you’re on top of that. So, we’ve had a lot of success with that, with groups where it isn’t just the store trying to fix their own problem. It’s the group people saying, “well, if we could get some consistency across our stores we could make major improvement.” And the best motivation for these people is peer group pressure brought on by other peers.
Jim: Wow. I would imagine that’s a game changer for most dealer groups. Where they’re all calling each other out and holding them accountable.
Dennis: It helps everybody. We come in and provide the ways that the individuals get away from the finger pointing, and stress of not knowing what’s going on. And then, it kind of rolls up. The store does better, the groups do better. Everybody has more money. And the margin compression that you talked about, it’s not going away.
Jasen: And I think, to give some other guys hope that’s not a Pinsky. Even if you are at a 15 day turn around time, if you just cut off two days, down to 13 days … heaven forbid 13 days is bad. But, that’s two days a month, times 12. It’s 24 selling days. You just got an extra month of selling for your year.
Just even going from 15 to 13.
Jim: When you go into a store, what do you see as the biggest factor that’s preventing dealers from getting cars out quicker?
Dennis: They’re so used to just wanting to hear good news before they go to the 20 group meeting.
Well, we got by that now. There is … They don’t want to be embarrassed. Now, they have real numbers. The biggest issue is, where are we really and do all my people know? And do they agree? And then, what are we going to do about it?
Jim: So you’re saying the transparency starts here rather than out on the pricing. There’s got to be transparency in this process. That says, “here are the problems. Let’s fix it right now.”
Jasen: But I think too, controlling what you can control. Another big issue I see is a lot of dealerships’ transportation. It took seven, or ten days. Or four days to get it transported. So, it’s even more important then to have at the store … Control … You can’t control the weather, or the transportation company. But, once it hits your lot, you have total control. If transportation is the problem, fix it internally once it gets there. And slice that down.
Jim: It seems such an easy … I mean, obviously with your platform that you offer, it seems like such an easy fix, right? And we’ve talked about it before. Your fee is … I often kid that it’s less than a bar tab for many dealers. At the end of the day … I can say that ’cause I was one. But, at the end of the day it’s like, “are you kidding me?” To shave off, whether it be two days, or 12 days, off my used cars, is incredible. It’s a no brainer.
Dennis: It helps everybody. Everybody loses when it takes too long. Everybody wins from the customer, all the way through when it wins. And, you know, people say … I had a group come up to me today at our booth and say, “Tell me how many dealers you have that are under three days.” I mean, I talk about three days. They said, “I want to know.” And so I said, “Well, 20% maybe today. Next week … ” They’re always trying to get to that number.
It’s a constant. It’s a constant thing. But, the only way to win the margin compression battle is to continue to get that number down.
This is a fun thing. Is it possible to sell 100 cars a month and only stock 50? Some do. 24 turns, yes. Yes. But, you have to know immediately when you get those cars, “Did we make the right decision?”
Then you can move down that track.
Jim: That’s right. That’s exactly right. Do you find … Let me ask you this question. Looking at the used car operation of dealers, what do you think is the greatest challenge for dealers moving into 2019?
Jasen: I think appraisals is going to be one of those big traits because new cars go down a bit, you’re going to have less access to those trade ins. Customers have a ton of other options. Carvanas and other places. Carmax is offering to buy their trades automatically.
Yeah, that’s true.
Downloading. People sell them online. I’ve got the background, but every car I’ve had I’ve sold myself type thing. But I had the access to, because of the internet. Trades, I think, are going to be the biggest thing that I think dealers are going to need to focus on. And streamlining that whole process. Along with recon. And then CPO I think is a big benefit too. If new car sales … you guys know the headlines better than we do at the news, but I believe the projected 10% slow down … you’ve got to make it up somewhere. You’ve got to try to get the trades with certifieds. It’s a a great alternative, plus it drives service money. And repeat customers, all that. All the other added benefits of it.
And certified is a program that you have to have all buy in. You can’t just try it. “Well, we’ll try it.” ‘Cause when you do that it won’t work. Just like leasing and everything else. You’ve got to get bought in, sold. You’re able to sell that benefit to the customer. You’re able to justify the cost. And I think those two areas you’re going to have to focus on. But again, ti all comes back to that margin pressure. Control what you can control. Appraisals you can. You can’t control how many show up that day, but you can figure out … Get that process right. Who’s doing it right or wrong? And then fix that week in and week out. And then get the buy in on the CPO. I think that’s going to …
Jim: Should dealers be buying cars off the road from consumers in your opinion?
Jasen: Oh yeah. Definitely.
Jim: So if there’s any dealers out there that are not doing that right now, they need to look at that. Right?
Jasen: Definitely. Again, trades are easier to sell. Better gross profit. Less likely the agent. Got a story behind it. Than just that rental car. And I don’t have the transportation problems. I don’t typically have the other problems when buying a car from the auction. A good, nice car at the lane is there for a reason, probably. You know, there’s … A dealer had a problem with it. Or it’s an influx of cars like Enterprise or somebody dumping them in there. When they’re that high and they’re easy to get there’s a reason why. Dealers end up … If they’re not turning them fast, they’re going to get burnt.
Jim: You work with a lot of dealers nation wide. What are some of the things that kind of keep you up at night about the industry in 2019?
Dennis: The thing that keeps me up at night is across the whole spectrum of dealers. Not just the US, but in Canada. We have a lot of stuff in Canada. We’re in Australia now. Things like that. They all have too many cars. They have many more cars than they need to sell what they want to sell. And they just don’t know it. You know, I’m a technology guy. [inaudible 00:15:45] You know, it’s measure and manage. Measure and manage. Measure and manage. And … We’re still … there’s still a long ways to go in this particular industry, to pick up that model of continuous improvement of your process.
Get it down, figure it out. Establish a baseline. And then you … Every weak you take a look at what you did. What did I do last week? What was my time to line last week? Every Tuesday I want to know. And what was working and what wasn’t? Show me.
Jim: And that’s what your platform does right?
Dennis: It does. It does, exactly. It isolates reconditioning. It shows you where your bottlenecks are. Who’s using the system right, who’s not.
And it looks at the time to line, which includes all the time before that.
That it takes you to get the car into reconditioning. Time to line is basically a measure of return on investive capital and inventory.
That’s how ell you’re using your money.
Jim: That’s exactly right. Much more efficient. Much quicker to, as you said, time to lot. And as a efficiency for the managers, to hold them accountable, and to be transparent. So everybody is in this thing together. Right? That’s a huge factor that you bring to the store.
Dennis: Yeah, it’s kind of … There are a lot of sports analogies on this today, right? Football team. Who’s in charge? Well, are we all shooting for the same play? That kind of thing. And so there are a lot of things that you can bring into this that people really understand. But, if you don’t have organization, if you don’t have an understanding of where you are, the metrics tell you where you are and where do we want to go? You’re not going to win games.
That’s right. That’s right. Very good point.
Jasen: You can’t get healthier and lose weight without getting on the scale and knowing where you’re at. So, if you’re a manager or gm and you’re yelling at your [inaudible 00:17:39] or your sales department because things aren’t getting done, but you can’t back it up and show it to them. Hey, we’re here and we need to get here. But, if you can validate and show them those numbers, it’s easier to educate them and get them better. Everybody wants to get better, right? But, if you’re just arbitrarily yelling at them and assuming things aren’t working out, they’re going to fight back.
Jim: It really does. Well, Jason Rice from Lotpop, and Dennis McGinn from Rapid Recon. I want to thank you so much for joining us on CBT News. Hopefully we can have you back again in a couple of months. First quarter and see how things are going.
Dennis: Thank you Jim. I love the opportunity to spend some time with you. You really know this industry.
Jim: We’d love to get you into the study. So maybe next time we’ll do that in Atlanta. That’d be great. Thanks so much.
