Issue link: https://read.dmtmag.com/i/437570
www.PowersportsBusiness.com SOLUTIONS Powersports Business • December 29, 2014 • 27 Every dealer should know by now that pre-owned units sales are supposed to be more profitable than new unit sales. But, is that really true? Let's look at the current averages for metric deal- ers from Gart Sutton & Associates dealer 20-group data system: Overall, total all-products new unit sales aver- aged 12.6 percent, while pre-owned averaged 20.4 percent gross profit margin. As one of my Southern California dealer friends put it when I showed him the number: "Dude, that's pretty major." If you are not "IN" the pre-owned business — if you are not selling at least one pre-owned to every two new units — a light bulb should have just gone off. To drive the point home, here are five rea- sons why you need to be "IN" the pre-owned business, along with some "How-to" hints: 1. PRE-OWNED PRODUCTS OFFER YOU A HIGHER GROSS PROFIT POTENTIAL THAN NEW UNITS. You have control over the gross profit margins. Rule No. 1: Buy low and sell high — if you can't make a good profit, don't do the deal. Since every pre-owned unit is unique in some way, pricing is seldom influenced by competition from other dealers. Using the term pre-owned establishes a higher perception of value for the customer. HOW TO: You have to establish a fixed mar- gin you expect to get for pre-owned units. When you have the opportunity to buy or trade-in a used unit, follow this formula: Local market value (your selling price) minus your fixed margin and any reconditioning costs equals your trade value or purchase price — generally referred to as Actual Cash Value (ACV). If you ever over-allow on a trade, the over-allowance is treated as a discount off the new unit — that is what you actually did. The pre-owned margin should not change. 2. PRE-OWNED PRODUCTS HELP YOU INCREASE THE VOLUME OF YOUR NEW UNIT SALES. Offering to take trade-ins increases your sales of new units. Pre-owned inventory attracts additional customers. Some of these will convert into new motorcycle purchasers. If you treat them right, pre-owned pur- chasers often trade-up to new units later. HOW TO: You have to let people know you are in the pre-owned business and get your dealership staff on board. Advertise the fact that you take trades and buy units outright. Have signs in your store windows and in your showroom that mention this as well. You need to create a store culture that believes in the pre-owned business. Your entire team has to treat it as an important and highly profitable part of your business. 3. STOCKING PRE-OWNED UNITS INCREASES YOUR FLOOR TRAFFIC. Pre-owned inventory creates addi- tional price points that help you attract new customers. Pre-owned inventory provides you with an expanded model selection that opens new markets to your business. HOW TO: Treat pre-owned units the same way you do your new units. Create quality displays featuring popular units and incorporating appropriate clothing and accessories. Mix pre-owned in with new units to stimulate interest and provide options for cus- tomers suffering "sticker shock." 4. SELLING PRE-OWNED UNITS INCREASES YOUR SALES OF F&I PRODUCTS. Pre-owned customers buy your F&I products, just like new unit buyers. Extended protection programs are gener- ally easier to sell to pre-owned customers. HOW TO: Create programs that drive F&I product sales. Include an in-house extended protection contract with selected pre-owned to justify a higher retail price. Consider developing your own "Certi- fied" pre-owned program that includes various F&I products. 5. SELLING PRE-OWNED UNITS INCREASES YOUR PARTS AND SERVICE SALES. Reconditioning pre-owned units gener- ates additional business for your parts and service departments. Pre-owned product purchasers often become good, long-term service customers. HOW TO: Pre-owned product customers fre- quently purchase add-on accessories. Remove any accessories from pre-owned units that might narrow the buyer market. You want a fairly stock unit the customer can cus- tomize to fit their needs and wants. "Stripped" models might benefit from being packaged with accessories that are highly popular in your market area. Get in the pre-owned business, and you will increase your sales and profits in all depart- ments. What's stopping you? PSB Steve Jones is senior projects manager at Gart Sutton & Associates. He has worked in the power- sports industry for more than 30 years, for dealer- ships and manufacturers, and as a consultant and trainer. Contact him at steve@gartsutton.com. Five reasons why you should sell pre-owned STEVE JONES RETAIL REMEDIES Count of Parts Counter Invoices: 287,792 Number of Dealers: 1,254 States represented: 50 Total Cash Sales: $29,587,234.46 No estimating here. This is the real deal. And it was clean. I checked my math, several times. Backed up and went at it from a totally different angle, and came in with the same answers. This is solid, folks. V-twin is up a touch for Friday only (Chart C), and down about three points for the weekend (Chart D). Metric is up 20 percent for Friday (Chart A), and up 18 percent for the weekend (Chart B). That's the facts. Now that we know where this comes from, what does it mean? Years of researching motorcycle data has proven time and time again that the V-twin market is a different animal from the metric side. Metric was late coming to the Black Friday game, and is still growing that unique market segment, while V-twin has been there for years. Perhaps what we are seeing here is a mature market compared to a growing one. However, the drop in three of the six regions of the country for V-twin (Northeast, North- west and West) is disconcerting and should by looked at closely by those dealers. Metric did have one region — the Northwest — that declined in 2014, but all other regions showed substantial increases. Ritholtz points out that accurate, reliable numbers for Black Friday will not be avail- able until the credit card companies report the full December sales sometime in early January. But for us, it really doesn't matter. We are what we are, and this sample of 1,254 dealers in all 50 states is a reliable measure of what happened in our stores on the Black Friday weekend. Metric folks, enjoy your success. V-twin? Time to take a look and see if you aren't resting on your laurels. Yes, there is frenzy here, but these unique shoppers still want to be coaxed and coddled. Nothing comes easy. Black Friday is not a gimme. In the V-twin space, there is obvi- ously work to be done. And these numbers show it. PSB Hal Ethington has been associated with the powersports industry for more than 40 years. Ethington is a senior analyst at CDK Global Recreation. Contact him at Harold.Ethington@ cdk.com. ETHINGTON CONTINUED FROM PAGE 26 13% 11% 11% 20% 20% 19% 0% 5% 10% 15% 20% 25% Motorcycle ATV/UTV PWC New Pre-Owned GART SUTTON & ASSOCIATES 20-GROUP GROSS PROFIT MARGIN % Are you buying and selling pre-owned units? Let your customers know!