3/28/2023 0 Comments T buckets for saleThe shift needs to start with metrics that help dealers and managers know if/when appraisers and buyers are doing the best job as they aim to acquire cars and/or customers. That’s why I believe it’s time for dealers to apply a bucket- or channel-minded approach to managing their inventory acquisition efforts, just like they’ve done with managing and pricing vehicles in their inventories. Meanwhile, dealers who want to maintain their retail sales volumes and profitability have no choice but to continue acquiring inventory from as many channels as possible to meet their goals, and to know, in no uncertain terms, what buying a car “right” means for any specific sourcing channel. Well, such favorable conditions are fading right now. What’s the point of sweating how right you acquire vehicles if you know values are rising, customers want almost any car and, if you have the cars, they’ll likely sell quickly? Unfortunately, this shift occurred at a time when dealers didn’t necessarily need to worry about how they were acquiring these cars. Many turned to their own customers, looking for vehicle acquisition opportunities in their lease portfolios, service lanes, off the street and we’ll-buy-your-car programs. Dealers who relied on auctions or trade-ins for inventory found themselves in a pinch. My thinking follows the evolution of how some dealers quickly shifted the way they acquire inventory as the COVID-19 pandemic disrupted the wholesale and retail markets for used vehicles. In a nutshell, I believe we’ve arrived at a time where dealers should follow a bucket- or channel-based approach to acquiring used vehicles, lest they miss out on opportunities in today’s supply-constrained market. I share this bit of inventory management history because it’s helpful to understand where we are in the current moment with used vehicle inventory acquisition. In the past two-plus years, with the help of vAuto’s ProfitTime GPS, some dealers have gone beyond buckets, using each vehicle’s investment value and automated price recommendations to manage each vehicle to its appropriate investment return. The parameters usually tie to market metrics (like Cost to Market, Price to Market and others). Each bucket generally has parameters for pricing and promotion to manage sales throughput in each bucket. Dealers set up buckets based on a vehicle’s age or time in inventory, as well as other criteria. Over time, the bucket-based approach to inventory management has proven to be a superior method. If you scrolled the clock back 15 or 20 years, you’d find very few dealers who managed their used vehicle inventory in what we now call “buckets.” Rather, dealers managed used vehicles in blocks-cars that were less than 60 or 90 days old and those that weren’t.
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