AM Live Session - The essentials of good stock management

Best practice for stock management came under the spotlight at this year’s Automotive Management Live event when our chief executive Andy Whitehair was joined on stage by two retail professionals.

Sam Luscombe, sales director at Luscombe Motors in Leeds, a single-site multi-franchise dealer representing Suzuki and MG, and Alex Jones, chief operations director at West Country independent used car supermarket Carbase provided insights, advice and the challenges they face.

The Autofinity-sponsored session – the five essentials of good stock management formed part of AM Live’s annual event which took place on 13 November at Birmingham’s NEC.

Kicking off the session, Andy set the current scene whereby the used car market faces a supply shortage after a million fewer vehicles were sold as a result of the pandemic.

Whilst the wholesale market is strong with prices on the rise, that’s not reflected in retail prices which means dealers are squeezed in the middle as well as struggling with costs.

Sourcing stock

Sam said: “There are lots of companies telling us they can help us source stock but that’s putting another spoon in the trifle between us and the cars I want to buy.”

A car that may have been acquired as a part exchange could now find its way onto a classified platform where dealers would typically pay a higher price. However, on the plus side, a car in another area may well fit the business’ stock profile providing the opportunity to retail a car that would otherwise be missed.

“It’s a blessing and curse,” he added.

Efficiencies

Dealers have become far more efficient in the past year driven largely by a higher cost base.

Alex said: “The number I heard quoted was that as an industry we have become four days more efficient in stock turn in October versus October last year, if you think there’s 400,000 to 500,000 cars for sale at any one time, that’s a massive improvement in efficiency across the whole industry.”

However, there has been little change in margin despite an increased cost base which means dealers need to find a balance between pricing competitively and faster stockturn.

Data

Sam’s business buys around 20-25 cars a week compared to Carbase at 1,000+, either way, data is key as long as it is rich enough for firm decision-making.

Now data is used to understand used car pricing, Jones points out that it has become far more rigid to protect the market. But by utilising various data sources, Jones is able to understand if they have previously undersold a car to correct their future pricing strategy.

But data needs to be meaningful, as Jones said: “You can easily look at the tealeaves and see data that doesn’t exist.”

EVs

Both Carbase and Luscombe Motors have expanded the proportion of used EVs they now retail.

With the average Carbase customer spending between £10-17k on their next vehicle, the business has identified used EVs which now fall into this bracket and have teamed up with a battery testing partner. However, a major obstacle are the long lead times in the franchise network should an EV require any work.

For Luscombe, as a growing market EVs are a potentially good investment. The business has found a ‘sweet spot’ retailing 3-4-year-old EVs (depending on the manufacturer warranty) particularly the likes of Teslas and Porsche Taycans.

He said: “I would much rather take a smaller profit, sell it quickly and buy another one.”

What can suppliers do?

Whilst Alex is optimistic that the wholesale and retail price are now the most stable in years, his focus is on better understanding the best leads.

“How are we measuring the eyeballs to leads, leads to appointments, appointments to store visits and store visits to purchases?” Jones asked.

Improving conversion by a few percent at the end of the sales funnel will make a huge difference so identifying the partners helping the business to convert leads better are crucial.

For Sam, it’s about the ability to utilise the various data and the amount of work required on spreadsheets whilst ensuring the information is insightful and actionable.