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Business Management

The Importance of Pennies and Nickels

It Pays to Examine Two Key Components of Your Operations

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In a brisk economy, eyeballing the little things seems trivial. Almost miserly.

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In our economy, it’s downright smart. As you and your staff accelerate your spring and summer plans, it pays to examine two components of any successful parts and accessories operations: your escalators and rounders.

 

Please note: The time you invest to examine these parts of your business won’t result in a sudden landslide of new revenue. Hardly. In fact, these two areas of your business equate to the old spare change bottle sitting in my closet. Most of the time, it’s almost meaningless. It collects pennies here, nickels there. But after a few months, it becomes something. For me, it becomes a family outing. For you and your version of the “escalator” change jar, it can become a significant expenditure from seemingly insignificant savings.

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Bottom line, it produces something meaningful. That’s critical in this economy.

 

But first, you have to be willing to take in the pennies and nickels through your escalators and rounders. 

 

For those of you who haven’t taken the time to do this lately, a reminder about these important tasks:

 

• Escalators: These call for pricing a part, garment or accessory above MSRP by a measured amount, say 5, 10 or even 15 percent. Often this is done on less expensive items.

 

• Rounders: These are often viewed as a “Wal-Mart” strategy because every price ends with a “9,” like a Yuasa battery for an older FZ600 for $48.99, rather than $48.90.

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Both strategies drive additional revenue through measured means. The interesting part is just how much of an impact they can have on a parts department’s bottom line.

 

Escalators can be a tricky thing, especially in a retail climate as transparent as ours. “Didn’t I just see that helmet online for $10 less?” 

 

Sound familiar? It certainly does to many of us who use escalators more liberally on lower-cost, must-have OEM hard parts than the more expensive accessories and garments. It’s not uncommon to hear dealers dropping escalators from products over a certain dollar amount. Sometimes it’s $100. Sometimes it’s half that.

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Interestingly, we drop escalators because of our real fears that consumers will price-shop us on our showroom floors. This is happening today nationwide, and you can bet it’s only going to accelerate in the years to come, especially on more expensive items. How should you react? Should your escalators continue to recede into the background, becoming something for products that are so cheap that they’re not worth price-shopping?

 

Ultimately, what you decide to do with your escalators needs to reflect your market. What is your competition doing? What will your consumer bear? But you also need to adapt to the online shopper who happens to be in your showroom. You know what drives an online shopper to buy from the store vs. buying online? The top reasons, according to a 2013 Columbia Business School study include customer service and return policies. Does your parts sales staff mention your consumer-friendly return policies when they’re asked why this helmet costs $10 more than online? 

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“Yeah, it’s a few bucks more, but our return policy is terrific and you can wear it home today.”

 

The #1 reason for not buying online when a consumer is in a retail shop? The “now” factor. They can take it home right here, right now.

Consider driving those points home before you drive escalators out of your parts department revenue.

 

Also, don’t end this task with simply examining and possibly updating your escalators and rounders. Turn this measured revenue addition into measured progress for your dealership. Vow to take whatever revenue comes from these moves and put it to good use, like upgrading your business software.

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We still know too many small powersports operators who work without a dealer management platform. Dealers who use those systems swear by them because they provide such a thorough analysis of store profitability. 

 

Through effective escalators and rounders, you can make those pennies and nickels count for something. 

 


CJ Pedler is the director of customer support for Dominion Powersports Solutions, the provider of DX1, the industry’s only end-to-end business management platform. Pedler has spent more than 15 years setting up and providing training for dealerships. He can be reached at [email protected]

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