At GSA we track benchmarks through our involvement with dealer groups, such as the Best Operators Club. Some of the members have kindly consented to let us share their numbers from our real-time, web-based data reporting system.
This month we discuss a dealership that has exceptional P&A sales measured per vehicle sold (PVS). This dealer sold around 700 new and preowned units in 2008, about 100 less than in 2007. They are located just north of a major metro area and are confronted with intense sales competition and discounting. In order to survive on low unit margins, they have invested considerable effort in selling P&A.
As you can see in Chart 1, their P&A gross profit dollars PVS is over $980, while the benchmark is $525 and the TBOC is at $709. In addition, they have held a respectable 35 percent parts margin and a 37 percent accessories margin.
CY: current year
PVS: per vehicle sold
TBOC: average of the top five BOC members in this category
* Some rows and columns without data have been removed to reduce table sizes.
Chart 2 points out how much they have emphasized this part of their business. This excerpt shows that in 2008, parts represented 11 percent of their total sales, while accessories accounted for over 14 percent. Compare this with the TBOC numbers of 7 percent and 12 percent, respectively. When unit sales are tough and you have to sacrifice margin, you really need to have these kinds of numbers in P&A to help you make up this loss. The goal is to have the gross profit from P&A and service cover the entire overhead of the dealership. This is called 100 percent absorption, and it makes you pretty much recession proof.
As far as staffing, they have one parts manager and four parts people. Looking at some of the history, their counter staff was consistently averaging over $2,000 per day for most of the year. The general guideline is at least $1,000 per day. How productive is your P&A staff?
So, how does this dealer attain this kind of performance? “The most important thing we have done is getting our P&A staff to buy into the idea that dollars per invoice is the most important gauge of success,” said Bill, the parts manager. “If this number is strong, everything else falls into place. They believe in this, and focus on it.”
The owner acknowledged that they have a stable, well-trained staff. “Customers have an opportunity to establish a relationship with the counter staff and this makes them more willing to spend money with us,” said Bill. “This means less time training new employees and more time improving those we already have. They have progressed from just being cashiers to being salespeople. Our staff knows they can increase their odds of getting a sale by finding out the needs and wants of a customer, then finding the product that best fulfills those needs.”
The dealer says the free tire installation program also contributes to the shop’s success. Any tire purchased from them is installed free. This not only increased their tire sales, it brought a whole new set of customers to the store.
This dealer has a quality product selection with a variety of price points and good inventory management. Bill said they try very hard to listen to what customers are asking for and utilize the “Lost Sale” feature in Lightspeed. “This helps me determine what items we might be missing from our product selection,” he said. Bill’s final words on stocking pointed out a problem with many dealerships: “You can’t allow your own likes and dislikes to cloud your judgment as to what items you carry. The customer needs to drive those decisions.”
Make a commitment to improve the sales in your parts and accessories department, and you’ll find a significant improvement in your store’s overall profitability!