In a dealership, every penny counts. If you don’t bring this mentality to the Parts Department, you’re going to struggle with managing your overhead—especially during times of economic uncertainty. There are many ways to cut back: keeping window cleaning in-house, going for a cheaper paper goods supplier, nixing the single-use cups at the water fountain, or creating more efficient delivery routes for parts runners. Cost cutting alone is not enough—a Parts Department that doesn’t find more efficient ways to drive volume and profit won’t be set up for success at the other end of the economic recession.
This guide will dive into the larger Parts Department costs and how to cut back efficiently without sacrificing the revenue generators that work. It’s not about slash-and-burn, because cutting your way to profit is not a long term solution. The following sustainable strategies will help your dealership reduce major costs while putting you in the best position to generate more revenue.
Run a cleaner, leaner parts inventory
Parts Department inventory is a major expense for your dealership. That means that your parts inventory should be as efficient as possible. As you know, holding onto a surplus of aging and obsolete parts hurts your bottom line because it’s tying up dealer cash. This begs the question: are you making the smartest investments in your inventory?
There are many resources available to help Parts Departments run a clean inventory. In order to run an inventory with 2% obsolescence, you should:
- Request Manufacturer Data
- Keep on-hand stock levels accurate
- Track inventory trends in your DMS to plan for next year
- Form wholesale relationships
- Move obsolete and aging parts on eBay
- Create a web store to open your inventory to a national audience and increase inventory turnover rate
There has never been a better time to launch an eBay parts store to unload any of those parts that have been tying up dealer revenue.
Cut Back on Personnel
No one enjoys having to lay off their employees, but sometimes you don’t have a choice when the dealership is struggling through the economic downturn. After all, employee salary and benefits are a huge dealership expense. When times are hard, you are sometimes forced to operate with fewer hands.
In the Parts Department, one of the first places to cut is the fleet drivers. But how will you continue to deliver good service to your wholesale customers? How will you quickly get parts to your service drive in a cost effective manner? RevolutionParts Local Delivery can help.
Deliver Parts Locally More Affordably
Showrooms are closed nationwide. Forty-seven million Americans have lost or are at risk of losing their jobs. People simply are not buying new cars.
The good news for fixed ops is people will need to maintain their old cars. Repair shops, body shops, and dealership service departments need parts. If you have to cut a fleet driver, how are you going to move the parts locally in order to keep your service drive fed and your local wholesale network buying from you? RevolutionParts Local Delivery can help you maintain your wholesale parts business, especially when you’re short a driver.
This is how Local Delivery works.
Eliminate Uncertainty by Over Preparing for the Future
Data driven decisions are the only ones you can depend on in the Parts Department right now. A recent study by Yotpo reports that consumer shopping habits have shifted dramatically due to coronavirus forcing people to stay home.
Consumers are shopping online more now than they historically have. This is likely because they are unable to shop at brick-and-mortar stores due to the nationwide social distancing orders. People are stuck at home, browsing for things to buy online. You’ll need to make sure that your parts department has a presence there.
Some experts are predicting that the eCommerce spike from Covid-19 will have a lasting effect on shopper habits. The forced switch to eCommerce shopping is slated to be essentially permanent. The future of shopping may be changing forever. Is your Parts Department prepared for that?
Part of preparing for the future is identifying and securing new revenue streams in the parts department. Given the expert auto industry forecasts, eCommerce seems to be the way of the future for dealerships who are serious about rising to the top at the end of economic strife.
Safeguard Dealership Revenue Growth with Parts eCommerce
Cutting costs alone is not a sustainable approach to guarantee Parts Department success. In order to effectively safeguard revenue and set the Parts Department up for growth at the end of the economic battle, you must focus your efforts on driving revenue channels that really work.
What does that mean? It means you need to modernize the Parts Department with digital retailing, also known as Parts eCommerce.
There’s no doubt that the economy is going to snap back. Introducing eCommerce solutions to your Parts Department helps you streamline old processes and opens your business to parts shoppers all over the country—and beyond. With your very own web store that integrates with your current dealership site, you can fill more part orders than ever before easily and quickly. Imagine it as a member of your staff who works 24/7 and never needs a lunch break or vacation.
Remember, consumers are stuck at home with their iPhones and computers, making it the perfect time to get your parts department in front of them with a web store, eBay store, and/or Amazon store. David Steinberg, Foureyes CEO recommends dealers, “Leverage online shopping trends. A portion of the virus’s economic impact will be due to lower productivity from people working from home, where they’re more likely to waste time on activities like shopping online. But there is an opportunity for automotive where inventory is online.”
While the uncertainty is scary, the true silent killer of parts departments and dealerships will be inaction. Success will be earned by dealers who adapt to a changing auto landscape.
It’s no secret that new car sales are declining as a result of COVID-19—showrooms across the country are closing and car sales continue to decline. People are still going to need more service and more parts for the cars they have.
Cutting costs to minimize overhead and protect dealer profit is one of your strongest approaches to weathering the economic storm moving through the auto industry. Coronavirus is scary and the future is uncertain, but Parts Departments that tap into the online market will be the ones that float to the top of this global pandemic.
Luckily the automotive aftermarket is traditionally recession-resistant. Cars need parts. Enthusiasts will always want more parts and accessories. A garage or driveway is a great place for a DIYer to practice social distancing. This is the Parts Department’s time to shine.
These are the things you can do to safeguard your dealership. RevolutionParts have the tools to help.
“RevolutionParts has empowered us to eliminate expenses and be more competitive. With stock order discounts, return reserves, and profit on shipping, we add thousands of dollars in gross profit on top of the online part sales.” – Anthony Wells, Fixed Ops Director, Shingle Springs Subaru
CUT COSTS CHECKLIST
Do an audit of parts department inventory
Do as much maintenance as you can in-house
Get a solution for obsolete and aging parts
a. Free up dealership revenue tied up in parts that aren’t moving
Downsize parts department personnel
Find a cheaper parts delivery method
Protect profit centers
Create new revenue streams
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