September 3, 2007: Tips on increasing over-the-counter parts department sales
September 3, 2007
Filed under Columns
Have you ever wondered, “How can I really quantify the overall effectiveness of my parts and accessories (P&A) department?”
One way is to determine your P&A department’s sales on a “dollars per unit sold” basis. For instance, let’s say the total sales for a P&A department in one month was $50,000 and the sales department sold 100 units. Fifty thousand divided by 100 units equals $500 in P&A sales per unit sold.
By viewing a couple of reports in the dealership management system and tracking this number on a monthly basis, we can consistently measure the true effectiveness of the P&A department.
According to a recent RPM Group composite report, the benchmark for P&A sales per unit sold for a metric dealer was $1,574. So, this means for every 100 units sold, there should be, on average, $157,400 in P&A sales, which is a big improvement over the $50,000 mentioned above (over a $100,000 increase). However, this number can be indefinite when tracked alone.
Keep in mind the sales department is one of the big drivers of a P&A department. An increase in new and used unit sales will typically have a positive impact on the P&A department. Also consider that parts sold to repair orders (ROs) can make a tremendous impact on P&A sales.
In fact, I recently spoke with a dealer principal who had mentioned how proud he was of the numbers his P&A department was achieving. Upon further analyzing his numbers, he realized that his average of parts sold to ROs had nearly tripled. So, his service department deserved a lot of the praise.
A strong performing service department can make an under-performing parts department look good. A couple of wreck estimates can add thousands of dollars to the P&A department’s numbers. So, it’s often necessary to dig deeper to see if the service or sales department deserves some of the recognition.
Here are some tips on increasing over-the- counter P&A sales:
A common word mentioned at RPM Group’s 20 Groups is “absorption.” Absorption is the percentage of a dealership’s expenses that fixed operations (the P&A and service department combined) can cover. Obviously, if fixed operations can pay for 100 percent of a dealership’s expenses, the profit generated from the sales department will go straight to the bottom line. By measuring your P&A sales per unit sold and focusing on improving in one area at a time, the P&A department’s contributions and overall effectiveness will improve.
About this column
Series goal: Each Profit Ability column will focus on one key measurable found in most dealer 20 Group’s composite reports and offer tips on improving those measurables.
This edition: A parts department’s dollars per unit sold
National average for closing ratio: $1,574, according to a recent RPM Group composite report.
Tory Hornsby, general manager of Dealership University, was drawn to the powersports industry more than 10 years ago when he turned his passion for motorcycles into a career. Hornsby worked in nearly every position in the dealership before becoming a general manager. He welcomes your e-mail: firstname.lastname@example.org.