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Jan. 21, 2008 – Training, not additional retail outlets, is key to profitability

January 21, 2008
Filed under Columns

I am on my last United flight to Dallas of the year. As I sit and peruse the latest Powersports Business, I come across Neil Pascale’s column, “Think e-commerce, and be smarter than a fifth-grader.”
“This will be good,” I think. I read and see Neil is advocating for putting more resources into the online buying experience. As any good columnist, he puts forth statistics to make his point, which I will too as a counter to that point.
For I believe, nay, statistics prove, that unless you do huge volume, concentrated efforts on e-commerce in our business are not so much wasted effort as much as it is misguided energy for most.
Make no mistake, e-commerce is exploding and can be a viable revenue stream if the volume and effort level is maximized. Keep in mind if you’re selling on the Net, you’d better have the lowest prices around, as you’re not selling any kind of “customer experience.”
Neil quoted that 3 percent of total retail sales revenue comes from e-commerce, equating $30,000-$300,000 of additional revenue, depending on the size of the operation. If you blend all parts, accessories and apparel, our average dealer is carrying a 35 percent gross profit, with a 17 percent gross profit on wholesale. That means the average dealer would have to sell more than twice as much volume of product over the Net at those anemic margins as he would selling that same product in the store. Three hundred thousand at a 17 percent margin equates to $77,000. Now back out your payroll and what do you really have left? A lot of effort with not much reward, that’s what.
If you’ve earned the right to go after the online business, then have at it. That said, most dealers are underperforming so drastically that efforts are better spent working inside the brick and mortar on those customers who are already in the store.
Here are a few more statistics from the average metric dealer within the RPM Group family:

  • Has a rolling monthly average of $70,000 in obsolete P&A inventory;
  • Sat down 200 fewer customers (only 52.4 percent of the total consumers that walked through the front door) this year who wanted to buy a bike;
  • Spent $130,000 in advertising in 2006 to drive people into his or her store;
  • Saw a 52 percent increase in swing count (floor traffic) this year over last year;
  • Saw a 9 percent decrease in net profit.
    So what does all of that mean? It means the average dealer spent a lot of money to drive people into the dealership … and they came. Fifty-two percent more came in this year than last year (through October data), yet we did less with them. We sat fewer of them down, and we sold fewer of them product.
    Why? Training … or lack of it.
    Dealers continue to admit they are guilty of not spending enough time training their team. The No. 1 reason a person leaves his or her job is not money but lack of training. People want to do a good job, yet many simply don’t know how. When is the last time you put your parts clerk or your service writer through a structured sales training course?
    You don’t need more people coming through the door. They are already there. You don’t need new outlets to make sales. Your four walls, filled with enthusiast impulse buys, is enough. What you need is to spend the time and resources on training your team on how to sell, not clerk.
    Neil is right that e-commerce can be a viable alternative source of revenue. But why go after it if there is so much opportunity right in front of you? If your sit down percentage is at 70 percent, your P&A obsolescence is minimal and your net is up, you might then want to look at the e-commerce world. Until that time, work on your people, and keep your eyes on the front door. There might be a fifth-grader coming in who wants a dirt bike. psb

    Sam Dantzler is president of RPM Group, the industry’s largest 20 group provider. Dantzler can be reached at sam.dantzler@assurant.com.

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