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Feb. 13, 2006 – Step out of your dealership to take an even closer at it

February 13, 2006
Filed under Features

So, you’re going to Indy. And you’re thinkin’ parties, and goodies, and shiny things, and girls who walk around with paint in funny places.
And, while that is all true, there is just a little more to it.
I get around to many of your stores during the year, and it is amazing to see the difference in how you handle your customers — and the difference it makes at the cash register. I recall two parts guys in an Eastern Shore Maryland shop. There were only the two of them on the counter, and one had an average ticket of around $65, while the other had an average ticket of only $45. Same number of customers, same number of hours on the counter. But a difference of about $20 as each customer walked away from the cash register.
Difference over the course of a year? Guy A produced about $110,000 in margin in 12 months, while Guy B contributed only $76,000. Guy B’s limitations were costing this owner $34,000 every year in lost margin, and he didn’t even know it.
Just like these two very different parts guys, every one of your stores has its own personality, its own way of thinking, and its own perception of what is good and what is bad. It is only when you step out of your own world and view yourself in a more complete light that you begin to realize that what you thought was good, just may not be that good!
For example, the chart below shows the performance of six different stores. They are from all over the country, one is a Harley shop and the other five are metric. Each of them thinks they are doing a good job at selling parts, but they are worlds apart in the results they get.
The three stores on the left of the chart (Dealers A, B, and C) show average lines per ticket between 1.6 and 1.85. The dollars they sell per line run from $23 to $29 and their resulting average tickets (the red dots) range from $43-$46. They each sell about 2,000 tickets per month, so their total revenue is a million dollars, and their gross margin is about $400,000.
Good job? Let’s see.
The next three dealers are arrayed on the right of the chart. They are running 2 to 2.2 lines per invoice, and the average dollars per line are $38-$40 each. The average ticket for these three stores is $83, annual revenue is (with the same ticket count) at $2 million and gross margin comes in at $800,000.
Now remember, these six stores are all about the same size. There are roughly five parts people at each store, or about 30 total, and it is a stretch of the imagination to believe that the 15 who went to stores A, B, and C all agreed to limit sales to $46 per customer, while the 15 who work at stores X, Y and Z are knocking off twice that amount.
No, it isn’t the salespeople. There is more at play here.
The first obvious difference is the number of lines per invoice. The low group is running well under 2, while the high group is getting well above 2. It doesn’t seem like much, but the effect is huge. It appears to me that the owners/managers at A,B and C are just showing up, opening the doors, standing behind the counter and taking orders.
But, the guys and gals at X, Y and Z were there 45 minutes early. They had donuts and coffee. They sat with their sales team (“The Hot Shots”) and enjoyed their goodies while the other guys ate nothing because they lost yesterday’s sales contest! And then they spent 30 minutes talking about features and benefits of the latest and greatest. It wasn’t a lot — just one pair of boots, some new jackets, and that new exhaust system that just came in.
Then, the factory rep (Yeah, he’s there too) took a few minutes to explain warranty on parts and how to use that in selling expensive items. And after he was done, the team that lost (“The Fantastics”) threw together a high-five, tried to grab some of the Krispy Kreams, and grinning, they all walked toward the front doors, which were just opening, to greet their customers and walk them through the clothing section and the bikes before taking them to the counter.
Any question about why the X, Y and Z guys and gals are getting more out of the customers than are A, B and C?
Now remember, we are talking about six real stores here. OK, maybe I made up a few details, but I’m betting that something just like this is really happening. You can see it in the numbers.
But what about the dollars per line? A, B and C are getting $23 to $29 per line, while X, Y and Z are getting $37 to $40. What is the difference here?
This is a little harder to figure out, but there are some clues.
I find that for the high group, there are simply more parts with retail prices above $25. Thirteen percent more. For the low group, 55% of its part numbers have retail prices below $25 and 45% of its numbers are priced above $25. But, for the high group, only 42% of its numbers fall below $25, while 58% of them are priced above that amount.
In other words, the stores with the higher per/line average have a much stronger presence of higher-price parts in their inventories.
It will take more study to determine the full effect of this mix difference, but we all know about that empty wagon.
So, you’re off to Indy. Meet with your people each morning. Map out the floor. Make assignments. Get out there, get back and report. Find those items that sell for more — high-ticket items that our customers really want, and will pay for. Learn about the new stuff. Get the sales points. Learn about related items. Get the features and the benefits. Highlight the literature and pass it around. Make this work for you.
But most importantly, figure out what your average lines per ticket are, and your average dollar per/line before the show and then after the show.
Everything has to pay its own way. And Indy is no different.
And those girls with paint in funny places?
Fo’geddaboudit. They’re working too.
See you at the Show.

Hal Ethington has been associated with the powersports industry for more than 30 years. Ethington is a senior analyst at ADP Lightspeed.

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