Dec. 28, 2009 – What’s good for a recession but not for the rebound
December 28, 2009
Filed under Features
Don’t know if you’ve encountered it in your holiday shopping but there is a plastic toy that is notable only, or so I can fathom, for its ability to change shape. It starts out as a volleyball-sized mass of plastic but with a couple deft moves can expand to the size of the biggest beach ball you’ve ever seen smacked around the outfield seats of Dodger Stadium.
If you can somehow picture that toy in its constricted volleyball size, you can get the picture of what dealership staff size is these days. In other words, it’s been squeezed and squeezed to where it can’t get much smaller.
If the present economic outlook holds true and we’re indeed progressing as a nation, then it stands to reason that dealership staff sizes will begin to rebound. This assuredly won’t happen overnight nor will many dealers share the same commitment to enlarging their staff sizes like they traditionally have after the slow winter period. Cash flow is just too dicey right now.
However, staff increases are bound to happen in 2010, and my biggest fear is the dictum that I’ve heard repeatedly through the recession will stick right through the rebound. That dictum? “Back to basics.”
Now don’t get me wrong. It has certainly served its purpose as we as retailers came to the realization at some point in 2009 that current retail demand does not meet our demand. And to counteract that, we’ve instructed our sales staffs to build demand, phone call by phone call or e-mail by e-mail.
The underlining philosophy of using conventional means to artificially create business has its uses. It is, if nothing else, a kick in the posterior to the likes of us who as industry players “grew up” in an environment where floor traffic was as predictable as taxes. It always happened, and it happened at the same time each year.
The problem with this conventional wisdom of “back to basics” is, well, it’s conventional. And these retail times are anything but that. So as we look forward to 2010 and consider the overwhelmingly No. 1 dealership revenue source — new unit sales — then we have to come to a realization. One that’s not easy to swallow.
And that is: It’s doubtful that we’ll make up the 35-40 percent loss in new unit sales suffered this year in the next 12 months. In other words, the rebound doesn’t figure to be as momentous as the crash. At least not in new unit sales.
There are just too many obstacles to overcome in such a short period of time. The unemployment rate doesn’t figure to rebound at a significant pace anytime soon. Economic experts have stated employment rebounds traditionally lag behind the end of recessions, reflecting the overall conservative nature of businesses after such periods. Plus, financial experts openly wonder if the housing market — a market so pivotal to many powersports sectors — doesn’t have more challenges coming in the days ahead.
So if you buy the notion that your 2010 new unit sales will not equate to your 2008 sales, or at least budget for that possibility, then do you reorganize your thoughts about how you expand your dealership staff? When that time comes, do you automatically look first at increasing the new unit sales staff or do you look at the other departments, those that may not bring the same level of revenue but certainly the likelihood of a higher profit margin?
Many may consider that line of thinking not only untraditional, but downright illogical. After all, new unit sales traditionally account for roughly half of a dealership’s revenue, if not more.
The problem with that big chunk of the business is the return on investment. New unit sales, at least in the immediate term, have a series of daunting challenges. Too much noncurrent inventory in today’s pipeline probably means pricing wars and decreasing profit margins for the first part of 2010. Maybe longer.
In my mind, improving other parts of the dealership, or at least putting more focus there, only makes fiscal sense for the first half of 2010. The service and parts departments seem like areas that could snap back faster, especially when you consider return on investment. And if your dealership isn’t profitable in either of these areas, then fixing that should definitely be atop your New Year’s resolutions list.
Just keep that in mind as you come closer to the day you start to expand, rather than contract, your dealership staff size. The right move, after all, isn’t necessarily the traditional move.
Too much inventory?
Chances are, your noncurrent inventory is decidingly heftier than you would like it to be, not to mention much worse than a year ago.
If you’re in that spot — and many are — then you should find an e-whitepaper on our Web site, www.PowersportsBusiness.com, particularly interesting. For those of you who, like myself, are put off by anything that starts an “e,” let me assure you the e-whitepaper is a simple thing. It is simply a collection of articles that all pertain to a single subject. In this case, it’s advice on how to improve your noncurrent inventory, both through long-term business principles and short-term marketing tactics.
The e-whitepaper is loaded with practical ideas and business formulas to help your dealership approach the new year with a new way to combat that dead weight on your showroom floor. And perhaps best yet, it’s free. Enjoy!