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George Gowen

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Give the Big Dogs a Run for Their Money

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Advance, NAPA, O’Reilly, Auto Zone, and Carquest all have something in common—they are in the parts business. More than that, though, they sell 100 times more parts and make 100 times more money than franchise car dealerships that sell parts. These parts businesses do not have OEM support. They do not have a service department at their store out of which they sell parts. And, they do not have a continuously growing customer base to prospect to. So how are they growing and building new stores across the country?

As car dealers, you support their businesses with millions of dollars of purchases. How many OEM parts did they buy from you? Are you content to let them be in the parts business without competition? What do they offer that you can’t? How many dealers have opened a stand-alone parts store? Take a moment to brainstorm what you can do to be competitive and, more importantly, make money …

Think of anything? Here are some ways to stay competitive with your existing parts department.

What’s your turn strategy?

At 20 Group meetings, the least interesting subject to dealers and general managers is always “the parts discussion.” Yet, it is the number one or two cash investment in any dealership (used vehicles may be an exception in certain cases). If we think of the parts department in terms of cash, we need to ask ourselves: Why don’t we focus on it more? I’m sure you have a turn policy on your used cars; do you know what your turn policy is for your parts inventory? Do you have a used car on your lot 9-12 months before you start to figure out an exit strategy? But that’s what we do with parts. Why?

Stock what you need, when you need it.

Having the part you need on the shelf when requested is more important than having the used car your customer firsts asks for. You can always switch the used car buyer to a different car, but not so with parts. If the part is not on the shelf when requested, it’s a lost sale. Most parts managers don’t count these as lost sales if they can get the needed part within 24 hours via a factory order or an outside purchase from a competitor. The fact is, having the part in stock when you need it will not only increase your margins but dramatically increase your service departments’ efficiency. What is the amount of monthly lost productivity in your shop because you don’t have the right parts on the shelf? If this metric was measured and multiplied by your labor rate, it would astound you.

The Math: $300,000 in outside parts purchases equals $300,000 in labor sales, divided by $100 per hour labor rate, comes to 3,000 labor hours. Assuming 1.5 hours per RO, we can say you had 2,000 ROs that had been delayed 30 minutes each waiting on parts. That comes to 1,000 hours of lost productivity, times your $100 per hour rate, equals $100,000!

Doesn’t it seem worthwhile to have the part on the shelf?

Training is a must.

How much training did your parts manager participate in last year, or ever? How can you get best practices in your parts department? TRAIN them. The NCM Institute offers outstanding parts manager training and NCM has two parts management 20 Groups whose numbers are constantly improving due to their openness to share ideas and best practices. Either or both will yield a huge ROI.

It’s time to get into the parts business and beat the competition.

About the author

George Gowen

George Gowen

George has more than 30 years of experience in the retail automotive industry and is invaluable as an Executive Conference Moderator at NCM. He is a third-generation dealer who grew up working in every department of the dealership, including management positions in sales, business development, training, and as a director of fixed operations. He was also the general manager for a $100 million dealership, then became the owner/dealer principal of a multi-franchise operation by the age of 33. George was awarded Chrysler’s Five Star Award in his first year in business and he also served on the Board of Directors of Carolina Chevy Dealers Advertising Association. George received his degree in automotive marketing from Northwood University and resides in the Tampa area.

Permanent link to this article: http://blog.ncm20.com/2017/07/give-the-big-dogs-a-run-for-their-money/

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