The first step toward regaining profitability in the parts department is a thorough examination of two benchmarks: the average ticket sale and the store’s total ticket count.
That was the message from Hal Ethington, a senior analyst at ADP Lightspeed, which provided a webinar for dealers titled “How one in four dealers increased parts revenue in 2009.”
Ethington, a Powersports Business columnist, used an unnamed dealership as an example, noting how an examination of average ticket sales and total ticket counts using existing DMS tools provides answers to how a dealership can turn a profit in this key department.
In the specific case of the unnamed dealership, Ethington’s study of that store’s data found the dealership actually had a higher number of tickets — meaning more customers came through the doors — but wound up with less parts revenue for that particular year. Why? The answer resided in the “average ticket sale” category, which decreased compared to the previous year. The decrease actually amounted to less than $5 per ticket, but it wound up leaving that department in the red.
For dealerships that fall in this category, Ethington offered a range of strategies for stores to consider to increase per-ticket sales, including:
•Presenting and teaching new parts and accessories to the parts counter personnel;
•Requiring those personnel to try up-selling in every purchase;
•Placing impulse items in multiple locations, including by the registers;
•Placing related items together;
•Stock — and display — high-end items;
•Incentive parts department personnel through their pay plans or offer sales competitions with winners either receiving bonuses or perks, like time off.
On the other hand, if dealerships are seeing parts department revenues sag because of a reduction in total tickets, then Ethington suggested some other strategies. Those included:
•Using a CRM system;
•Scheduling and executing effective consumer events continually;
•And becoming a “face” in the public by putting on charity events and being active in area service clubs.
Besides those two measurable benchmarks, Ethington also advised dealers to use their DMS systems to look closely at each of their parts department salespeople.
Again, using the unnamed dealership, Ethington showed how stores can look at specific dealership personnel six different ways:
1. salesperson’s average parts invoice; 2. salesperson’s gross margin percentage; 3. salesperson’s percentage of discounted invoices; 4. salesperson’s percentage of return sales; 5. salesperson’s average lines per invoice; and 6. salesperson’s percent of total invoices.
Such breakdowns could prove useful to the PG&A manager.
On the unnamed dealership example, Ethington highlighted one salesperson who was low on their average parts ticket but high on the number of discounts they gave. This could obviously lead to a discussion of why such discounts are happening on such a regular basis — a discussion that could ultimately profit the department in terms of average ticket price and gross profit.
The individual personnel data also potentially shows the department’s best performers as one sales associate that Ethington identified was both high in the number of tickets and the average price of the ticket.
A final statistical area to consider viewing to increase PG&A profitability: Gross margin of products by source.
Ethington notes the unnamed dealership had vastly different gross profit margin percentages by distributor.
Copyright 2010 Powersports Business