Trevor Robinson, Director of Retail Solutions, Training & Development
Profitability challenges ahead
Trevor Robinson, Director of Retail Solutions, Training & Development
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The year ahead may see dealers struggling with profitability, according to NCM Associates. The company aims to help train dealers become more profitable when times are good, while also preparing them for more challenging economic conditions that may arise.
“I really think this show is a turning point for the industry around our networks in the country. Our data has been indicating changes that everyone has been talking about — margin pressures and so on and so forth,” said Trevor Robinson, Director of Retail Solutions, Training & Development, NCM Associates. “This is the year that margin pressure is perhaps a plateau in sales, compounded with market share challenges, which is going to lead to real profitability challenges on average.”
Robinson said he believes everyone will be affected by this. The company typically looks at both the department and operational side of the store, net to gross, when considering dealer profitability. It follows the concept that well-run dealerships should be targeting 30 per cent net gross, by department and by store. Robinson said it’s not a perfect science, but it’s a good place to start. “This has been around for 30 years with us, and we still think this holds true.”
The challenge, he said, is that the math around it has become increasingly complicated. “It’s been more complicated to figure out what gross is. It has to change, we have to go back to measuring what gross is and it’s not the same as before.”
“We’ve seen dramatic trends in the net to gross, by department — and specifically on the variable side of things in the last few years. Those are the ones that worry me, because return on sales, you can get by,” said Robinson. “But once you have a net-to-gross by department issue, you then all of a sudden have an entire department that you don’t know how to pay and compensate on. How do you pay a manager on the variable side when you’re making no money? We don’t know how to do that as an industry.”
Dealers have figured out how to make up for this by pulling in more profit from F&I, though Robinson said that has just escalated a problem that was already present. “The F&I manager is making more money than the general manager, sucking up all the gross and preventing us from paying all the sales people.”
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