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Inventory Management in Powersports

Danny: You mentioned something about inventory; inventory management. Why is inventory management such a vital part? Such a primary aspect of your financial success as a dealer? 

Larry: Holy Mackerel, that's a whole like; that's a whole discussion. But the short answer is, that you know when you have downward price pressure, which is what the Internet causes; and none of us like it, but we all have to live with it. It is what it is. When you start to have downward price pressure on your product, as automotive has, as power sports is starting to realize is that downward price pressure squeezes your margins. You've got to be able to turn that inventory faster. Inventory is evil. Inventory costs money. It holds up capital. There's so many reasons not to have inventory. If we can get to a just in time delivery in either automotive or powersports, it would be great, but you can't. You've got to have more, very much, an instant gratification culture.  

Larry: So when I go to my powersports store, it's not like, you know, like in Europe. You don't buy a, you don't pick up the car when you go to buy it. You buy it, and they order it, and then they deliver it, and then you go pick it up. That's just in time inventory. They've, they've kind of trained their customers over there to have that for a whole lot of reasons. In the US we don't have that. If I go to a store to buy a car, I go to the power sports store to buy a machine. I expect to get that machine right then, that day. I expect to find it and get it. So where we are is where we are with that, but to keep that as low as possible is going to free up capital. 

Larry: It's going to make you more money in the long run. The faster you can turn that inventory, you know, Michael Dell prove this, right? With the Dell process. So inventory is going to be important, it's important from your bottom line, but it's also important to the customer and that's what they're coming to buy. So access to inventory and quick easy access for your salespeople to inventory is going to be crucial. And what you can't have is salespeople pulling up their mobile phone and going to your website. Because you're creating false positives in your visitor rate. I mean, you'd be amazed once you remove the salespeople's visit to your website from your website's visitor count, you'll find it's about a third of it. And then you're going, "well, gosh, I thought I was doing really good told now."  

Larry: So you know, there's that aspect of it. So the quick, easy access to inventory for salespeople, inventory turn, this will become inventory turned and inventory management, and ordering the right inventory and taking the right trades. Power sports is huge; there is a huge demand for used power sports equipment and use powersports machines. But there is a small, very, very, very small supply. And so getting the right used inventory in your store and appraising vehicles where you can get some of that right used inventory is extremely important. And you know, there are still power sports stores now that don't take trades, period. Just, I mean, for a car guy, that's just unheard of, right? We'll take a dump, you know, it doesn't matter what it is, we're going to put a value on whatever it is. You can walk up with a pocket knife; I'm going to give you something for it.  

Larry: You know, that's just the way it works. In power sports are a lot of guys that, because they don't, because it's so volatile, because it's so hard to get the information, they don't take trades, period. They just tell the customer, go sell your vehicle and let us know when you're done. Well, gosh, to turn away a customer who wants to buy something and cross your fingers and hope they come back once they sell their vehicle is crazy to me. It's crazy to me, and most of the people that I know. So, you know, getting a good inventory tool that will bring you NADA value, Kelley Blue Book value, bring you, National Powersports Auction information. And then compare that to your historical sales. That's the key. You know, these things, this vehicle may be, NADA may say it's worth $5,000.  

Larry: NPA May tell you it's worth $3,500. Kelly's telling you it's worth $5,500. But what's it really worth to you until you look at your historical sales and say, I've sold 20 of these in the last 12 months, 18 months and up, these 20. I made this much money. I turned them this fast. This is an "A" vehicle or a "C" vehicle, or even an "F" vehicle, Even for me, if I don't turn it fast. Until I know what it means to my store, these numbers are just arbitrary, and that's the problem. They look at these book numbers. These are just arbitrary numbers, but this is an "A" model vehicle. I'm obviously not going to the 3,500 NPA number. I'm going to be more up here to the Kelley Blue Book, $5,500, $5,000 number. And I might, if it's a clean vehicle, and I've got a good, you know, audience or market for that. I'm might 60 or 6,500. That's what's happening in automotive today. You don't see us giving book value because book value's not what a vehicle is worth it. What it's worth is what somebody will buy it for.  

Danny: Sure. You could be a numismatic enthusiast and have a silver dollar that you think is worth $200, but it's worth what someone will pay you for it.  

Larry: Always. Always. And so having that extra, that last extra bit to be able to compare this with what l sell vehicles for; that's crucial in getting the good used inventory. So inventory management, and getting the right use inventory, ordering the right inventory, knowing what you got, what you need to order at the time when you need to order it, and making sure that your salespeople have good access to it and that you're turning it fast. These things are going to become more and more crucial as you see downward price pressure come and you've got to be more efficient with what's on your lot to continue to make your numbers on the bottom line. 

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