As summer comes to an end, it’s important for dealerships to reflect on the season’s performance to refine their strategies for the rest of the year. The summer of 2024 presented many challenges, shaped by economic factors and shifts in consumer behaviors. Understanding these factors is important for optimizing inventory management and enhancing sales practices as we head into fall.  

Economic Blockers and Market Dynamics: 

This summer was marked by many economic factors that impacted vehicle sales. Despite new vehicle sales exceeding predictions in May, the overall market recovery remained limited. Inflation, while slightly reduced to 3.27%, continued to strain consumer budgets. Continued high-interest rates added to the situation, making vehicle purchases highly unaffordable for the average customer. The average price of a new vehicle climbed above $48,200, pushing it beyond the reach of affordability. Elevated interest only added to the burden of customers.  

The prolonged period of economic uncertainty has led to a shift in consumer behavior. U.S. car owners are holding onto their vehicles longer, with the average age of cars on the road rising to 12.6 years. This trend means it’s getting more difficult to sell cars, forcing more dealers to deal with inventory carryover. However, there are strategies we can take away from summer that can help minimize inventory risk. 

Strategies for Proactive Inventory Management: 

To navigate these challenges, dealerships must focus on understanding their specific local market conditions rather than relying solely on broad economic indicators. Analyzing local economic factors, such as job creation, real estate developments, and demographic changes, provides valuable insights for adjusting inventory and pricing strategies. 

Using data tools to understand consumer behaviors and preferences is vital. Knowing who is shopping for new vehicles, what their purchasing behaviors are, and how they interact with digital platforms allows dealerships to tailor their marketing and sales strategies more effectively. 

Dynamic Pricing and JIT Inventory Operations: 

Dynamic pricing is a key strategy for managing the fluctuating supply and demand. By adjusting prices in real-time based on inventory levels and market conditions, dealerships can better align their offerings with current consumer readiness to purchase. This approach helps mitigate the volatility of market fluctuations and enhances sales performance. 

Adopting Just-In-Time (JIT) inventory operations can alleviate the burden of excess inventory. With JIT, dealerships can coordinate more effectively with manufacturers and auctioneers, avoiding overstock and reducing costs. This strategy requires transparency and awareness of inventory at any given moment, enabling dealerships to manage stock levels more efficiently and minimize such financial burdens. 

Proactive inventory management involves understanding the "right" number of vehicles needed to achieve optimal profitability. Relying solely on historical data and assumptions is not sufficient. Rather, employing AI and machine learning tools provides a data-driven approach to inventory management. These tools evaluate market conditions and inventory factors to determine the optimal stock levels, supporting better decision-making and improved margins 

Managing Aging Inventory: 

Traditional markdown strategies may fall short without a data-driven approach. Implementing a pricing strategy informed by predictive analytics is essential for managing aging inventory effectively. Advanced analytics tools can enhance pricing strategies for both new and aging inventory, helping dealerships maintain profitability while reducing inventory risk. 

Dealerships should focus on building a data-driven pricing strategy that considers both market trends and individual vehicle performance. This approach ensures that pricing decisions are well-informed and aligned with current market conditions, further supporting better inventory management and improved sales outcomes. 

Digital Transformation and Improved Selling Practices: 

Investing in advanced technology solutions is important for improving dealership operations. Technology that collects and analyzes data to deliver actionable insights can greatly improve inventory management and customer relationship practices. Integrating inventory management systems with customer relationship management (CRM) applications is essential for a streamlined operation. 

The customer experience is increasingly influenced by digital interactions. Enhancing mobile-optimized Vehicle Detail Pages (VDPs) is one way to improve this experience.  

While traditional advertising can drive traffic to dealership websites, VIN-level advertising provides a more precise approach. By tracking and ranking inventory based on engagement, dealerships can optimize their advertising spend and identify underperforming and in-demand units. This data-driven approach allows for more proactive sales strategies and better alignment with market demand. 

Looking back on the summer selling season, dealerships can take note of several valuable lessons. By adopting a data-driven approach, understanding local market dynamics, and investing in advanced technology, dealerships can better manage inventory, enhance customer experiences, and position themselves for continued success throughout the year. Embracing these insights and adapting strategies accordingly will help dealerships navigate future challenges and capitalize on emerging opportunities. 

About The Author: Len Short is the executive chairman of Lotlinx, who offers the only inventory platform that enables dealers to automatically adapt to market dynamics, mitigating inventory risk through VIN-specific strategies. Click here to download the Lotlinx Summer Sell Down Guide. 

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2. 2024 Summer Sell Down Report
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