Wholesale Discounts

[maggio69]

I'm a midsized dealer in my market,which is a highly competitive market here in the northeast. I have developed my share of clientele that I work hard to maintain a good relationship with through communication and service. first thing I learned was not to go outside my market for wholesale, thats were most of the trouble lurks. Second thing I did was esablish a break even point for my dept, taking into account all variables that go into work here such as picking time, order time, checking in time, delivery time, etc,etc. What I came up with was a 21% break even point, anything under was unacceptable to my dept. Even my largest accounts don't get less than this. ( this number is also based on matrix pricing)So what I end up with is my beter accounts get 20% off and the rest get 15% off . The best lesson I've learned is that if you are honest and give great service your customers will stay with you and you will be profitable as well. I now average 25%-28% profit per month. Hope this helps in some way.

[davem]

Maggio69,

Are you able to matrix your wholesale? I always thought we coulcn't get away with this.

[OLDPARTSGUY]

Matrix parts to wholesale customers? That seem like a sure road to losing customers. Once customers get wind of that it will spead like wildfire. Customer trust is critical to a successful business....

Just my opinion

[Tazz121]

I use a matrix with three of the four car lines that I run. It all depends on what car line and what competition you have. It definitely can not work with GM. There are too many dealers just giving away the parts. If you have an import line there is nothing stopping you. As far as being honest with the wholesale customers I am. They know that I use a matrix and they get a discount off of it. The discount depends on how much they buy and how much they return.

[David Cates]

I love threads like this one. Very educational for someone like me who just likes learning more about the business.

Nice email address Scot

[This message has been edited by David Cates (edited 03-30-2005).]

[Mike Nicholes]

Wholesale has always been an interesting contradiction in general. The best justification of a large wholesale business is not the margin. Wholesale lies in the margin/volume arguement; high volume, lower margins. But if a dealership has a large wholesale market, it justifies a larger inventory, in house, that helps that more efficient process in the dealership to produce more and higher profit and fill to the technicians.

One of the challenges (problems?) is that as a general rule, a wholesale business does not belong to the dealership, it belongs to the person servicing the customer. It is a business dependant on personal relationships as well as parts availability.

With the advent of the daily stock order in most of the manufacturers (the remaining few will come around eventually) the need for huge inventories in wholesale has been reduced somewhat. Wholesale is a good business, but is risky. I could bore the reader to death with stories of individuals who left dealership A and went to dealership B and took a huge chunk of the business with them.

To insure that the dealership retains the hard won wholesale business, the parts manager must go out and visit the customers, frequently if for anything just to thank them for the business. I also recommend that the G/M or dealer also goes out to the larger customers and does the same. Many dealers might question the validity of this and importance of it, but let me draw a picture you can use.

Let us say you have a wholesale account purchasing $10,000/month or $120,000 a year. that, in terms of profit is much like four or more cars a month. Any dealer who had a customer buying this many cars a month would certainly know who the customer is and would roll out the carpet for them. We are selling those cars (in pieces) every month to customers who deserve and need the same recognition and thanks that we would give but one new car buyer.

With the insurance companies (most of whom have questionable parentage) calling the shots and demanding ever increasing discounts, and with the availability of factory pricing available in many good search engines, we are the only business that tells the world what our pricing and profit structure is and then tries to go out and sell something. Consistency and availability are the competitive factors in wholesale; combined with a high degree of personal attention to the individual (the better ones) customers we can make, and grow the business.

The factories, for the most part, really do not understand some of the factors in building the wholesale market. If they did, they would not be so quick to cut the benefits that we have enjoyed in the past by purchase effiency on our part. From time to time I see factory parts reps going out, with the parts manager, to larger wholesale accounts. To these few I take off my hat and say thank you and welcome to the real world.

Nuff Said.

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[kcatdeejay]

Very well said, Mike. Now you just have to post it to the Dealer's Forum in hopes of opening an eye or two. I keep wondering what I may have forgotten in order to build a wholesale business like I've done a few times in the past with pretty good success. Relationships, availability ? Nope, I KNOW the extreme importance of those facts. Ah! I know what it is ! I'm dealing with get rich quick, impatient types who don't know the first thing about building a wholesale business, much less anything else involving parts. It was good to see in print, though, to reinforce my thoughts on the matter.