Any room for a medium-size wholesale dept?

[mbowers]

One of the subscribers to The Parts Manager is interested in building his small wholesale parts business into a medium-sized operation.

Can a medium-sized wholesale business compete with the big guys? Can it be profitable? Is it worth the effort? If yes, any suggestions for our reader on how to go about building his wholesale business?

[Garry House]

Depends on the Franchise...and the Regional Market! With Ford, L-M, or certain imports, I believe there is some opportunity. General Motors and Chrysler-Plymouth is far to competitive. Please identify the dealer's Franchise and Market Area...then I can help with developing 1) Profitability, 2)Distri- bution, and 3)Marketing Strategies, in that order.
Garry House
NCM Consulting Division

[cwalden]

1)Take care of the accounts you have now
2)Find out what your break even % is and lower it.
My opinion is go big or stay at home.

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[Chuck Hartle]

I usually try to stay away from this. As most of you know, NADA says wholesale is a loser and you should promote your own dealership's service department. I just did a complete breakdown of our wholesale operation for the third time in 5 years.
Five years ago we were doing between $500,00 and $600,000 per month in wholesale sales. However, our profit percentage was 13% (very low). We have been averaging $350,000 per month for the last two years and we "weeded" out our non-profitable wholesale business during a two year period to get to this level. Looking at our wholesale operation and the employees and resources it takes to generate the 19% profit it now enjoys, the wholesale side of our business breaks even at best on paper.
However, there are many "hidden" profits to doing wholesale. It helps to build return allowance and inventory variety that can enhance your retail operation in the dealership. It helps to build the reputation and the integrity with your community and your wholesale customers. If a wholesale garage can't fix it who are they going to refer their customer to if it is a dealer issue? They will refer them to the dealership that supplies them with parts!
Wholesale can be profitable if you set your price up front and give good 'service' without sacrificing your pricing to get into it.
Too many dealerships fall into the 'trap' and the false belief that you can 'buy' your way into a market. I know, because I fell into that trap and I spun my wheels for 6 years in a non-profitable wholesale situation.
All the suggestions here are good and prudent. Remember to identify your market and competition and never sacrifice your profit margins to move forward in the market. Being in a very competitive market in southern California, we have stuck to our pricing policies and focused on great service and it has provided the consistency and repetitive customer base.
Chuck Hartle'