Getting Out Of Wholesale?

[lochstein]

Hi Everyone!

The first month of the new year is almost done and it seems that our wholesale business is not what it used to be. Has anyone here considered or actually pulled the trigger on getting out of the wholesale business altogether? We have a few dealers in our area that are giving away huge discounts and trying to steal as much business as possible from the other area dealers. It is not profitable to operate on a 15% margin (or less) just to compete. When the manufacturers sold franchises 50+ years ago, they did so based on location and servicing customers in that location. Now it is 2015 and we are competing with online "dealers" across the globe in addition to local dealers who will literally drive 100 miles to sell sheet metal @ 34% off (in our own zip code.) Some have also invested in new $30,000+ box trucks to do this. I can't see how they can be profitable. This is all before dealing with the insurance fraud, returns, slow payments, time taken to confirm orders, pull parts, check in parts, load trucks, unrecoverable damage claims, etc... When I got in the business 20 years ago, dealers gave 15% off list and shops were lucky to get that. Plus; stock orders were weekly, not daily. Now, we've collectively cut each other's throats just to make a couple more bucks gross, without realizing the expense and other immeasurable issues that i mentioned. If we eliminate wholesale, we will lose a few $K out of net (post-expense,) but can perhaps make it up in becoming more efficient servicing our own mechanical and body shops.

If it helps to understand my point of view, we are a mid-sized import dealer in central NJ. Our wholesale gross profit is $7K-$10K/month @ 20% margin. This is ~5% of our potential overall business.

Thanks for your input!

[coleracing77]

I did it and then took the mirrors off the truck so I cant look back! Couldn't be happier. My gross fell a little and my net skyrocketed! Its nice to sell less and make more and even nicer not to have the b.s. returns and "damage claims" form wholesale shops.

p.s similar scenario as far as the sales numbers and local whores

[erikw]

On January 4th, 2010, I took over two parts departments that were selling $1.2 million per month combined. Of coarse, they were losing money every month. After writing off $280,000 in obsolete inventory, (including over 100 reman engines and transmissions), totally reorganizing the warehouses, changing all of the processes and getting rid of the employees that would not conform to the new way of conducting business, our sales are down $600,000.00 per month but our department net profit was up $600,000.00 in 2014 over 2009. Inventory is 97% under 9 months. We do about $50,000.00 per month in wholesale. I don't give anyone more than 20% off MSRP. I don't take returns over 30 days old. I don't take back anything that is not in 100% saleable condition. I assess a $15.00 or 15% service charge to all special order returns. If anyone refuses to accept a special order or refuses to pay the service charge, they are immediately put on pre-pay.

[dbuck]

I've seen the gate swing back and forth here several times over the years.

We once had a parts and service director go wholesale crazy, he wanted trucks delivering to shops for hundreds of miles, he wanted every shop buying from us he could find inside a huge radius.
And we lost our ass. That didn't surprise me, I told him we would. I don't think he ever cared about the profit as much as the visibility. Most shops willing to wait for those kinds of once a day long distance deliveries just to save a few bucks usually have cash flow problems.

After he left we leaned out wholesale hard. Got rid of the high discount-high maintenance shops, kept a few good local ones, and net about ten thousand a month after expenses just on wholesale. Not a ton, but it keeps the factory happy, the owner happy, my obsolescence is 0, and it only takes five total employees shared between two dealerships to handle all of it.

One of our group's stores has four times my inventory, triple the employee expenses, drives everywhere with a half dozen trucks, and only makes a few thousand more net profit at the end of the month. His gross is high, but the net isn't. It doesn't make sense to me to spin your wheels that hard for so little but it is also very hard for everyone (or anyone) involved to take a hard look at exactly what is happening and to change the culture.

[PartsPlant81]

I've been on both sides of spectrum in regards to wholesale and I really believe it is better to not be involved in wholesale. When I was employed by a dealer group that was totally invested in the wholesale business it was an absolute nightmare...3 countermen taking nothing but wholesale calls all day; incorrect orders, returns, 4-5 drivers, only delivering twice a day (even to customers around the corner). It's really not worth it when all of the expenses are factored in.
Now I am managing at a smaller dealership with about 10-15 wholesale customers that are all local, loyal and understanding. Returns are still an issue at times but for the most part not a huge issue. I would much rather not deal with the low net profit and other headaches that go along with wholesale

[tmundal]

Theoretical question. If you have had a good wholesale operation for years, but a mega dealer an hour away has ten times your inventory and will undersell you no matter what. How do you exit wholesale? What happens to the $1,000,000 in inventory you currently stock? And what kind of ramifications with GM and RIM would you have?

[Denise Trimble]

Just before I became employed at the present dealership, the owner, parts mgr, and s&p director got together and disbanded their wholesale business for the most part. Our owner sent out letters to the body shops and told them he was no longer selling sheet metal, and collision parts. He told the rest there would no longer be delivery service, but he welcomed their business if they are willing to pick up the parts themselves.
He is fine with the results and we still have a lot of local shops stopping in. I could not be happier with his decision. We are a small dealer and the profit in our area is just not there.
These customers are still coming in for things they need, but like the previous post says: they have so many other resources available to customers these days. Wholesale is not what it used to be.

[OilleakEarl]

I sent out a letter letting ALL of our wholesale customers know that we cannot continue doing business in the same old way because of the way things have changed. 1% return reserve and constant returns from body shops AND mechanical shops just doesn't work. I'll keep the good customers who know what they want and the ones who don't want to pay a 35% return fee can be someone elses headache. Here is what my letter says:
[b]Dear valued customer, 12/19 2014
General Motors has systematically decreased our ability to return parts to the manufacturer. We have reached the point where we can no longer accept returns at the current rate. Returns on special order parts will be subject to a 35% restocking fee which is what General Motors charges the dealer. However, we will be offering a significantly better discount if your return rate is 5% or less
Our desire is to serve you better in spite of the policies levied against us by General Motors. We believe this proactive approach will improve your overall profitability.

Please feel free to call with any questions.
Best regards

[Rykid50]

I was just going to say what he did ^. charge 35% and do a cso return.

[brparts]

GM does not want the small dealers doing wholesale, they want only large one's. this is a post i did in 2009, you can agree or not. "The amazing thing to me is how people here have blinders on and are shocked at what is happening or has happened in the industry, you can't tell me NONE saw any of this coming? """ back in 1982 at a cadillac dealer advisory board that i serverd on, i brought up the fact that it looked like GM was trying to get rid of the small dealers . when they got rid of wholesale comp, i think around 1979 or 80 they told us we would make more money because we would sell more because they were going to reduce the price. with that kind of thinking we as parts mrg's knew then that the next 10 or 15 yrs GM was going to be in the dumpster, it did take a little longer but it did happen. most of the PM that were in that meeting left GM and went to other car lines, most went to imports, some out of the auto business. the the big wiggs in there ivory towers are now paying the price for the dumb decisions they made back in the 80's and early 90.