PowerSports Business

November 6, 2017

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SOLUTIONS 40 • November 6, 2017 • Powersports Business www.PowersportsBusiness.com Parts, garments & accessories (PG&A) represent some of the high- est gross margin opportunities you have in your dealership. If you maximize the potential in this department, you can absorb a large chunk of the operating expenses for your dealership. This makes you less dependent on unit sales to keep your doors open — some- thing that is critical during periods when unit sales are in the tank. In this month's article, I will recap a few of the current best business practices dealers are using to increase their PAC sales and profits. To track the volume and profitability in this department, it is vital that you first verify that your PG&A inventory is properly categorized in your DMS. The supplier price guides that feed into your DMS do not always categorize all part numbers correctly. For example, I have seen helmets categorized as hard parts and a coat classed as an accessory, etc. Hard parts are usually defined as OE- supplied replacement parts that came installed on the basic unit (often related to engine/drive system components, nuts & bolts, etc.; items like windshields and saddlebags are generally classed as accessories). Aftermarket replace- ment items like brake pads could be classed as parts or accessories, but I prefer to call them accessories since they are not OE-supplied. Weigh the benefits of selling OE replace- ments versus aftermarket products. A major OE advantage is exclusivity, which reduces competition. In addition, brand-loyal custom- ers may prefer OE replacements. In some cases, the quality, reputation and/or warranty may be better, making it easier to sell. After- market replacements might fit multiple brands (which reduces inventory cost) and have lower retails with higher profits. Also take into account the program advantages (discounts, freight, dating, etc.) of each supplier. Get to know your PG&A reps. Some OEs and virtually all aftermarket suppliers have field reps that visit their dealers. As a dealer, I will pay more for a product if I have a rep that supplies good advice on stocking for my market, provides feature and benefit training for my staff, helps display their merchandise, and is willing to step up and exchange stuff that isn't selling. Reps can make a huge difference in your ability to turn particular products on a regular basis. Monitor your inventory number of turns every quarter. Overall, you need to see 4-6 turns of inventory in 12 months. 1) Add up your ending inventory at cost every month for 12 months and divide this number by 12 to get an average. Then divide that number into the total sales at cost for the period. 2) Pull a report from your DMS on inventory that turned less than three times in the last 12 months. 3) Pull another report on anything that turned more than four times. Reduce slow movers and increase fast- turn inventory. You want to reduce P&A inventory that turns less than three times and increase what sells more than four. Take sea- sonality into account. If you are selling over six turns per year overall, you are likely losing customers because you have to special order too many items. Note that clothing tends to be among the slower turning items. However, it is often necessary (or required) to stock these items. Eliminate OBS. Obsolete inventory or OBS drains your cash flow. You need to eliminate stuff that doesn't sell and reinvest Essential best practices for PG&A dept. success RETAILREMEDIES STEVE JONES See Jones, Page 42 Create appealing retail space to increase your PG&A inventory turns. Photo by Dave McMahon/ Powersports Business

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