Many dealers may not be aware of the various ways that a well ran online operation can lose profitability. We want to make dealers aware of all the methods to save money and keep more of the income made from sales revenue. This should serve as a simple checklist to make sure all things are being considered!
- Pricing Matrix
The objective is to stay competitive while still making sure that there is enough profit to make the order worthwhile. Dealer pricing matrices should be set up so that the higher margins are on lower cost goods and lower margins are on higher priced goods. Customers are less likely to notice a 30% above cost padding on a $5 part then they are on a $500 part. Make sense?
All dealerships should have ‘loss leaders’, whereby you take a smaller profit on some items to encourage sales of other items customers will find on the website. If your dealership has overstock, open box or obsolete parts that are taking up valuable space in the warehouse then why not offer these parts at cost on a clearance page to entice more customers into placing an order? This will not only build your customer database, but it will also increase the probability that other items are added into the cart before checking out.
- Shipping Matrix
Lots of dealers neglect to setup a matrix based on weight to scale their shipping. The same idea we just went over for pricing can be attributed to your shipping model if you are dealing with a catalog that is not 100% accurate. The more a shipment weighs, the higher your pricing markup should be and the less a shipment weighs, the lower you can make your margins. This way a single item weighing in at 7lbs can ship for 10% above your FedEx, UPS or USPS rate and an item that weighs 70lbs can ship for 12% above your going rate. This ensures you have enough coverage so that you are not losing profit.
Dealers should NOT be buying dunnage to repack items sold online before shipping. Your service department already throws away packaging used on the OEM parts and accessories they outfit vehicles coming in for routine repairs. These boxes, bags and other materials can be saved and sent to the parts department to be used to repack parts and accessories to be shipped to customers placing online orders. Your UPS and FedEx account also entitles you to flat rate packaging at no charge, so whenever possible, utilize those!
Renegotiate Carrier Discounts
As the business increases for the parts department, business is also increasing for whatever carrier you use to send packages to customers. Renegotiations should take place annually to ensure that dealerships are getting the best possible discount on shipping rates, so that this savings can then be passed onto the customers and drive more traffic to the site.
- Catalog Corrections
The catalog data provided from software companies, like RevolutionParts, comes from a third party data company and is not always 100% accurate, especially when a new or obscure part is added to the system for the first time. As orders come into the website, dealers need to make sure the weights and dimensions of the parts on the order are correct to ensure accurate shipping quotes. If the data is not correct, then take the time to update it so that the next order that comes in for that same part, is giving the customer an accurate estimated shipping based on proper dimensional weight. You can click here to see an article on how to update weights and dimensions on the RevolutionParts platform.
The parts department is a low profit margin business in dealerships and OEM Interactive wants to help our clients be successful by keeping as much of the profits as possible. These are just a few ways you can save money internally and we are always working with our dealers to define methods for running the department more profitably. Happy Selling!