You don’t need a columnist to tell you the current weakness of the Canadian dollar is creating business challenges. If you recently visited an open house or bought some inventory, you’ve probably experienced sticker shock. You’re likely already thinking about ways to cope with this unsettling circumstance. Here are few ideas to keep your dealership growing profitably – despite US dollar strength.
FIND ENTIRELY NEW RV BUYERS
RV owners will find today’s prices higher than they paid for their current unit and that difference can be tough to overcome. One suggestion is to focus on thousands of potential buyers who haven’t bought an RV before and who have no basis for comparison. Non-owners are looking at a purchase through a very different prism. They tend to consider your selling price in the context of their budget or monthly payments, rather than the comparative prices of five years ago. With interest rates at historical lows, you’re able to arrange purchase financing with monthly payments well within the means of many potential new buyers. With a creative sales and marketing plan you can find and bring such new buyers to your store and maintain retail sales momentum.
HELP YOUR SALES PEOPLE ADAPT
There is an art to selling products with higher prices. There is also an art to finding completely new customers for your dealership. The good news? These valuable skills can be developed. Salespeople can learn how to focus on attributes other than price. And they can develop an ability to bring in customers that are completely new to the industry. If you can’t impart these skills, hire a specialist or encourage your association to organize training sessions.
NEGOTIATE
In every industry, manufacturers understand the financial health of their dealers comes first. They know pricing and policies must adjust to maintain sales while the US dollar is strong. The RV business is no exception. Some vendors reduce prices for foreign customers. Others increase advertising allowances or help with costs related to shows. They may provide extended payment terms or reimburse your financing costs. Any of these concessions help you deal with the margin compressions usually required to maintain unit sales. Just as manufacturers earned extra profit when the Canadian dollar was recently stronger than the US dollar, you need to win their support to share in the pain of the currency differential to keep your dealership competitive and financially healthy.
‘COST AVERAGE’ YOUR INVENTORY
It may be too late to implement a currency hedging strategy, but it’s still better to make regular purchases than try to time exchange rates. Like making investments in the stock market, it is almost impossible to determine an ideal time to buy. Purchase regularly to average costs of your inventory and keep selling prices competitive over the season.
WORKING CAPITAL IS CRUCIAL
It’s essential to buy new inventory regularly. It’s equally important to have lines of credit in place with banks or finance companies to buy trade-ins. Both require adequate working capital. Remember, current RV owners are not solely concerned with the suggested retail price of your products. Rather, they’re focused more on the difference they will need to pay to buy a newer unit. Dealers with adequate working capital and good knowledge of resale values can welcome trade-in units at fair and reasonable prices. Such a basic tool can often make the difference between a retail sale and a potential buyer leaving the lot to “think about it.”
OPTIMIZE PROFITS ON EVERY SALE
To maintain sales momentum, mar-gins may compress on new unit sales to offset a wide dollar differential. Total profit per unit need not reduce. A more intense focus now on income potential from finance and insurance products can pay big dividends throughout the selling season. Call in your finance or insurance provider. Be sure you are selling the full suite of services available. Ask your provider to train salespeople on ways to help improve finance and insurance penetration with resulting profits. Then, be sure to embrace any technology tools they offer. Finance and insurance are not only useful profit enhancers; they can often be powerful closing tools to generate more sales.
GROW OTHER PARTS OF YOUR BUSINESS
Sometimes a current is just too strong to successfully swim upstream. Should currency pressures start to wear you down despite these proactive measures, create strategies to focus on higher profit components of your dealership. It might be too late to mobilize a seasonal storage program for this year, but it’s not too late to develop, promote and reap the rewards of a pre-season service special. Promoted to existing customers or RV owners in the community, service visits in the January to March window can generate thousands more dollars in revenue from service and related parts sales. There is still time to boost parts and accessory sales in the coming season. Rework showroom displays to create more space and visibility for accessories, and you can boost annual profits substantially. Careful consideration of stocking incentives from parts and accessory suppliers can assure better inventory as the season arrives. Better displays and availability encourage more customers purchases and valuable gross margins that partially offset margin compression on unit sales.
CHECK YOUR BUSINESS CULTURE
With challenges resulting from the strength of the US dollar, I can confidently predict there will dealer-ship winners and losers in the coming months. Why? Your dealership business culture drives the outcome. As respected management guru Peter Drucker once said, “Culture trumps strategy every time.” Even if you follow my advice and implement all of the strategies I outlined, the culture of your dealership will determine success or failure. So, I encourage you to first look closely at that culture. What are your dealership strengths? What are weaknesses? How do customers perceive you? How do your employees think of the business? What can you do to change the culture? To avoid being crushed by the US dollar, I encourage you to first assess your dealership business culture. Be sure you have a positive environment in every section of the business. Assure every employee is dedicated to customer satisfaction. And, demonstrate with your own words and actions that you’re confident both your products and dealership represent great value.
