Focus on Volume and Higher Total Gross Will Follow
Have you ever seen an item in a retail store and thought “How do they make any money at that price? These crazy people must be losing money!”
The reality is that they may indeed lose money on that particular product, but there is usually a good reason why.
Every retail operation has a different formula for pricing, and they don’t always follow the axiom buy low wholesale, sell high retail and make a nice profit on every sale.
If you buy tickets at a large pro arena or stadium you know that the tickets are very expensive, and there are some healthy profits on food and drinks at the concession stands because they’re also very expensive. But an article in the New York Times covered an NFL team owner who actually lowered concession prices and then experienced higher gross profit. Pro sports teams have many channels to draw in revenue, but strategy and pricing are how they maximize gross.
Auto Dealer Consultant and Expert Witness
Auto dealers are very complex operations with many current and future avenues for gross profit beyond the vehicle gross margin. The key is a vehicle sale that enables the rest: manufacturing volume incentives, advertising credits, floor plan credits, finance, insurance, parts and service are all driven by vehicle volume. A low margin vehicle sale is better than no sale at all. Plus, the sale leads to a potential customer for life, future vehicle sales and ancillary profit from affiliate body shops, car washes, quick lubes, tire retail outlets and the like.
Kirk Kleckner is a skilled and experienced auto dealer business consultant.
Click here to see Kirk’s credentials and call 612-294-8730 to set up a consultation.