Mastering Bucket Management: Turning Inventory into Profit
For used car dealerships, bucket management is a critical strategy for maximizing profitability and ensuring inventory turnover. In the latest episode of LotTalk, our team unpacked the essentials of bucket management, offering actionable insights to help dealers better manage their inventory and improve overall performance.
Here’s what you need to know about bucket management, along with practical tips to streamline your processes and enhance profitability.
The Challenge: Stale Inventory and Missed Opportunities
Stale inventory isn’t just frustrating—it’s expensive. Every day a car sits unsold, it loses value and ties up capital that could be reinvested. As discussed on LotTalk, managing your buckets—groupings of inventory by age—is essential for maintaining profitability.
“Think of it this way,” one of our hosts explained. “If your first bucket, the 0–15 days, isn’t selling enough inventory, your profitability will start bleeding into the later buckets. That’s when gross compression happens.”
Too often, dealers get caught holding out for higher gross profits while ignoring the critical cost of aging inventory. The solution lies in balancing speed and pricing to ensure optimal turnover.
Solution 1: Align Pricing with Activity
Pricing decisions should never be reactive or based purely on timelines. Instead, as LotTalk emphasized, pricing should align with customer activity and market data.
Here’s a recommended approach:
1. First 7 Days: Price inventory slightly above market value to test demand. For example, if your average sales price is 99% of market, consider starting at 101–102%.
2. Day 14: Adjust pricing to align with how your store typically sells. If there’s no activity, it’s time to meet the market or even slightly undercut it.
3. Day 30+: Begin exploring wholesale options while pricing competitively to attract retail buyers.
“Activity, not the clock, should drive your pricing decisions,” one of the hosts noted. “If a car has a lot of interest but no sales, consider raising the price. If there’s no activity, adjust downward sooner rather than later.”
Solution 2: Use Market and Store-Specific Data
Bucket management requires understanding both market trends and how your dealership operates. While market data is essential, relying solely on it can lead to missteps.
“You need to ask yourself: How does this car sell in my store, in my market, with my team?” explained one LotTalk host. For example, two dealerships in the same city could have vastly different sales results on the same vehicle because of variations in staff expertise or customer demographics.
To align inventory with demand, focus on:
• Market Data: Understand how vehicles are trending regionally.
• Internal Trends: Analyze past sales to identify which cars perform best in your dealership.
One guest emphasized, “It’s like planning your day based on the weather forecast. If the forecast is for snow in the mountains but you’re in the valley, you need a different strategy. The same applies to inventory management—your data needs to reflect your specific environment.”
Solution 3: Integrate Lead and Inventory Management
Good bucket management doesn’t stop with pricing and stocking decisions. It extends to how you handle leads. Aligning inventory with active leads ensures you’re maximizing every sales opportunity.
Consider these key strategies:
• Match Leads to Inventory: Regularly audit leads to ensure you’re presenting customers with relevant options.
• Follow Up on Sold Inventory: If a vehicle a customer was interested in has sold, reach out with similar options.
• Audit CRM Activity: Monitor the quality of communication between staff and prospects to ensure consistency.
One host highlighted the importance of lead follow-up: “Fifty-six percent of customers end up buying a car that’s different from the one they initially inquired about. If you’re not matching leads to fresh inventory, you’re missing out.”
The Bottom Line: Be Proactive, Not Reactive
Effective bucket management requires discipline, patience, and the right tools. By focusing on pricing strategies, leveraging relevant data, and integrating lead management, you can avoid the pitfalls of stale inventory and maximize your dealership’s profit potential.
Ready to Elevate Your Bucket Management?
If you’re ready to take your bucket management strategy to the next level, we can help. At LotPop, our LotWalk software provides actionable insights to help dealers manage inventory, optimize pricing, and connect with customers effectively.
Visit Lotpop.com to schedule a demo today and start turning your inventory into greater profits.
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