When Hawk Auto Group raised prices earlier this year, director of parts operations Vince McIsaac saw a decline in business but not in revenue.
McIsaac told host Sam D’Arc on a Fixed Ops Friday edition of Daily Dealer Live why Hawk intentionally traded volume for margins.
Explaining the shift: McIsaac oversees the parts operations for multiple locations in the Chicago area.
Collision repair is a central part of the dealership group’s operations and its efforts to diversify services, according to McIsaac.
The group, he says, is looking to cut expenses and focus on efficiency as business has trended down.
“We thought we were efficient before. We're trying to manage that in an industry that has declined 7% over the last couple of years across the board on car lines,” McIsaac explained.
Less is more: In a February appearance on DDL, McIsaac detailed a planned price increase to meet rising expenses. Four months later, he reported the initial results.
Their overall volume has dropped 15% to 20%.
Meanwhile, gross revenue has been within 2% or 3%, higher or lower.
“We’re doing less, making the same,” McIsaac noted.
Paying for value: When asked about rationalizing price increases with customers, McIsaac says it actually allows for quicker parts delivery, which reduces cycle time, and creates additional time to help customers buying from them.
“We pride ourselves on having a lot of skilled guys that we pay pretty well on our end of the phone, so that when these customers call and they may not make the investment in training or experienced people, we can help them to have the right information in order to provide the right part,” McIsaac said.
Digging deeper: Turning parts inventory quickly also helps dealers cut expenses.
Due to lines of credit up to 10%, insurance, taxes, and employees ’ expenses, McIssac places the cost of carrying inventory at 18% to 25%.
“That’s something most businesses, and especially in the dealership world, typically were not looking at,” McIsaac said.
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Looking ahead: McIsaac is working to build an internal AI tool to handle complex parts identification.
The simple matching of parts to VINs is within grasp by using existing databases.
He explained other potential use-cases, adding, “I've got a little piece of plastic, and it’s something [that] attaches to something else. What is that piece? We have to use our intuition. That’s what I’m constantly trying to teach AI to get more complex in their thinking.”
For managers: McIsaac’s shop found a correlation between the quality of service and the volume that customers are willing to pay for the difference.
“If we provide better service, then we can do less overall business,” McIsaac said.
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