100% fixed absorption is a requirement for the long-term sustainability of your dealership, especially as vehicle profitability falls and the future of service grows more uncertain. But this goal remains a hurdle for many dealerships because the average U.S. dealer absorption rate lingers at 60%. The answer is in front of you: your parts department.
Parts departments, in particular, can be a real money drain if not managed efficiently. Lost opportunities, increased costs, and lower profitability are all potential issues. Sales departments have always been the star of the dealership, but the strongest armor protecting your dealership’s success is in the fixed ops department. But only if you have the tools and processes in place to reach your full revenue potential.
Let’s explore the hidden costs associated with dealership inefficiencies. Plus, we’ll share how modernizing your processes can boost your dealership’s profitability and customer satisfaction.
Table of Contents
Finding Inefficiencies in the Parts Department:
Operational inefficiencies will have a snowball effect on dealership profitability. A few of the most common inefficiencies that dealerships suffer from include:
Poor inventory management: leads to lost sales opportunities.
Managing inventory is not a cakewalk. There will be substantial problems in the absence of real-time inventory management. Dealerships will overstock slow-moving and deplete the high-demanding ones. This causes service jobs to be delayed, loss of sales, and worst of all, losing customers to your competitors.
Outdated ordering processes = high obsolescence costs
Slow fulfillment and incorrect part identification result from manual or obsolete ordering procedures. These are some inefficient practices in the inventory and contribute to a large percentage of obsolescence. The end result is dissatisfied customers and a crippling burden to your dealership’s budget. With razor-thin margins being the norm for modern dealerships, mistakes like this sting a little more.
Lack of eCommerce = Failure to Meet Customers Where They Are
Many departments still use conventional sales approaches, restricting access to walk-ins, phone-in orders, and service lane customers. There is no doubt that customers like to purchase their parts online; they expect easy shopping that dealerships which do not have eCommerce cannot give them. If you will not adopt eCommerce now, it will keep on giving away more and more customers; eventually, your dealership gets left behind.
As an interesting side note, in fact, according to our 2023 eCommerce Shopper Behavior Report, web stores powered by Revolution alone had no fewer than 143.2 million unique users within the year of March 2022 through March 2023. That’s a whole lot of customers to miss out on if you aren’t currently selling parts online.
The Vital Role of the Department in Fixed Operations
A well-managed parts department is the key to fixed operation success. As Tully Williams once said:
With-out Great people, with-out Great inventory there is no service department. HOURS are sold because of parts sell HOURS.
This quote outlines the symbiotic relationship between parts and service departments. When parts are handled efficiently, there is a smooth running of service operations, which translates to increased revenues through additional labor hours.
Here’s how an efficient department can enhance service operations:
Reduced service delays: Quick access to the right parts ensures that service jobs can be completed on time.
Increased productivity of technicians: Technicians can concentrate on completing jobs rather than waiting for parts when they have the necessary parts available.
Enhanced dealership profitability. Improved management enhances dealership revenue through higher fixed absorption rates from the sale of more labor hours.
Embracing Modern Automotive eCommerce Solutions
If you are like 95% of U.S. dealerships, you know there is no room for error, which highlights the need to maximize the revenue impact of every department in your store. One area with a typically underutilized power source is your department. To tap into your parts department’s revenue potential, adding an eCommerce channel is a must. Here’s why:
Reach a Larger Market:
An eCommerce platform opens your dealership up to reach customers beyond your local market. Can any of your other departments do that every day? By selling parts online, you tap into a national-and even international-customer base, boosting sales opportunities and supersizing your dealership’s footprint.
Streamline Inventory Management
You’ll get the most accurate and best updated brand catalog available, directly from a platform specifically built for the dealership. It equates into real-time inventory management-which means you can sell any part at any given time. As long as you sell parts in this manner, you get paid before you’re required to purchase the part. That’s no financial risk and no threat that the part might become outdated. It also increases the accuracy of sales trend tracking by providing insights from data.
Enhance your Customer Experience:
There is a vast do-it-yourself market which appreciates genuine parts, and those customers want quick, easy, and transparent online shopping experiences. eCommerce enables customers to browse available parts, check prices, and place orders from anywhere, at any time. It also simplifies order tracking and communication, which improves customer satisfaction.
Online sales of automotive parts and accessories are expected to grow nearly 50% between 2024 and 2030. So, embracing eCommerce has never been more of a must-do.
Success Stories That Speak Volumes
BMW of West Chester:
Huge success for BMW of West Chester happened when it integrated eCommerce with the parts department. It removed all old inventory and maximized the parts sales while serving the customer better.
Today, the dealership reports nearly $200K in online parts sales each month. Their story is a perfect example of how eCommerce can transform a parts department from a cost center into a profit generator.
Olympia Nissan:
Olympia Nissan’s parts department, one of the quietest cornerstones of the dealership a few years ago, was transformed into a major revenue generating arm by shifting to an eCommerce-focus strategy using RevolutionParts. This shift helped them jump up their absorption rate and scale up their monthly online orders into 465, which then generated $67,275.39 in revenue with an average order value of $144.68. Over time, Olympia Nissan’s online efforts garnered an impressive $7.3 million revenue and $1.2 million gross profit.
The key to this success was the decision of the dealership to break away from platforms such as eBay and Amazon, to instead focus on building its very own customized web store through RevolutionParts. Flexibility and user-friendliness made the platform possible for the dealership to streamline its parts operations and explore broader
Modern INFINITI of Winston-Salem
From then on, online parts sale through RevolutionParts has marked its smooth and extremely successful time for Modern INFINITI. It has proved to be quick and clean due to selling old and surplus age parts. Leverage manufacture’s in-favour promoting activities boosted more traffic. The dealership, further profitting, made choices accordingly toward cost-effective shipping methods while working in conjunction with established goals.
From what it achieved in 30 days: 260 orders valued at more than $111K in sales and bringing gross profit of $6,367, even being aggressive with online pricing for competitiveness, Modern INFINITI outpaced performance of its wholesale department and gained exposure to everyday customers aside from repair shops.
