To get a sense of the approach Jasen Rice and his team at Lotpop take in working with dealers, picture the one-game-at-a-time, week-by-week approach of a football team.
“They don’t worry about the Super Bowl; they worry about who they’re playing this week. They make their adjustments and try to win that game,” Rice said in a late June phone interview.
“And if they win that game, they go to next week, make their adjustments and try to win that game,” he said. “So, each week, the dealer has to make adjustments; they’ve got to figure out what their strengths and weaknesses are and make adjustments and move forward.
“Just win each week,” said Rice, who is Lotpop’s owner. “And when you can do that, you’ll eventually get to your goal of how many units and gross you want to make.”
Keeping the gridiron parlance going, Rice and Lotpop now have a new team they’re coaching up: the Fiat Chrysler Automobiles dealer body.
Specifically, their pre-owned operations.
After a pilot, the automaker added Lotpop to its official FCA Digital Supplier program in June, whereby the FCA dealer body can now utilize Lotpop to help boost their certified pre-owned and used-car operations — particularly when it comes to how quickly they are turning that inventory.
Eric Swanson, FCA’s head of certified pre-owned vehicles, connected with Rice over the years at Cherokee Media Group’s Used Car Week conferences.
“I like what Jasen’s approach is, in the fact that he’s not just a consultant where he shows up, and he gives you a list of things to do,” Swanson said. “I really like how his team literally dives in and works with the dealers that he (partners) with on a weekly basis.
“Obviously, the whole intent here is to help improve our dealers’ used-car operations, help improve their profitability. It’s a big hot topic right now — with a lot of dealers, not just FCA dealers,” he said.
In a nutshell, that’s the goal of the partnership between FCA and Lotpop: Help the automaker’s dealer body with used-car profitability, increase used and CPO sales and improve turn times.
Focus on ‘First 30’
The latter is crux to a current focal point of Lotpop’s training, something it has dubbed the “First 30.”
“And what we mean by that is, we know the profit of a car is going to happen the day you buy it,” Rice said. "The most profit you’re going to make is when the car’s fresh. And our best-performance stores will sell 60 to 70% of their inventory in the first 30 days. The first 30 is where you’re going to maximize profit potential.”
Easier said that done, of course. Getting to a level of selling some two-thirds of the inventory in the first 30 days requires some weeding out of the aged inventory.
It can be a tricky proposition. Simple as it may sound, in order to get to a 60-70% level of cars sold in 30 days, you have to have fresh inventory to begin with, Rice said.
“And dealers that have an aging problem have 15, 20, 30% cars over 60 days old. They’re going to have a hard time having 60 to 70% of their inventory fresh. So, it’s a matter of cleaning up that aged inventory. And once you can do that, that’s when the profit can start maybe exposing itself a little bit,” Rice said.
“It’s not until you can get it consistently in that 60 to 70% sale rate the first 30 days that you start seeing gross.”
As far as why a dealer might not be carrying or selling enough vehicles in the zero-to 30-day bucket, there could be any number of influences, Rice, said.
That could include challenges with turnaround time, inadequate photos and descriptions, pricing issues or simply having the wrong cars.
“There’s all these metrics that will affect what is causing you not to be able to perform in the first 30. And so those are the things that we track ... we expose it,” Rice said.
“Each week, we give them what’s working on their lot and what’s not. Maybe their average investment went up,” he said. “Maybe their make mix is out of round. Maybe they’re carrying the wrong cars. Maybe their pricing went up. Maybe their photos got behind. Those things all cause them not to perform in the first 30, to get their 60-70% in the first 30.
“And then we isolate those cars, try to figure out what’s causing that problem and give them a game plan each week. So, it’s always adjusting.”
Like the aforementioned football team.
Grassroots efforts to boost CPO
From the OEM’s perspective, Swanson agreed that the hands-on coaching that Lotpop offers can serve as a granular, grassroots marketing of CPO at individual stores.
“I think this is our way of, sort of, attacking that (grassroots marketing),” Swanson said. “From a CPO perspective, we’re not going to have the budgets that they have on the new-car side.
“We’re not going to be able to do television ads and radio spots and billboards and things to that degree, where you’re going to make a difference,” Swanson said. “So, you have to attack this at a grassroots level.”
Swanson said FCA has “always attacked it like this,” where it has personnel in the field that are fully dedicated to CPO, talking with dealers about enrolling in a certified program and being active in it. But there are limitations to what an automaker can do. That’s where partners like Lotpop come into play, to provide some extended services.
“We can go and talk to (dealers) about CPO; we can help them with the training of it; we can help them with their administrative processes and making sure that everything is coordinated,” Swanson said.
“But when you get into stuff like pricing and profitability and vehicle acquisitions, and a lot of the things that Jasen and his team do, that’s stuff that goes beyond the scope of what an OEM can really do,” he said.
“What Lotpop does is literally work with the dealers,” Swanson said. “They extract their inventory information, they analyze their information, they put it in a scorecard, and it’s tracked on a weekly basis. And calls are made, and they’re like, ‘OK, here’s how we need to price these cars that week.’ It’s well beyond anything that we can do from a factory perspective.”
Rice said one of the things that attracted him to partnering with FCA was Swanson’s goal of not just boosting CPO, but used-car sales in general. That perspective showed FCA had the best interest of the dealer at heart, Rice said.
“If they’re just a better used-car dealer, they’re going to be a better new-car dealer,” Rice said.
The fact that FCA’s CPO program will benefit is an added plus, Rice said.
Industry opportunities in CPO
Industry-wide, even with the slightest of year-over-year declines in June (0.09%), certified pre-owned sales in the first half of the year were still 1.3% ahead of where they were in 2018, which was the eighth straight record year, according to a recent Data Point report from Cox Automotive.
Through June, there have been 1.40 million CPO sales, the report said.
“This year CPO sales are growing at a comfortable pace above 2018’s record-setting performance,” Cox analysts said in the report. “Favorable supply of vehicles entering the market will continue to support used retail sales.”
There certainly are opportunities abound in CPO for dealers.
Generally speaking, one of the arguments that’s often brought up, however, is that the profit margins on CPO are tougher because of the additional costs to certify the vehicle, Rice said.
“But it’s not the CPO that caused that (profitability challenge). It’s obviously, one, the way they bought it, but two, the way they handled it after the fact,” Rice said.
He emphasized the importance of not just looking at CPO from a front-end gross perspective. It can bring more trade-in opportunities to find later-model vehicles that might be more challenging to acquire at an auction, Rice said.
Certified sales can generate service revenue for an OEM’s dealer body down the road or lead to a new car purchase — or perhaps another CPO purchase, Rice said.
In other words, it’s not just about the cost of doing CPO from front-end perspective, but the ancillary opportunities that can come along with it.