Mama Sonic takes charge of used sales
Group says centralized system boosts results
Sonic's Smith: Cars go where the profit is.
DALLAS -- At Sonic Automotive Inc.'s Lute Riley Honda near Dallas, Dan Weiss is winning more trade-ins with the help of his trusty iPhone.
A new, centralized inventory management system, piloted at the Honda store and now rolling out across Sonic's dealership network, crunches real-world sales data to help store-level employees offer the best possible price to customers looking to sell their existing vehicles.
"All the time, we're bumping the trades and saying, 'Oh, we can sell for this,'" said Weiss, general manager at Lute Riley. "The tool proves us right. It makes you less afraid to put more money in the car."
Stores using the system are securing more trades, selling more used vehicles, turning them faster and generating higher profits on each sale, Sonic executives say. The new tool, dubbed SIMS in Sonic parlance and administered from a center in Sonic's hometown of Charlotte, N.C., also uses internal and third-party sales data to determine the optimal list price and best store location to sell the used-vehicle acquisitions.
That means it no longer matters if the used-vehicle director at Sonic's BMW store in Ann Arbor, Mich., doesn't want to pay top dollar for a 3-series convertible in December. The SIMS center back in Charlotte, nicknamed Mama Sonic by President Scott Smith, will intervene.
"We've got BMW stores all over the country," Smith said. "We can say we know that BMW convertible needs to go to Long Beach because that's where it's going to bring the most money. So we can say, 'Put X in it,' which might be $2,000 to $3,000 higher than what they'd put into it otherwise."
SIMS will help Sonic get to its goal of 100 used vehicles sold per store per month by the end of 2013, said Jeff Dyke, executive vice president of operations for the nation's third-largest dealership group. That would be up from 79 per store in 2011. Ultimately, sales of 130 to 150 cars per store are possible with SIMS, Dyke said. Sonic currently has 102 dealerships.
Sonic already has had months in 2012 when it has averaged that 100 per store, and two regions -- Texas and Southern California -- are consistently above that threshold.
The retailer also is moving more cars between stores than ever before, the company says.
Average gross profit is up sharply in the stores using SIMS, Dyke said. At Lute Riley Honda, for instance, per-vehicle profit is up 26 percent, or $242.
SIMS will be operational in all Sonic stores by next March.
But taking control away does not make for an easy cultural transition for dealership employees, Dyke said.
"It's a change, and anytime you have a change, it ruffles people's feathers," he said. Managers who don't like the new system will "go work somewhere else."
Sonic prepared for the transition by reducing store turnover, getting the right leadership in place and increasing compensation for used-car managers, he said.
The pilot with SIMS, developed in-house, was launched at Lute Riley Honda and a few other stores in mid-2011.
Weiss, the store's general manager, said the new tool provides two big advantages. First, it heightens managers' awareness of the importance of pricing the vehicle right from Day One. Second, it teaches the importance of speed to market.
Managers use Sonic-issued iPhones to get a trade appraisal in five minutes. They scan the vehicle identification number, answer some automated questions, take snapshots of the car's exterior and interior and type in comments about vehicle condition. The SIMS center generates a price recommendation and says whether the vehicle should be moved to another store.
Once the store owns the vehicle, the system automatically generates a vehicle listing for Sonic's Web site and third-party sites featuring the comments and photos gathered by iPhone. The vehicle listing is typically posted on the Internet in less than two days vs. the 10 days it could have taken in the past, Weiss said.
He recalled a Lexus ES 350 that came in on trade in August and was sold in one day for its asking price before it even landed on the used-vehicle lot.
Weiss, a former national used-vehicle director for Sonic who helped develop the centralized system, retains some flexibility on appraisal pricing. If his own research shows a vehicle is worth more than the price the tool generates, he can offer it.
Sonic executives' big concern is missing trade-ins because of low offers. The tool is especially helpful when the store is faced with an unfamiliar vehicle such as a late-model Range Rover.
"That's a real win-win because that's a car I'm afraid of," said Weiss, who has never sold a Land Rover at his store. "We don't know that car."
Because of SIMS, the Honda store is more likely to win the trade and make its own sale. The Range Rover then can be sent to Sonic's Land Rover store in Houston to retail, Weiss said.
Dyke and Smith are fond of referencing Moneyball, the book and movie chronicling the data-driven player decisions made by the Oakland A's baseball team.
"That's what we're doing at Sonic," Dyke said. "We're using data to make decisions instead of a used-car manager and a black book. It's a different ballgame."
You can reach Amy Wilson at firstname.lastname@example.org.