'Velocity strategy' boosts sales, profits

At Tom Gill Chevrolet, selling used vehicles quickly and bringing those customers back for service are newfound keys to success.

A little more than four years ago, the Florence, Ky., dealership had about a 5-to-4 new-to-used vehicle sales ratio. The store has since implemented an aggressive used-vehicle strategy and now has nearly a 2-to-1 used-to-new ratio. Last year, it sold about 1,840 used vehicles and 980 new ones. More importantly, the store's profits have grown by double-digit percentages in each of the last four years — the most profitable in its history.

At the heart of the used-vehicle push is what the store's general sales manager, Phillip Gill, calls a "clear velocity strategy."

"It starts with a great purchase," Gill said. "But then how quickly can you get the car to your lot, how quickly can you get it detailed, and how quickly can you get it online and ready to sell?"

Then the store is in liquidation mode pretty much from the get-go while also maintaining profits, he said. Tom Gill Chevrolet has no-haggle prices, which are aggressive. "We're going after that customer count and what that means for the overall store, rather than just what the front-end gross profit means for a deal," he said.

The strategy was inspired by Cox Automotive Executive Vice President Dale Pollak's "velocity method of management," which involves turning inventory quickly. Tom Gill Chevrolet, just south of the Cincinnati airport, has adopted it while implementing its own holistic approach.

"When we look at it, that used car really can hit every single department in our dealership," Gill said. "So collision, parts, service and then obviously the sales department, and that's before we even sell it to a customer. So there's a lot of ancillary gross that's hitting that store just by turning as many cars as possible."

Gill acknowledges that the dealership's average front-end gross profit on used vehicles is "not anything spectacular" compared with the industry average. But the finance and insurance department makes money on those sales. And the dealership keeps customers coming back with its lifetime powertrain warranty program and similar offers for oil changes and tire rotations.

"We're retaining 80 percent of our used-car customers from 13 to 36 months in the service drive," Gill said. "So when you talk about return, now you're talking major growth dealershipwide because we're retaining these customers."

Of course, used-vehicle sales have increased. When Tom Gill Chevrolet started the strategy, the store was selling about 75 used cars and trucks a month. Now it averages about 175.

Crucially, Gill said, the store has set parameters on what it will buy and sell. The few times it went beyond them, the store learned its lesson, he said.

"If the market's tough, we need to dig harder for the cars we can buy because these are the standards we know are working," he said. "We're constantly looking at those [standards] to make sure [they're] still correct."

The used-vehicle focus comes at an ideal time, as the pre-owned market is expected to remain steady as new-vehicle sales drop. "We're personally very bullish on the used-car market right now," Gill said. "I really like how 2019 has played out thus far."