March 2006

Time for a change — recyclers have tried to be too much, for too long, for too many

We have tried to be retail, wholesale, and everything in between. We have tried to handle too many parts on too many types of vehicles. We think that anyone that drives a used car must be our prospect. Although this might have been ok 10 years ago, when we had 25% cost of goods, and very little competition, it simply doesn’t work today in most markets.

The customers have too many choices, other than used. These include new, rebuilt, and even trading in that old or damaged car on a new or newer car with zero percentage financing, and a payment of just a few hundred dollars per month.

Many years ago, there were several department stores that mailed 1” thick catalogs to what seemed like every person in the United States. Both companies, Sears and Montgomery Wards, have folded their catalog divisions, or at least as they existed. Sears still publishes some catalogs for specialty items, like tools.

Before you choose your customer niche, consider, do you want to be the low cost provider (like K-mart), or the high value provider (like Wal-Mart), or the highest quality and price provider (like Nordstrom’s)? You can’t be all things to all people. I prefer the high value formula. No matter which category you choose or create, it will necessitate saying no to some customers in other categories.

Are you going to do import or domestic? Or only a certain make, or many makes but certain years, or certain products off of those vehicles, like mechanical or collision parts? After you choose your niche, look at each of your products and services, and tailor them to that group. For instance, deliveries may not be important if you are primarily retail. Corrosion warranties won’t be important to mechanical customers. Every time you are considering a new product line, or service, consider how important or incremental it is to your chosen niche.

Also, spend more time (aim before shoot, vs. shoot then aim) and do a full cost-benefit analysis of any new product or service you are contemplating.

We once asked our salespersons how we could improve sales, and to generate three ideas in writing. One of the ideas was to do two deliveries per day into a given area. Now to do this, we would need another truck and driver, but if it would produce more sales, I was agreeable. Our Pinnacle system was able to measure exactly the number of stops daily into the given area, and we went back and generated reports showing that we were currently making 16.1 stops per day in that area. I then put together a mailing campaign for that area, and mailed a postcard every week touting two deliveries per day. Of course, the customers liked it, but the real question was “will they buy more because they like the additional service?” At the end of 90 days, we re-measured. The deliveries averaged 16.2 stops at that time (and our average invoice amount was unchanged). No more double deliveries. This cost benefit analysis was done before we made the change, and we decided in advance how to measure the benefit to us. When possible, try to calculate this in advance. Based on competitive issues, some markets might need two deliveries, ours simply didn’t respond, or at least with their wallet.

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Remember, only you can make BUSINESS GREAT!

Ron Sturgeon is past owner of AAA Small Car World. In 1999, he sold his six Texas locations, with 140 employees, to Greenleaf. In 2001, he founded North Texas Insurance Auction, which he sold to Copart in 2002. In 2002, his book “Salvaging Millions” was published to help small business owners achieve significant success, and was recently reprinted. In June 2003, he joined the new ownership and management team of GreenLeaf. He also manages his real estate holdings and investments. You can learn more about him at WWW.autosalvageconsultant.com He can be reached at 5940 Eden, Haltom City, TX 76117, rons@rdsinvestments.com or 817-834-3625 ext 6#.

 


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