Eye-Opening Automotive Market Shifts

Transcript is auto-generated from the episode recording and lightly formatted. It may contain transcription errors.

Chris Keene (00:04): Well, welcome back folks. We are on season 2, episode 11. You have tuned back into Lot Talk powered by Lot Pop. I'm Chris Keene, one of the co-hosts, joined by the all famous, the infamous Mr. John Anderson and Mr. Ronaldo Leonard. Ronaldo, I'm going to go ahead and start off. Guns up, baby. Your Raiders, your Texas Tech Red Raiders, them folks. Yes, guns up. I will pull that off one time. Um, Anderson, we can't even say hook 'em. Matter of fact, we can say hook 'em. Give Arch the hook. Get him off the field. Okay. Just give him the hook. Get him off the field.

John Anderson (00:45): Yeah, you need to give that young man a break.

Chris Keene (00:48): He got one. That boy got a break. He came from a 2A private school and he got a break to go to a division one college. So, there's his break. He just needs to carry a clipboard. Needs to carry a clipboard.

John Anderson (01:04): Oh my god. I think if I remember correctly they did have a win last week. I mean, ultimately that is the measure, right? Win or loss.

Chris Keene (01:16): They played Helen Keller School of the Blind.

Renaldo Leonard (01:22): He's gonna pull out some Billy Hoyle philosophy. You think about that movie, what was it? White Men Can't Jump. I don't mean that in any way to get anybody riled up or anything like that. It was just the title of a movie. But anyway, sometimes when you win, you actually lose. And sometimes when you lose, you actually win. And then sometimes when you lose or you win, it could be theoretically a tie. So, is that where we're taking this?

Chris Keene (01:59): One of the best movies ever. So, I love it.

John Anderson (02:05): I love it. Hey, I missed you guys last week. But I'm glad you got Brother Vill up here, but you're right. Next time, because I did kind of watch the podcast, I mean, we got to put him on a phone book. My man got to get on a phone book.

Chris Keene (02:22): I will say though, I did miss you guys and I missed being, you know, on the podcast with y'all, getting to chop it up like this. And, you know, a lot has happened in the last week that I've been out. A lot has happened in our industry and it's kind of blown my mind. I guess on one side it was really nice to be gone, obviously, to get the break, but it also gave me a new visual and being able to see, you know, because when we're in the mix of this all day long, and it's magnified even more for our dealers because they're even deeper in the mix because they got bullets whizzing by their head all day long, like a service heat, an F&I problem. You know, I think it's probably the only industry in the world where you have to be a cheerleader, a counselor, and a referee all in the same job. Okay. But they're so engulfed in it, our dealer partners out there, everybody in our industry, that it's very hard for them to see, you know, what's going on in the industry. We get a better light to it because we don't have some of the distractions that they have. But then when you step away for a week and then you come back in and you're assessing what's going on, it's like, whoa, I can't believe how much has changed in just a week. And John, I want to say it was more of an eye-opener yesterday when you and I were doing that launch call with that dealer out of the Dakotas up there, and you know he was like, hey, can you run over that shopper index again? We're like, yeah, sure, no problem. So, we ran over the shopper index again with them and I sat there and was watching that shopper index, and then I started looking at market day supplies dipping but then coming back up, but then now we're watching inventory levels rise. So, we have an inverted market. Instead of the demand being really high and the supply being okay, low, maybe the same, but that demand really high, now this thing is completely inverted and it's actually kind of going in the wrong direction to some degree with the inventory levels rising even more and the shopper index falling even harder. It can be a scary time. And you know, Ronaldo, the conversation we were having just a little bit ago of a dealer wanting to stockpile inventory because he could buy it two, three thousand dollars cheaper. Well, I mean, what's he buying two, three thousand dollars cheaper? Later model stuff. Why is he buying it two, three thousand cheaper? Well, because new cars, you know, is on the resurgence. So, it's refreshing to be away and it's an eye-opener to come back, is what I'm getting at with that. So anyways, listeners and viewers, there is right there the topic we're going to talk about today, the eye-opener. Okay, you've got shopper index declining. You've got strategies that need to change. You've got inventory getting stale out there. You've got large, publicly held auto groups out there that are upside down in some inventory. There's a lot of different things going on right now. Is the world on fire, the automotive world? No, it's not. It's not a dumpster fire right now. But we do have to make some very, very important decisions of how are we going to manage this inventory throughout what's coming up on the fourth quarter, the winter months, and how do we strategize and prep ourselves for springtime of '26? And if you're not thinking about that now, you're going to be in trouble. Naldo, what you thought?

Renaldo Leonard (06:24): If you're not thinking about it now, you're too late. I mean, we've been talking about this and we've been ramping up for this for a good solid year, not knowing exactly that it is going to pan out exactly the way that it has. But when we talked about during the spring having those sales brought forward, that was going to kind of put a lull on what we normally saw for the end of summer months. And telling dealers, all right, so we've had this rush, and at the time everybody was kind of saying that we still don't know exactly how it's going to play out, but you need to be prepared because we've pulled a lot of business forward. And so those inventory levels, and making sure that you have everything situated where you're running lean and you can react either way that it goes. Position yourself and think 60, 90 days down the road, because you don't want to be left holding the bag with a lot of inventory that has aged and trying to figure out how you're going to get out of it, because that is the time that shopper counts usually begin to decline. And so fast forward to today, and just recent conversations that we've had with dealers who are trying to think outside of the box, but their box is still the same box. It's just a little bit bigger. And going back to conventional wisdom that leads everybody into that situation where we're not in a lean situation and we are subject to the market conditions, as opposed to being proactive and putting ourselves in an inventory position where, shopper counts down? I'm fine, because I've got processes in place. My sales team, I got a team of trained killers out there that can work their way through any objection, but they're gonna maximize every opportunity that we have, every lead that we have in our CRM. I know they're going to be worked all the way down to the goal line. We're going to slide through the cracks. We're going to take advantage of every opportunity that we have. So shopper counts are not going to affect my business, whether or not there is an overabundance of inventory that's out there in the marketplace. I'm fine because I'm running lean and I don't go out and try to stockpile vehicles to save a buck here but end up costing myself 20 bucks there. And so the eye-opening effect of it is that we still have a lot of guys out in the marketplace who are committed to a process that puts them in a trick bag, gets them behind the eight ball, and then we're scurrying to try to correct everything. That's why our industry is so subject to economic conditions and things we can't control. Not concentrated on what we can control and then controlling it in such a way that puts us in the catbird seat, so to speak.

Chris Keene (10:32): Whoa, whoa, whoa. Time out, folks. Time out. So, you've tuned in to the Lot Talk podcast for a reason. You've tuned in because you're like, hey, let me get some nuggets. Let me find a way to help improve my business. Volume and gross, and running those simultaneously, is the end goal. And for anybody that told you that you can't run volume and gross simultaneously, if you go to lotpop.com, here's what I want you to do. I want you to book a Lot Audit. It's the very first thing you see when you get on there, because what we're going to be able to do is we're going to be able to shine that spotlight on these areas that we constantly talk about here on the podcast. So, I want you to go to lotpop.com, book a Lot Audit, and I promise you, we are going to find challenges inside your process and your inventory that is going to help inch you closer to selling volume and gross simultaneously and be able to stay ahead of your market. Lotpop.com. So, thanks for letting me butt in here for a minute. I look forward to spending more time with you one-on-one. So, with that being said, Anderson, you know, we had that conversation, like I was alluding to, with that gentleman out of the Dakotas up there. The shopper index, and listeners and viewers, we implore you to sit there and start looking at this big picture with your eyes wide open, using all your factual data that you have through all your resources, and really start pausing, looking with your eyes wide open in a 360 degree view and understanding a couple things here. Brett, do me a favor, will you throw the screen up on stage? I want Anderson to unpack this. He unpacked it really well, but I want to preface it with two things. Number one, and this is just some of the data that we pull over here at Lotpop, when you look at new car inventory counts on two of the major listing sites out there, Autotrader and Cars.com, in new car you can see that since the beginning of September, obviously allocation drops are hitting again and you've got inventory on the rise. Look at used car. No surprise, when you see new car inventory declining and then used car inventory rising, there's obviously some trades coming back into the market. So with inventories maintaining and rising, John, explain to the world the importance of that right there. The shopper count, that red line that has done nothing but completely dip since, what is that, mid August? It took its first downturn and has done nothing but that since then.

John Anderson (13:50): Well, first of all, both you guys have made some extremely good points so far. Ronaldo, you nailed a lot of good points in what you had to say. First of all, folks out there, we're not saying the world's coming to an end. You know, this is something that typically happens this time of year, every year. I think it might be a little bit more exaggerated this year because of all the tariff talk and some of the folks that were pulled forward early on in spring that aren't there now. But this is something that happens every year. So, Chris alluded to us having a conversation with a new dealer partner yesterday. And by the way, he watches this podcast quite a bit, and Chris and I realized through the conversation with him, he really didn't grasp the importance of, he grasped, but he just didn't understand the importance of why we talk about the shopper count so much. And the fact of the matter is it affects the markets, right? And so there's a lot of things that come from that. One, as Chris is showing here, listeners, we've got a dramatic drop in online shopper counts out there in the marketplace. Again, that happens typically every year. This time of year, you start to see shopper counts drop. And by the way, they will stay low until the end of November to the middle of December. They start coming back in with the anticipation of the tax time that happens early on, usually around February. They'll start ramping up during December. While they're shopping for Christmas, they're looking at cars. So the reason why I bring that up is this time period between now and the end of November, middle of December, is what we really need to focus on. And if you're feeling a pinch, if you're feeling a slowdown, you're starting to see your inventory not sell in the normal, if you've been selling a lot of inventory out of your first 30 days and now all of a sudden you're starting to realize a lot of your inventory is shifting into that middle bucket, into that 31 to 60 day period, then it's not selling as fast as it was. That's something you need to think about and bring this into the equation and understand what's going on, because that's an indication that I may need to adjust my strategy, and or I may need to tighten the screws down. So what you're seeing here is a dramatic drop in that red trend line. The shopper counts are dropping. People are pulling out of the market. They've been in this summer selling market, they've either purchased a vehicle or now they've shifted their attention to whatever it might be, kids in school. I already see Halloween stuff everywhere in stores, right? So we're getting into that time, that fall, and so they've shifted their attention. And so with the previous slide that Chris showed, the listings on Autotrader and Cars.com, we put this in our software so dealers can see, and I know we've kind of been going against the headwind out there with this, because everywhere you read, everybody's saying there's not as many cars out there in the marketplace. Well, from a used car perspective, I beg to differ. Chris, if you go all the way over to the left on that chart and just show: back in September of 2024, a year ago, there were 1.422 million listings on Autotrader and 1.172 on Cars.com. And now today there are, call it 1.496 and 1.2. So the listings on these two third parties, which are two of the biggest, are up from a year ago. So used cars are out there. So what happens when you have this and you get shopper counts dropping? You've got more used car listings than there were a year ago out there and you have less shoppers. So you have more cars per shopper out there. So the shoppers that are in market, they have plenty of options to choose from. So let's fold in what we've talked about before. The data says that when a new shopper enters the market, they send out 12 to 15 leads. And I personally think, it surprised me it was that high, so let's say they send out seven. Okay? So the shopper in the market sends out seven leads. So you have more vehicles, less shoppers. This shopper sends out seven leads. And when they send out a lead, what typically is the number one question that a shopper asks? Is this vehicle still in stock? And so understand the psychology of a shopper. Cars, unless it's a need, my car broke, I had an accident, something where I have to replace the car, other than that, they're emotional purchases. So now I've got a shopper that's come into market. There's tons of inventory, less shoppers, and they're asking that question of seven dealers: is this car still available? And let's say five of the seven come back and say yes, it's available. Well, then there's no reason for that shopper to get anxiety. There's plenty of vehicles out there. I've asked about seven. Five of them are still available. I can slow down a little bit and I can shop a little bit. I can do my research a little bit more. Contrast that to when the market's really moving in the early spring, summer selling season. You guys as dealers out there, you're selling a bunch of cars. Things are really clicking, right? And now they're sending out those leads and they're hearing, no, I'm sorry, we sold that. No, I'm sorry, we sold that. No, we took a deposit on it. Well, guess what? My anxiety as a shopper picks up and I go, okay, I've got to get something.

Chris Keene (19:48): That FOMO kicks in. The fear of missing out.

John Anderson (19:53): Exactly. So, think about this for a second. Shoppers during that time will make a more irrational decision. They won't make an irrational decision now. So, what does that mean to me as a dealer? That means that I got to tighten down all my processes. Ronaldo alluded to it. My processes have to be airtight. And that means if I've got inventory bleeding through, if I've got customers on my inventory, I've got to make sure I'm reaching out to those customers every day, every other day. Because now it's shifted. The customer's not coming to me. I got to pull the customer to me by the quality of conversation and the quality of content that I'm sending them every day, every other day, on a vehicle in stock. I've got to be more strategic in what I'm doing. I've got to make sure I'm sending videos on that vehicle. I've got to make myself better. I've got to present a better presentation to that customer than those six other dealers. I have to, because when everything is the same, then it becomes about price. And so if I've got customers on a vehicle and I'm priced over the market, which we're still seeing a lot of, priced at 101, 102, 103, that's 3% over the market, then I've got to make sure my processes are airtight and I've got to make sure that I'm trying to pull that customer to me. I have to. And so that's really the essence of what Chris was sharing with you in this shopper count, because it's changed now. And so now I have to adjust my strategy. Does that mean I got to go in and lower my prices on everything? No, it absolutely doesn't. We've got plenty of dealers that are selling what they're stocking or more than what they're stocking and they're priced over 100%. But they have airtight processes. They're some of our top dealers, and one, they know where their inventory sells at, so they don't get way outside of where their inventory sells at, and two, they have an airtight process on their floor of how their customers are contacted. And if it's not happening with their salespeople, guess what, those managers are picking up the phone and they're getting involved.

Chris Keene (22:27): John, right there, hang on, I'm gonna step in here for a minute. Their managers are jumping in at that point, right? Okay, listeners and viewers, I want you to think about this for a minute. If you had 10 people standing on your showroom floor and you're working car deals and you got a deal out there that's a very handsome gross profit, how many times does that customer get a TO'd? A gajillion. It's the rule. It's the law. It doesn't even have to be written down, because that's what we do inside of our brick-and-mortar dealership. But yet we are seeing exponential amounts of activity sitting inside dealers' digital dealership where we haven't called, texted, and emailed the customer by the salesperson or the internet BDC rep in two, three, four, five days, let alone have a manager TO that deal. If I am a dealer principal, if I'm a general manager, if I am a manager listening in on this podcast right now, if you did anything today, put in a rule in effect for your digital dealership that you have for your brick and mortar on these deals. Because that's why you guys are dealer principals, GMs, GSMs, managers, because you are qualified to be able to help the consumer fill their wants and needs and help that salesperson be that professional sales consultant that we give them the label and the badge to be. Sorry, John, but that just strikes a nerve with me every time.

John Anderson (24:21): Hey, listen. No, you're spot on. Dealers and listeners and viewers, here's, to Chris's point, why do we manage our virtual dealerships different than we do our bricks and mortar? Now I know why, because I've sat in that chair. You've got bullets whizzing by your head in that store all day long. You're wearing multiple hats. Most stores don't have the bandwidth of employees to manage both stores. You're running two stores. You're running a virtual and a physical. And so the things that we do on our physical lot, we don't do on our virtual lot. Why? Because a lot of that stuff goes unnoticed. That's where I'm going to put in a plug for Lotpop. That's really what we help dealers do. We help you see the things that you don't see, because you're sitting on the showroom floor and you got a million things going on in front of you on your bricks and mortar. But what about that virtual lot? When you've got a customer or multiple customers on a vehicle that's still in stock on your lot, that's the same thing as a customer pulled up on your lot, getting out of their car and standing next to the car on the lot. As a manager, if one of your salespeople didn't approach that customer and start walking out there within a minute, you'd throw a chair through the window. But yet, to Chris's point, we see customers that are leads on vehicles in stock that have not been contacted in 15, 20, 25, 30 days. Why? And please, if there's any CRM out there listening, I'm not pointing at CRMs. CRMs are great tools. We got to have them. They house our customers. They help us with how and where to contact our customers. But most CRM processes are based on the age of the lead, not the issues that are happening in our inventory. What I mean by that is, let's say I got a 47 day old car and I've got a 42 day old customer. That car is still in stock. That customer is still active on that car. A lot of times, because they're 42 days, the process says we're not contacting them but maybe once a month. But as a manager, if that customer was standing on your lot, how quickly would you get a salesperson out there? So I need to do the same thing on my virtual lot. That customer is still on a car that's in stock. I need to contact that customer every day, every other day, until they tell me leave me alone, or yes, I'll set an appointment, come in and look at the car. But we contact the customer.

Chris Keene (26:55): Yeah. You've used this word multiple times, John and Ronaldo, both: quality. Okay. If you're picking up the phone and, hey, you still in the market? Hey, is this car still available? You think you're creating a sense of urgency, but you're not, because that's what they hear from everybody else. There's 14 other people saying the same thing. But we've talked about it before, John. When you were buying your Tahoe, you reached out to some dealers, but there was only one dealer that understood your wants and needs of why you were buying the Tahoe. And they followed up with you about towing capacities. They followed up with you about storage. They followed up with you about comfort. They followed up with you about the things that were important, whether it was safety, performance, appearance, comfort, economy, or dependability. They followed up with you and gave you all of the necessary information for you to make an educated buying decision. And that is the job of a professional sales consultant. Because we could sit here all day long and we could talk about shopper indexes. We could talk about market trends. We could talk about dealers not touching the price of their inventory and following when those trends are happening, missing the opportunity when the market is swinging back their way for those handsome gross profits. We could talk about all those things, but if the end result of managing the inventory is to drive activity to your store and you fumble the ball once you get it, none of the inventory management matters. None of the bucket management matters if you're not taking care of the consumers. When you have this much consumer versus this much consumer, the numbers don't lie in the screenshot we showed just a minute ago. In that screenshot, if you look at 2024, there was a consistency of shopper index. Yes, it had some ups, it had some downs, but they weren't as dramatic. And it just incrementally went down as the season of our industry changes. Then once you got down to September, October, then you saw it kind of drift down. Then at the end of the year, you see it kind of come back up. Then you get to them dog days of winter and you see it drift down a little bit. Then you hit that spring sell season and the process starts all over again. That's just the cycle, normally, of our business. This year's been completely different. So dealers, some of those things that you're feeling is a byproduct of everything getting pulled forward so early, and that drop now is more prominent because we pulled ahead so many people. Does that mean panic? No. That just means readjust your strategy. That's all that simply means. You know, Ronaldo, the dealer you were talking to earlier this morning, they're talking about stockpiling inventory.

Renaldo Leonard (30:30): Yeah. I'm sorry, I'm laughing at myself because I did the same thing. I would sit there and go, okay, man, look at all the stuff I can buy right now. Look at this book cheater here. Look at this vehicle here I could buy. All right, so if I buy it now, then by the time tax season comes back around, all right, the car may be 90 days, 100 days old, but golly, I own this car for cheap.

Chris Keene (31:05): Yeah. Talk about that again.

Renaldo Leonard (31:09): Oh gosh. Well, so yeah, you covered the basics. He asked me, so is it a good decision to go to the auction, purchase vehicles when I can buy them cheapest in the winter months, in order to stock myself up for the spring selling season, or when things start to pick up going into tax season? And my question, well, actually I said no, but asked the question: why do you think that that would be a solid strategy? Well, I can buy them so much cheaper during the winter months than if I went and bought them as soon as the selling season picked up. And I end up having all the inventory in my possession and in stock when other guys are panicking and trying to go out and get inventory that's not available. I said, well, let's just walk through it. It doesn't pencil out any way that you think about it, but let's just walk through it and see what's going on. So tell me exactly, when are you normally doing this? Well, January. Okay. Then when does your spring season start to pick up? Well, end of February, beginning of March. I said, okay. So as we started to walk through the exercise, and just using the numbers, I said, okay, we're going to be a little gracious. Let's just say that that season starts out mid-February, which is going to put you 45 days out. You're currently at $115 a day holding cost per vehicle. That's just what it is. We use the NADA average, which is $55. You're twice that. So let's take a look at that. 45 days, times that number. So when your season begins, you're 5,300 bucks behind the eight ball just in holding cost. Does that work for you? Well, but you don't get, I'm like, hey man, I don't have to get it. I was just looking at the numbers. It don't pencil. There's no way that pencils out. Well, but when I sell them, I'm making three grand, four grand deals. I mean, no, you're not.

Chris Keene (33:53): No, you're losing two grand.

Renaldo Leonard (33:56): You're losing two grand. And so I understand why a dealer would think that way. I mean, I've worked for several of them, and that's the way he did business. But knowing what I know now, I mean, everybody's sitting in their experience right now. That's where they are. That's all they know. And they don't know what they don't know. But when the facts and the data are presented to you, you got to wrap your head around it and just come to the acceptance that, okay, well, maybe I was a little misled on that, or I didn't understand everything that goes into it. A lot of guys don't even take holding cost into account, but at the end of the day, when they look at that P&L, they're like, what is going on? Why am I not profitable? I mean, I got all of these deals that are showing to be profitable deals. I'm hitting a home run here and a triple here and a double here, but why am I not? And so all of these concepts that we talk about, I mean, it's just basic fundamentals. But we always try to, statistics is for liars, right? We try to adjust the numbers to fit our narrative on what reality is. But at the end of the day, reality is reality. No matter how you try to spin it, stockpiling vehicles does not work out for you at all. I don't care if you don't have any floor plan expense. I don't care if you own them all. I don't care how you got it structured. And I'm gonna give my man a big shout out and I'm gonna tickle him to death, but to coin a phrase from my man Bill Rainol: time kills profits. And there's no other way around it. And so if we can make sure that that is the underlying theme behind anybody who is putting together an inventory strategy, we'd all be a lot better off for it. And a lot of guys would find themselves to be in a better position than they are today. Just by thinking about that clock and knowing that it's always ticking. Always ticking.

Chris Keene (36:30): There's a dollar value associated with each one of those ticks. Oh yeah. And Father Time is undefeated. Okay, so let's just keep that real. You know, you bring up a point though. The strategy, and dealers, listeners, viewers, some of y'all may be sitting there going, but what we're doing is working. Okay, great. What happens when it doesn't?

Renaldo Leonard (36:56): Well, here's another thing, Chris, that I would love to have everybody really kind of think about when we're really talking about thinking out of the box. All right, it works according to the standard and the measurement that you're using now. But if you understand exactly what best practice is or what's possible, and if you look at what's working for you now compared to how the best performing dealers are operating and the results that they're getting from the same metrics that you're using, and you see how far that gap is, okay, yeah, we'll give you that it's working. But if it could work better, if it could work more efficiently, and if it could work more profitably, is it really working? And I think that we all get subject to that comfort zone, right? Well, you know, the bills are paid, the lights are on, it's all good. But when there's a little strain, then all of a sudden it's not working. What I'd love for dealers to do is to think, okay, this is where I am. It's not working for me anymore. It's not going to work moving forward for what I want to accomplish. And if a dealer's thinking about how do I build another site or add another line to the group that I have, and thinking about what they want to accomplish and moving the bar, then what's working isn't working anymore, and we've got to adjust the way that we're thinking to get to a different level of performance overall. Does that make sense?

Chris Keene (38:42): No, it makes complete sense. And to that, Brett, throw the screen back up real quick, because John shared this with us of that exact scenario. Very good operator of a dealer. They do a really, really good job. And what we're sharing on the screen here is a piece of inventory from a dealer who has pretty good game plans and strategies set up. But even as good as they are, John, explain to the viewers and listeners what happened here.

John Anderson (39:21): Well, this is a picture of their inventory management tool, and it's vAuto. And vAuto has a history of market pricing, price to market. And by the way, I've been seeing a lot of this across our dealer platform over the last several weeks. For listeners, you can see that this dealer, for a period of time up until about the end of August, was staying ahead of the market. That trend line is dropping off, maybe they're lowering the price, and they're staying ahead of the market. And then right at the end of August, around August 30th, you can see a pretty dramatic uptick in that trend line. Now, their pricing didn't change. But what happened is the market, as we've just been talking about with shopper counts dropping, all this coinciding with this time frame, you're seeing the market drop on this car. And so where they were at around 98%, 99% price to market around August 30th, now as we approach where we're at today on September 19th, their price to market has gone up to 103. So the market on this vehicle has dropped 4% over a period of time, and this dealer is not making the appropriate adjustment on a vehicle. We also found that the left-hand rail, we were looking at this early this morning before we jumped on here, they had some things included in this that were deceiving them on the price to market. Now, we adjusted it to see what the true price to market was, and now you see the 103, and now we're behind the market where we were staying ahead of it up until the end of August. And guess what? This is a Chevy Equinox. So this is a local car. There's tons of these. Chris got a zero on it. There's 16 of them, and I think that's within a 20 or 30 mile radius. So we're priced at 103, 104, and right outside our back door, there are other Chevy Equinoxes that are at a lower price point than that. And as I said earlier, with everything being equal, similar miles, similar equipment, what's the customer going to gravitate towards? Look, I need to say this. When I was GM of a store, one of the things that I did do, I heat-mapped my website. I learned that from someone. So I heat-mapped my website and I watched the customer's journey on my website. I watched their path. I wanted to know, when they go click on a used car, what are they doing? And I moved my buttons around on my website to see if they got any more clicks that way. I was trying all kinds of things along with my Google Analytics. And I will tell you that one of the things that I consistently would see with a customer is when they would come in and open up the inventory that they wanted to look at, the next thing that they would typically do is go up in the sort on my website and sort low price to high price. They wanted to see the lower price point ones first. So that taught me a lesson. So in this scenario, I've got 16 other vehicles out there within 20 miles of my store. Let's say they're relatively the same. Guess what the customer is going to do? They're going to sort low price to high price. You're never going to hear a customer come in your dealership and go, hey, I noticed at the end of August you had this vehicle priced at 97% and now it's at 104, can you get it back down to 97? That conversation will never happen. But if you've got a savvy dealer that understands this and is working their strategy, and they go in here and they see that market drop, and they go, okay, back at the end of August I had this thing priced at 97, now it's at 103, I need to at least get it back down to 97, probably 95 or 96 to get ahead of the market, and they make that move and I don't, guess where that customer is going to go? They're going to go to that guy that moved it down to 95, 96, 97%, because it's a lower price point. And so now I lose out. Customers start gravitating towards that lower price point. This car continues to sit, and I'm thinking, well, I don't understand why this car is not selling. Well, because you're not adjusting to the market.

Chris Keene (44:21): And here's the thing, I just pulled it over and looked at it. So for those that are viewing, right here at that same period of time when they got behind in the market, this is no coincidence. This is why shopper index matters. Right here at that point in time, this is about the 26th right here, and you see where they start getting behind, that price to market shot up. They're four or five percent off the mark. Look right here, folks. That shopper index took another downfall right there. That is why shopper index matters. If you could understand where your shopper index is, and when you have less in-market shoppers out there and you're paying attention to your inventory every single day to stay two, three, four steps ahead, you're not going to be the last dog to the bowl. And we all know what happens to the last dog to the bowl. He starves. It's kind of like half a loaf beats no loaf. Okay, fine. I don't get to stand up on my soapbox, beat my chest, and talk about running $4,700 a copy. I don't get to do that. But I also don't get to stand in the welfare line waiting to refill my SNAP card. So it's your choice. I mean, do what you want to do, but if you want to take anything away from this podcast today, it is: understand that the index is down, the inventories are high. And for y'all that are listening going, well, I don't know where they're finding this inventory at, because everything I'm out there looking for, I can't touch it with a 10 foot pole. Okay, fine. You can't. Great. But there's still inventory out there. And maybe there's the wrong inventory out there. And maybe you're one of those dealers that has the wrong inventory. That's okay, too. Turn the metal into money. Lick your wounds now and take that later model inventory and position yourself to draw in that right inventory. Position yourself to pick that F&I income up. Position yourself, if you're a dealer principal, if you're a general manager, position yourself to feed your service department, raise your internals up. If you got new cars, position yourself in those new cars to draw those good trade-ins so you don't have to go buy cars at the auction, because that's the world we're back in today. The world we're back in today is new cars are built for a few select things: market share, trade bait, F&I income, feed the service department. Okay, you're only allocated so many. Sure, take your shot on it. Control that day supply in your new car department, and when you keep your day supply down, you got less interest going out. You increase your P&Ls, as Ronaldo was talking about. So if I took anything away today, it is: readjust your strategies in relationship to your market. You could throw every widget, you could throw every tool, you could throw every last advertising dollar out there, but it's not going to change the fact that there are less in-market shoppers. And it's not going to change the fact that when you get that consumer darkening your doorstep, in your digital dealership or your brick-and-mortar, that if you don't handle that consumer in a quality fashion, you're going to lose the race. So all the money you spent, all the widgets you put in, it's for nothing.

John Anderson (48:35): Absolutely. What's the average cost of a lead out there nationwide? What was it, $235 is what we heard? Something like that. So think about that, dealers, general managers, managers. If you walked out right now in your store, if you called all the salespeople to the front door and you walked out the front door three steps and you threw $235 on the ground and said, now go, how hard would those salespeople fight to jump on that cash on the ground? So my point, the reason why I bring that up is, you can think of it that way, right? If we don't exercise everything we have with that customer, we're just walking out there and tossing that $235 on the ground. If we're not exercising every opportunity we have to engage with that customer as much as we can while they're on a vehicle in stock in our inventory, we're throwing that money on the ground. If the vehicle they sent us a lead on sells, yet they're still active in our CRM and we're not exercising every opportunity we have to switch them to another vehicle on the virtual lot like you would on your physical lot, you're not, as Chris says, and I love it, you're not remarketing those dollars. You're just letting those dollars fall down the drain. And so that's just an inefficient strategy. And right now, in today's market, everything needs to be about efficiency. We have to be more efficient. Dealers and GMs, I beg you. I was in management for quite some time. The first time that I had a financial statement put in front of me was when I was a GM. That's too late. If you're not sharing your financial statement, you don't have to put it in front of them, but share some vital numbers with your general sales managers, your new car managers, and your used car managers so they understand the importance of holding cost and turn on your inventory. Look, here's a simple exercise. On a month that you have a really good month, share some critical data off your financial statement with your used car manager. Share the net profit of his department during a very good month. And then wait until you have a not so good month and turn around and have that same exercise, and let him hear the difference of how not turning our inventory as fast affects that net profit of his department. I beg you to do that. Don't wait. I mean, again, I wasn't exposed until I was a GM. Had I known some of those things that I learned when I became a general manager, I would have managed used cars differently.

Chris Keene (52:20): Right, 100%. But to your point, John, I'm glad you actually brought that up. And one of my old mentors, if you happen to be listening to this podcast, because I know you tune in every now and then, I'm going to tell the story right quick. When I first became a new car director of a store, I will never forget it, John. We sat there every single morning, we had our manager meeting, and I don't even have a stack of papers thick enough on my desk to share the morning report we went over every single morning. And part of that morning report was part of the doc, which for you operators out there, your doc turns into your financial, turns into your composite. Okay, I'll never forget this as long as I live. Number one, our morning report, I am not kidding you, was every bit of two inches thick. And we went over everything. We went over CITs, we went over pace and pending. I mean, we went over everything. We went over interest for the new car department. We went over the interest for the used car department, regardless that we owned our own inventory, our dealer still charged us interest in the used car department. But I'll never forget this. He said, Keene, where you at in your WeOwe account? And I'm the new car director, okay, and I shot from the hip, threw some outlandish answer out there. I don't even remember what it was, but what I do remember is we had this octagon table in our conference room, and he sat at the head, and he's got his morning report, and he wore the little cheaters, and he had a big ruler, because he'd go line by line across this morning report every morning, and had a Casio calculator. He asked me the question and I threw out a BS answer. I shot from the hip, and this man turned 30 shades of red. Little Irishman. And this dude cussed me up one side and down the other. Now mind you, I'm a 22, 23 year old kid. Okay, all I can think is, I'm about to roll this man up and throw him out that door, down them stairs right there. That's the only thing I had to go with. Okay, it was ignorant. It was dumb. But it was the only thing I had to go with. This meeting normally would last two hours. We had only been in this meeting for about 15, 20 minutes. He was so angry, he slammed his ruler down, slammed his calculator down, picked up his stuff, and walked out. We all just sat there and looked around. And then all of a sudden the GSM looks at me. He goes, hey man, I'd keep your head low today before it gets lobbed off. He walks out. Everybody else looks at me and goes, hey Keene, thanks for helping us get the meeting over with early. So I'm like, what the heck happened? And I'm mad. So I duck out the side door, I go all the way around the building, and I come in this other door and try to slide into my office. The next thing I hear: Chris Keene, come to Jim Holton's office. I'm like, oh, damn.

John Anderson (55:33): You about to get learned.

Chris Keene (55:36): So I'm thinking it's over with. I'm about to get fired. I walked into his office, and he's yelling and screaming on my way to the office. Shut the door. I shut the door, and then he talks to me like a father-son conversation. What are you thinking? I mean, just completely like Dr. Jekyll, Mr. Hyde. But dealer principals, general managers, listen up here. It was one of the most valuable lessons I ever learned, and I learned it at an early stage in my career of management. And John's 100% spot on. Do you have to share the entire financial statement? Do you have to do a whole financial statement review? No. But if you shared the parts of the financial for the department. We did it in F&I. We talked about our chargebacks. We looked at our percentages. We looked at how much of it was in reserve, how much of it was in VSC, how much of it was here in the new car department. We talked about the WeOwe. The reason why he brought the WeOwe up, because my WeOwe was out of control, because I just kept signing off every time somebody brought a WeOwe to me. Oh, boss, this was missing an owner's manual. This one's missing floor mats. Why? Because we would rob Peter to pay Paul. The next thing you know, it catches up with you. And we ran good gross. But the point being was, this is what he ended it with: it doesn't matter how much gross you run, Chris. It matters how much we could actually put in the bank. And every time you come to me and ask me to spend money here or to do this or to do that, I have to look at the profitability of your department to see if we could afford to do that. And that didn't set in with me for two, three, four, five months. Then it finally set in with me one day. I went, we can't afford it. I had somebody come in and pitch me a product. Man, we can't afford it. So to John's point, Peter eventually runs out of money. Peter runs out because he gave it all to Paul. But I'm going to echo John's sentiment there of sharing, you know, dealers, general managers, you don't have to share the whole financial statement, but share with them how much you paid out in spiffs, how much that affected the net profitability. Share with them, if they're a new car manager, what you had to write a check for in that interest. Share with them in the used car department all of that cost to sell, all those things that came in after the fact of selling the used car, something that didn't get added to the WeOwe and it had to go back to the cost of sale. Share with them those things right there, and watch how they start protecting your money even more when they understand that it may not have a direct reflection on their paycheck, but it could have an adverse effect on things that they need later on in their departments. And that's what I would like to say about that.

Renaldo Leonard (58:48): Well, just to kind of piggyback on that, you talk about people taking ownership of what they're responsible for. Give them sight to the big picture and how everything is interweaved together. I guess probably the best example we had of that, I tried to rob Dale, maybe, with Bob Ruth. He talked about tying payroll to the overall net profitability of the entire dealership, as opposed to individually what their department was doing. Everything was tied together. And you said, yeah, you don't have to show them the entire deal. Just take a little snapshot. You can put your ruler or a piece of paper over there, well, back in the day we used to just use the photocopy machine, but copy and paste it and just print it out, the numbers that are vital to their department successfully contributing to the overall net profitability of the dealership. If you give them exposure to that, in the long run they make better decisions and try to position their department to contribute on a daily basis.

Chris Keene (60:22): Million percent. So let's recap. Shopper index is declining. Inventory levels have increased, which means you got to look at your bucket management. You got to look at your strategies, and you may have to pivot, and the strategy you've been working, you may have to redefine. Look at the quality of your follow-up. Make sure we're implementing a good TO process inside of our dealerships. And the last topic we talked about today: share some of those bits and pieces of your financial, of what the end result is. Go Stephen Covey. Begin every single day with the end result in mind. Share some of that with your staff that is responsible for that department so they understand what they truly are responsible for outside of selling a car, what the byproduct of them selling a car or the byproduct of a decision they make, what impact that has on that financial statement. Do some of those things, start sharpening up on those, and watch your winter months be pretty important for you leading into the springtime when things get easier. It's easy to hide mistakes during the selling season. It's not easy to hide them during the off season. The off season is where championships are made. So tighten up your off season.

Renaldo Leonard (61:55): Oh, yeah. And the season always reveals what you did in the off season, right?

Chris Keene (62:08): Million percent. Million percent. Thirty seconds. John, anything to wrap us up with, sir?

John Anderson (62:14): I just go to the acronym on our shirt, what it stands for: work the facts. And guys, the stuff that we talked about today are facts. It's factual. I mean, look, we can debate a lot of things. Where we price our inventory, what good inventory is, how we're sourcing our inventory. There's a lot of things we can debate, but what you can't debate: shopper counts are dropping. Markets are dropping. You saw it in that one car that we showed you. I could show you, we could get on a call, I could show you many examples. Those things are happening right now. And if you're feeling it in your store, it's time to tighten the screws. And to the point that Chris made, what this brings, everything comes to a culmination, and what it means is you'll be more consistent across the year, and that's ultimately what you're after. We see too many times where there's an ebb and flow. We sell a bunch out of our fresh, then we let it age and it gets into our 61 day plus, and then we get fresh again, and it's just this up and down. And if you'll do some of these things and tighten up your processes and understand shopper counts and adjust to the time of year, you'll see more consistency across the entire year, which will bring more net profit and gross profit to your operation.

Chris Keene (63:31): Million percent. Naldo, anything to wrap, sir?

Renaldo Leonard (63:36): Yes. I had a flashback five minutes ago. We did an episode, Back to the Basics. Might have been in the first five episodes that we ever filmed. Back to the Basics. I think it is identically the same thing as what we are talking about today. And to recap it, because of the way that our market was, those dealers that went back to the basics and handled follow up and follow through with leads, bucket management, and running lean were going to be prosperous. Same situation today. So that's where I would go: the basics will handle you.

Chris Keene (64:25): Oh, absolutely. Absolutely. So this is where I will tell the listeners, this is where I will tell the viewers: go to lottalkpodcast.com, scroll back through, get back to the basics, go back to those episodes. Okay? That was No More Shooting Fish in the Barrel. We went back to the basics then. So listeners, viewers, hit it up, lottalkpodcast.com. From that website, you could reach out to John Anderson, you could reach out to Ronaldo Leonard, you could reach out to myself. We will be more than happy to break your new car department down, to break your used car department down with you. Take us up on it, pick up the phone, give us a call, but you got to go to lottalkpodcast.com, find our information there. While you're there, subscribe to us so that way you get all the updates, and any type of collateral we can send out to you, we're happy to do it. On behalf of these fine gentlemen, Mr. John Anderson and Mr. Ronaldo Leonard, on behalf of our Lotpop family, we thank you so much for tuning in to season 2, episode 11. This has been Lot Talk. We've had a lot of fun with it today, and we look forward to catching you next week. See you guys.