Maintaining a customer-friendly environment is the bottom line at Vance Outdoor Power Equipment. “We also must change from being a business that’s content with only making a living to a business that’s focused on departmental responsibility and accountability,” Vance points out. “Showing profits and losses—and reacting to them—is vital.”
By charging $60 an hour and operating at 98.3% technician efficiency, the service department is able to cover all of its costs and still show a healthy profit. In the parts department, the goal is 40% gross margin on OEM parts and 50% on non-OEM parts. Out on the sales floor, the average gross margin on equipment is 23%.
When it comes to wholegoods, though, even more emphasis is placed on net margin. Vance relates, “In 2000 we started printing our own price book for sales staff. We wanted to account for the cost of unloading, setting up, freight, crate disposal and delivery, which typically add up to about 5% of a machine’s direct cost. When we retail a piece of equipment, we want to know for certain that we made $1,000—not $900.
Over time that $100 difference can have a major effect on your bottom line.”
No Stone Left Unturned
With a population of roughly 13,000, a community such as Glasgow, KY, presents only so much market opportunity—even to savvy marketers like Vance. These inherent limitations, coupled with today’s changing consumer, have caused Vance to rethink some of the ways he takes his business to market.
“We now live in a 24/7 world,” Vance says. The dealership’s Web site is in the process of being revamped to project the same modernized image the dealership has been projecting for years.
Extended Saturday hours help bring in a different type of customer: one that would typically go to the box store. “We promote that we’re open all day,” Vance points out. “Our slogan is, ‘Sleep late … because Vance Outdoor Power will be open late.’ All our ads are tagged with that saying.”
Open from 8 a.m. to 4 p.m., Saturday now represents Vance Outdoor Power’s biggest sales day of the week. A full staff is on hand during the spring. As the season gets into swing and things slow down, though, some employees are only scheduled until noon. The service department is always closed on Saturday, but one of the three full-time technicians will come in to help work the parts counter.
Parts account for 20% of Vance Outdoor Power’s total revenue; the majority going to customers who bought their equipment at the dealership. Still, offering parts for brands he does not sell has helped Vance capture incremental, high-margin business.
“It’s easy to add a few parts to your inventory to increase your counter sales,” Vance says. “I’m not a big supporter of repairing box store products, but I love their parts business. We don’t go real deep into the brands we don’t sell. We have found that 90% of the parts we sell come from 10% of our stock. Our goal is to stock that fast-moving 10% on the brands we don’t sell.” Doing so has helped Vance generate more revenue from his parts department, and also cultivate new wholegoods customers.
Special events such as tent sales and mall shows have also helped Vance Outdoor Power find new customers. “Everyone wants to think they are getting a good deal on whatever they purchase,” Vance points out. “We do tent sales to create that atmosphere.”
Mall shows, Vance adds, are a must. “Where else can you have a captive market of several thousand people walking and talking about power equipment?” he asks. “When the family is shopping, most men would rather be looking at power equipment. The mall show is our best mode of advertising. Most of our manufacturers will co-op the booth. And in most cases, sometime during the show, my reps will be present to help.”
In late-2004 Vance opened a second store in Bowling Green, a city roughly 30 miles away with more than five times the population of Glasgow. “We felt like we had maxed out our potential in Glasgow, which happens to be my home town,” Vance relates. “Our growth was in replacement units, as opposed to new units. But we also wanted to see some growth in new retail sales.” The brands the dealership was representing were available in Bowling Green, so Vance decided to open a store there.