It\u2019s important to focus on streamlining processes between the parts department and service lane to help increase sales, diversify revenue streams, and improve customer service.<\/span><\/p>\n <\/span><\/p>\n [\/et_pb_text][et_pb_text admin_label=”Text” _builder_version=”4.21.0″ header_2_font_size=”34px” header_3_font_size=”34px” background_size=”initial” background_position=”top_left” background_repeat=”repeat” global_colors_info=”{}” theme_builder_area=”post_content”]<\/p>\n Charging customers the right cost for labor is one of the most important elements allowing a dealership to cover fixed expenses. When it comes to maximizing the profit in your service department, determining labor costs based on the market average is a good place to start.<\/span><\/p>\n The<\/span> National Automotive Dealers Association<\/span><\/a> (NADA) advises that your customer-paid labor should account for 60% of your total labor sales, with warranty and internal contributing 40%. On top of that, the service department should strive for 72% or higher gross retention in every category.<\/span><\/p>\n If you can\u2019t hit the market average, look at your local competitors’ average service labor rates to better understand what you can realistically offer. You don\u2019t want to lose out on potential profit just because you\u2019re not confident about the current labor rates. NADA suggests surveying the market every six months or so and bumping the rates up by a few dollars if you haven\u2019t in a while.<\/span><\/p>\n <\/span><\/p>\n [\/et_pb_text][et_pb_text admin_label=”Text” _builder_version=”4.21.0″ header_2_font_size=”34px” header_3_font_size=”34px” background_size=”initial” background_position=”top_left” background_repeat=”repeat” global_colors_info=”{}” theme_builder_area=”post_content”]<\/p>\n Where do most parts sales come from at the dealership? The service lane. The <\/span>service lane<\/span><\/a> is the number one source of parts orders and requests for the parts department. However, it can also be one of the biggest contributors to over-ordering and obsolescence.\u00a0<\/span><\/p>\n When the service lane puts in a parts order request, the time spent on sourcing that part can often lead to a few different outcomes. One, the customer becomes frustrated by the wait time and\/or price and finds a faster or cheaper alternative. Two, the customer is scheduled for a repair at the service lane but never shows. Three, the service lane puts in an immediate parts order request even if that part is already on the shelves, resulting in multiples of that part.\u00a0<\/span><\/p>\n In all of these cases, the parts department is left with parts that clutter the shelves, and the service lane makes little to no revenue. Streamlining parts requests and ordering processes can help reduce the number of back-order parts, ensure that parts get used at the service lane, and generate revenue between both departments.\u00a0<\/span><\/p>\n What approaches can help tackle these issues? <\/b><\/p>\n [\/et_pb_text][et_pb_text admin_label=”Text” _builder_version=”4.21.0″ header_2_font_size=”34px” header_3_font_size=”34px” background_size=”initial” background_position=”top_left” background_repeat=”repeat” custom_padding=”|||43px|false|false” global_colors_info=”{}” theme_builder_area=”post_content”]<\/p>\n <\/span><\/p>\n [\/et_pb_text][et_pb_text admin_label=”Text” _builder_version=”4.21.0″ header_2_font_size=”34px” header_3_font_size=”34px” background_size=”initial” background_position=”top_left” background_repeat=”repeat” global_colors_info=”{}” theme_builder_area=”post_content”]<\/p>\n Even with the best processes in place to keep both the service lane and the parts department running smoothly, the best strategy is to diversify your revenue streams to help increase the absorption rate. One way to do this is to expand your customer base by selling online.\u00a0<\/span><\/p>\n The online retail market is the largest in the world. With access to a national customer base, dealerships can effectively increase and diversify their revenue streams. What options should dealerships consider when focusing on online car parts sales?\u00a0<\/span><\/p>\n <\/p>\n [\/et_pb_text][et_pb_blurb title=”Online Marketplaces” use_icon=”on” font_icon=”||fa||400″ icon_placement=”left” image_icon_width=”75px” content_max_width=”760px” _builder_version=”4.21.0″ _module_preset=”default” header_font=”|800|||||||” header_font_size=”26px” custom_margin=”43px||43px||false|false” animation=”off” custom_css_blurb_image=”padding-top:10px;||width:140px;||max-width:140px;” border_radii_image=”on|10px|10px|10px|10px” border_color_all_image=”#DB3126″ global_colors_info=”{}” theme_builder_area=”post_content”]<\/p>\n Online marketplaces<\/span><\/a> are third-party digital platforms with an established, active user base. The most commonly known online marketplaces include eBay and Amazon. These platforms allow businesses to sell online through verified seller accounts.\u00a0<\/span><\/p>\n [\/et_pb_blurb][et_pb_text admin_label=”Text” _builder_version=”4.21.0″ header_2_font_size=”34px” header_3_font_size=”34px” background_size=”initial” background_position=”top_left” background_repeat=”repeat” global_colors_info=”{}” theme_builder_area=”post_content”]<\/p>\n They also offer a variety of additional services to help businesses sell online easily, like:<\/b><\/p>\n [\/et_pb_text][et_pb_text admin_label=”Text” _builder_version=”4.21.0″ header_2_font_size=”34px” header_3_font_size=”34px” background_size=”initial” background_position=”top_left” background_repeat=”repeat” custom_padding=”|||43px|false|false” global_colors_info=”{}” theme_builder_area=”post_content”]<\/p>\n <\/span><\/p>\n [\/et_pb_text][et_pb_text admin_label=”Text” _builder_version=”4.21.0″ header_2_font_size=”34px” header_3_font_size=”34px” background_size=”initial” background_position=”top_left” background_repeat=”repeat” global_colors_info=”{}” theme_builder_area=”post_content”]<\/p>\n Through online marketplaces, dealerships can expand their parts business beyond their local market and get built-in support to help facilitate the transition onto these platforms.\u00a0<\/span><\/p>\n <\/span><\/p>\n [\/et_pb_text][et_pb_blurb title=”Custom-Branded Store” use_icon=”on” font_icon=”||fa||900″ icon_placement=”left” image_icon_width=”75px” content_max_width=”760px” _builder_version=”4.21.0″ _module_preset=”default” header_font=”|800|||||||” header_font_size=”26px” custom_margin=”43px||43px||false|false” animation=”off” custom_css_blurb_image=”padding-top:10px;||width:140px;||max-width:140px;” border_radii_image=”on|10px|10px|10px|10px” border_color_all_image=”#DB3126″ global_colors_info=”{}” theme_builder_area=”post_content”]<\/p>\n While online marketplaces have a large built-in user base, quality control of online seller accounts can be more difficult. An integral part of selling online is establishing a strong online brand presence. Online customers can\u2019t quickly identify your dealership or differentiate it from competitors without a strong brand identity.\u00a0<\/span><\/p>\n [\/et_pb_blurb][et_pb_text admin_label=”Text” _builder_version=”4.21.0″ header_2_font_size=”34px” header_3_font_size=”34px” background_size=”initial” background_position=”top_left” background_repeat=”repeat” global_colors_info=”{}” theme_builder_area=”post_content”]<\/p>\n A custom-branded web store for the parts department gives you a few distinct advantages:\u00a0<\/b><\/p>\n [\/et_pb_text][et_pb_text admin_label=”Text” _builder_version=”4.21.0″ header_2_font_size=”34px” header_3_font_size=”34px” background_size=”initial” background_position=”top_left” background_repeat=”repeat” custom_padding=”|||43px|false|false” global_colors_info=”{}” theme_builder_area=”post_content”]<\/p>\n [\/et_pb_text][et_pb_text admin_label=”Text” _builder_version=”4.21.0″ header_2_font_size=”34px” header_3_font_size=”34px” background_size=”initial” background_position=”top_left” background_repeat=”repeat” global_colors_info=”{}” theme_builder_area=”post_content”]<\/p>\n Selling through a custom-branded web store can help you generate a brand identity that fits within your customer\u2019s expectations and help improve customer retention rates.\u00a0<\/span><\/p>\n <\/span><\/p>\n [\/et_pb_text][et_pb_blurb title=”Omnichannel Combination ” use_icon=”on” font_icon=”||divi||400″ icon_placement=”left” image_icon_width=”75px” content_max_width=”760px” _builder_version=”4.21.0″ _module_preset=”default” header_font=”|800|||||||” header_font_size=”26px” custom_margin=”43px||43px||false|false” animation=”off” custom_css_blurb_image=”padding-top:10px;||width:140px;||max-width:140px;” border_radii_image=”on|10px|10px|10px|10px” border_color_all_image=”#DB3126″ global_colors_info=”{}” theme_builder_area=”post_content”]<\/p>\n An omnichannel selling approach is one of the most effective selling strategies among online retailers. An omnichannel approach essentially means selling across all types of revenue streams available.\u00a0<\/span><\/p>\n [\/et_pb_blurb][et_pb_text admin_label=”Text” _builder_version=”4.21.0″ header_2_font_size=”34px” header_3_font_size=”34px” background_size=”initial” background_position=”top_left” background_repeat=”repeat” global_colors_info=”{}” theme_builder_area=”post_content”]<\/p>\n Some common selling channels included in an omnichannel strategy include:<\/b><\/p>\n [\/et_pb_text][et_pb_text admin_label=”Text” _builder_version=”4.21.0″ header_2_font_size=”34px” header_3_font_size=”34px” background_size=”initial” background_position=”top_left” background_repeat=”repeat” custom_padding=”|||43px|false|false” global_colors_info=”{}” theme_builder_area=”post_content”]<\/p>\n [\/et_pb_text][et_pb_text admin_label=”Text” _builder_version=”4.21.0″ header_2_font_size=”34px” header_3_font_size=”34px” background_size=”initial” background_position=”top_left” background_repeat=”repeat” global_colors_info=”{}” theme_builder_area=”post_content”]<\/p>\n Selling through all available <\/span>selling channels<\/span><\/a> at the parts department can help you expand your customer base, get ahead of the competition, and establish a strong online presence that helps foster customer loyalty. A strong eCommerce strategy can help you increase parts sales and move inventory faster.\u00a0<\/span><\/p>\n <\/span><\/p>\n [\/et_pb_text][et_pb_text admin_label=”Text” _builder_version=”4.21.0″ header_2_font_size=”34px” header_3_font_size=”34px” background_size=”initial” background_position=”top_left” background_repeat=”repeat” global_colors_info=”{}” theme_builder_area=”post_content”]<\/p>\n Having an effective fixed ops strategy in place can help you improve your absorption rate, create more revenue streams, and streamline processes between departments. With the right strategies in place, you can help both departments effectively grow their business.\u00a0<\/span><\/p>\n Looking for more ways to help boost the absorption rate at the dealership? Here are <\/span>five strategies to implement<\/span><\/a> to help you do just that! <\/span><\/p>\n [\/et_pb_text][et_pb_image src=”https:\/\/www.revolutionparts.com\/wp-content\/uploads\/5-absorption-rate-strategies-blog.png” title_text=”5-absorption-rate-strategies-blog” url=”https:\/\/www.revolutionparts.com\/blog\/5-strategies-to-boost-absorption-rate\/” align=”center” _builder_version=”4.21.0″ _module_preset=”default” global_colors_info=”{}” theme_builder_area=”post_content”][\/et_pb_image][\/et_pb_column][\/et_pb_row][\/et_pb_section]<\/p>\n","protected":false},"excerpt":{"rendered":" As a dealership, getting as close as you can to 100% absorption through the Fixed Ops department is what you aim for. The higher your absorption rate, the less likely you\u2019ll have to rely solely on new vehicle sales to boost the bottom line. Where should your dealership start when determining how to boost its […]<\/p>\n","protected":false},"author":1,"featured_media":62650,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_et_pb_use_builder":"on","_et_pb_old_content":"As a dealership, getting as close as you can to full absorption through the use of Fixed Operations is what you aim for. The higher your absorption rates, the more opportunity you get to sell vehicles (and at lower rates). Being able to sell cars for lower costs brings customers to you when they need one, increasing your profit margins.\r\n\r\nFixed Operations is just a fancy way of categorizing your Parts, Service, and Body shop under one umbrella. Your absorption rate is calculated as the percentage that these departments are able to cover their operating expenses in addition to the costs of all the other aspects of the dealership (including fixed expenses and dealer salary).\r\n\r\nThe closer you can get to an absorption rate of 100% - the better for your dealership. A rate of above 100% is even better. Think about it this way \u2013 if your absorption rate is at 50%, that leaves you with 50% of your dealership expenses needing to be paid through other departments \u2013 vehicle sales, primarily.\r\n\r\nOf course, if you\u2019re reading this, you\u2019re probably wondering how to get to a 100% + absorption rate. It makes things easier for your dealership if you\u2019re not primarily counting on the sales of cars to keep your business alive.\r\nProfit & Service Labor Rates<\/span><\/h2>\n
Streamline Parts Requests in the Service Lane<\/span><\/h2>\n
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Expand Your Auto Parts Customer Base\u00a0<\/span><\/h2>\n
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Tackle Your Absorption Rate Today\u00a0<\/span><\/h2>\n
Cost of Labor<\/strong><\/h4>\r\nWhen it comes to maximizing the profit in your service and body departments, separating labor costs and determining a target number to match the market average is the way to go.\r\n\r\nAccording to Automotive News<\/a>, the National Automobile Dealers Association (NADA) advises a standard rate of retail profit from labor sales should be 73%. If a customer gets charged $200 for labor, this would mean that $54 of that is used for the technician\u2019s wages and $146 is left as gross profit.\r\n\r\nIf you\u2019re not able to hit that target, you need to take another look at the average service labor rates of your competitors. You don\u2019t want to be losing out on potential profit just because you\u2019re unaware of the current labor rates. NADA suggests surveying every six months or so and bump the rates up by a few dollars if you haven\u2019t in a while.\r\n\r\nThe cost of labor is one of the most important elements allowing a dealership to cover fixed expenses.\r\n
Expanding your Customer Base<\/strong><\/h4>\r\nThere\u2019s a couple of ways to get customers to come back to your dealership \u2013 as well as reach others that may not be in your local area.\r\n\r\nWhen it comes to bringing people back in for service after they buy a vehicle, it all comes down to one word: loyalty. You have to establish relationships with customers, so they will want to return to your dealership for any issues or maintenance, rather than looking elsewhere.\r\n\r\nOne of the best ways to do this is by communicating effectively. Scheduling a service appointment immediately after the initial purchase is something you can easily do \u2013 and offering a discount (or even a free first service) is a great bonus to the customer.\r\n\r\nMaintaining communication is extremely important. Sending text and email reminders to buyers reminding them of upcoming service needs will increase the likelihood they return to you.\r\n\r\nNow, when it comes to parts, 93% of auto parts buyers do some sort of research online before making a purchase. Establishing an online parts store allows you access to these potential customers.\r\n\r\nIf you don\u2019t have an online presence, you\u2019re missing out on profit potential. Relying on sales at just your physical parts counter might not be enough to bridge the gap.\r\n\r\nSelling online is actually easier than you think \u2013 by partnering with an eCommerce solution, you can get a virtual part store up and running in no time. Here at RevolutionParts, we provide the tools you need to be successful. All you need is patience and the desire to try.\r\n\r\n
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