The Dealer Playbook
The Dealer Playbook

Episode 509 ยท 1 month ago

Kaylee Felio: Selling Auto Parts Before They're Obsolete


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Kaylee Felio is the Sales and Marketing Manager for PartsEdge, the power tool for helping your parts department generate higher profits. It's no secret that hanging onto aging auto parts inventory can cause many problems for retail auto dealers. The most obvious challenge is that if the parts become obsolete, they are more difficult to sell.

Kaylee's Advice For Avoiding Auto Parts Obsolescence:

00:00 - Introduction to the episode subject matter

01:57 - It's important to remember that fixed operations is the second highest producing revenue channel. Although it rarely gets enough talk time throughout the industry, the parts and service department has the genuine ability to provide more predictable revenue than auto sales.

03:56 - The best thing a dealer should focus on in fixed operations is getting a good grasp on the current parts inventory and forecasting obsolescence. OEMs are getting much more strict about returns, which leads dealers in a position where they need to know what to stock and in what quantity to not only fulfill the market demand but ensure that they keep the books in the black.

06:14 - Parts managers should take the time to identify blind spots when it comes to their parts inventory so that they can improve at spotting obsolescence before it's too late.

Listen to the full episode for even more insights and context from Kaylee Felio!

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Get Your Google vehicle adds up and running fast with FLEX DEALER DOT COM. The car business is rapidly changing and modern car dealers are meeting the demand. I'm Michael Cirillo and together we're going to explore what it takes to create a thriving dealership and life in the retail automotive industry. Join me each week for inspiring conversations with subject matter experts that are designed to help you grow. This is the dealer playbook. All right, gang, welcome to this episode of the dealer playbook podcast. So excited that you are here, especially because we're talking subject matter that we don't speak about nearly enough on the show. We're talking about fixed operations. We're talking about parts departments. I am joined by the sales and marketing manager at parts edge, which is a powerful tool to maximize the potential of parts managers throughout technology, through technology and a touch of consulting. Kaylee Filio, thanks so much for joining me on the dealer playbook podcast. Thank you so much for having me and, Um, you know, I hear that all the time whenever I come on podcasts. It's like this is something we don't talk about enough. So I appreciate it. It's like what, what's the term the step child of the industry, because we're always talking about variable we're always talking about how to move more metal. Um. But you, I've listened to you on on the fixed ops round table, Um, and you know, you bring up a lot of valid points and I think this is where I want to start, Um, and really introduce this concept. I mean it goes without saying, or hopefully should, that the parts department is I mean it's a it's a main profit driver for a store. It's the second largest revenue sort for a dealership. Yet we we tend to neglect it as far as mainstream discussions, and so my my question for you is, well, why is that? Why is something that generates, can generate much more consistent revenue is something that we tend to neglect in conversation. You know, I think it's because it's one of those Um things that just kind of works and Um, you don't have to well, I guess you kind of do have to work really hard to to make it really productive and and get um, but it's one of those things where it just works and a lot of times, um, there's really good parts managers out there that just do a really good job and dealers just kind of let them do their thing. But right now I think we're running into this thing where parts managers are retiring or we're having a shortage, people aren't sticking with it, and so we're running into this like thing where we don't know what that parts manager did and now really left with, you know, to figure it out. So I think that's why that's really interesting and really frightening. I think about as a business owner myself, really frightening. I mean, especially in an industry where we cling onto buzz phrases like got gotta gotta inspect what you expect. But probably to your point, because it's something that just functions, we're not necessarily paying attention to to how can we improve this? How can we make it more profitable? So, as you work with your clients and the industry at large, what are what are some of the things that you see on a consistent basis that, given a few tweaks, might just make that department even more profitable and productive? Yeah, I think, Um, the biggest thing lately is we've been talking about obsolescence, Um, because it is growing a lot in the departments because there are stricter return guidelines per the manufacturer and there's just a lot to keep up. And if you missed the windows Um, then you stuck with those parts. And then there's...

...the difference of the guaranteed parts and the not guaranteed parts. So there's just so many different UM aspects to it. But the biggest thing I've been talking to dealerships about is forecasting obsolescence. So how do you do that? Um? You take the parts that are in Um. What? Well, this is what we do at parts edge Um and it's something you can do too if you want to look at um a different guideline, but basically the parts that are in the seven to twelve month window. You take all those parts or that total, you divide it by six, because they're six months and that and that's how much your obsolescence is going to grow. So if you don't like, let's say, the calculations, five thousand dollars, if you don't have five thousand dollars in return allowance or appruals, your obsolescens is going to grow by five thousand dollars. So, like that's one of the things that you can look at to really uh improve and be more proactive with trying to offset your obsolescens or maintain it at a now or you know so and you mentioned so. So you've got a quick little formula there. But as you dig into it with your with your clients, I mean where are they missing the boat, you think, on average across the board and and being able to properly forecast for obsolete. This is gonna be my new favorite word, by the way, obsolescence. And then my phone just like knows how to spell it. So it's Um, so, uh the question. So, Um, we ask that question. I'm sorry. Sure, yeah, I know, I had to throw in my annoying Little Jab of I have that effect on people. Um, what are the common challenges you see as they as they seek to forecast obsolescence on their own? Is there I mean, is it as simple as just doing the formula and saying okay, a great water? Maybe some of the blind spots that we were not thinking about on the regular? I think the blind spots really is that the D ms is kind of overwhelming and the reports that need to be pulled to do that simple formula. Um, it's just one. It's just one of those things where you get to it when you get to it, and oftentimes you don't get to it, and so Um, I think that's what Um what we're discovering with our clients is bringing that consistency of like these are the numbers that you need to look at, this is how you need to look at them, and Um, looking at all those reports in the data so that you can be more proactive. So I think that's where it's falling short. Is there's Um, the D ms just there's a lot going on there and and looking at the data, and that's really kind of where where they're falling short right and it makes sense. You know, my mind immediately thinks about the narrative in the history of Hey, yeah, you've got this service department, you've got this parts department, but you're competing against stand alone companies out there who that's all they do. They sell auto parts, whether it's a blanket on names auto zone or or you know whatever. In Canada there's Lord Co or Napa auto parts or things of that nature. You're competing against these these people and it's not okay for you to just kind of to your earlier point, let this department do its thing. These companies are paying attention to all of this kind of stuff and constantly, to your point, asking the question, while what can we do to improve this, to Minim minimize loss, to, you know, minimize all these sorts of things? And so what's your take on that? Is it? Is it just forecasting obsolescence? What are some maybe things you've learned from these other companies that we're going to talk about your dog in a minute, but after we don't even worry about it.

I love it. I love it. Wait, you mean you're a real person, Kaylee. How dare you be a real person in an industry where we're all trying to pretend to be something else? Um, what are some of the things you've your company and you have observed that that perhaps the auto zones and these others like? What are some things we could learn from and take from them? I think that they're they're looking at their inventories, Um and organized. Man, I'm so sorry. Let me show. You'RE gonna have to pick this this be stup and and show everybody. Now, no, I just shut the door. PICK HIM UP. He's like. Would you be mortified if I told you I'm not cutting any of this out because I love it? That's fine, Guy, and I'm like and then when you order something, you're like, what did I order? That's awesome. Um, okay. So the yeah, what they're they're constantly looking at their inventories. To your point, yes, yeah, they're looking at the data, and I think the thing is, Um, you know, I don't really know how the auto zones are the overall least do it, but I know that Um, when dealerships can really um organize their their parts into more categories and really assess the true demand, they're able to Um really see what's going on with their inventories and know what they need to serve their customers. I think that's what it is down to. Is You can't just set it and let it go. You have to constantly be looking at the parts. You have to be organizing into the categories too, and the D ms does some of this work for the parts managers. It's just Um, it's just knowing what you need to do every day to be more proactive. And yeah, it makes sense. Um To that point, call me naive. What what is the average, based on what your observation is? I mean, how much parts business is a dealership doing? And then can you give me an example, maybe average, without specifics. Obviously you just keeping People's privacy mind, but what are you seeing like what what is the average dealership doing in parts sales per month? And is that because they're selling those parts into service? Is that or is that actual straight up customers being like I need a genuine o e m air filter. What does that look like? Yeah, yeah, I think most, most dealerships their businesses from the service department. Um, they're all kind of they all vary because some some parts departments are heavy and the wholesale. So they're they're servicing their shops around them. So it kind of depends. But Um inventory size that we're dealing with and seeing like average Um, it just depends. So like you could have, you know, the five to ten million in inventory and then sales are, you know, in the millions. Yeah, they're. They're producing their high volume and producing Um and it all kind of it's all connected with the service department and making sure Um, you know, you're pricing everything efficiently to Um, to to get the maximum gross that you can without you everyone's head off. Right, yeah, that makes sense. What are your thoughts on the future? I years ago, like we're talking. Years ago, I want to say over six seven years ago, I was having a conversation, don't even remember with who was here on the podcast for any of the enthusiasts that have cataloged my episode numbers. We were talking about the future of the business and one of the sentiments that was shared was show rooms might get a little smaller, inventories might get a little bit smaller and then the actually the primary of the business, the primary driver, would be fixed ops. I'm...

...curious on your take. I'm curious as inventory. We're seeing now inventory shrinks. We're seeing H O e M executives and other analysts of the industry saying, Hey, I don't think inventory numbers are going to return to where they were. Like there's a new normal that we're establishing here. Could this mean that service departments become the primary driver? It's like, if you to choose from here, you'll get it shipped to your door, but we're going to be your service, Primary Service facility. I do think. I mean we're already seeing it. Fixed ops is is really kind of not taken over, but it's I think we're focusing more on it and the fact that it is probably going to be more of the main driver, because we're always going to need our cars um maintained in service. Um. In regards to parts, I do think that Um dealerships are going to move to, hopefully, a more online way to sell parts, right and I think that's kind of already happening, but like to a level of like having a marketplace and a true like shop for parts, and because there are to do it yourself people and then there's people that just want to shop online and look at things, they're playing ahead Um. So I do think a lot of things are going to go online for parts. That which makes sense. Like I feel like if you're gonna try see, maybe this is just the way my brain works. Maybe I'm Kaylie. You're gonna have to tell me if I'm crazy or not. But instead of starting with parts and saying, Hey, here's this thing that would actually be really easy to sell online, we went directly to the most difficult thing to sell online, which we're good would be a good idea. Try. Let's try and transact a vehicle online. It's like, but what about this air filter that we could just throw in a box and ship? No, no, no, let's you what I mean. Like why aren't were? I think because it's a kind of overwhelming, because if you think about how many parts there are per like the make, the main like. So I think, Um, I don't think it makes sense like to sell every single part online, because, I mean, I think you just kind of have to what what needs to happen is figuring out the market and like what's going to sell, Um, what your customers are looking for, and I mean there's gotta be ways to do this, Um, and really track track people, because we're we're all being tracked all the time. So Um, yeah, I mean I just feel like there's and then what's Um, I was that digital dealer and it was who was it? Um, Sean Raynes. He had a pretation on parts and he took in service and he touched a little bit on it, but he was talking about how, Um, what's in the parts department physically, like all the you know, the fun stuff, the t shirts, the water bottle like this, the cool stuff. None of that's online for anyone to buy, right. So why is it not? I don't know, like how come nobody's buying this? Because nobody knows it exists. Yeah, What an interesting concept and I love Sean. But Way, he's one of my favorite people in this industry. Um, but that that he was funny. He's hilarious. Yeah, he he is. UH, he's a gem Um, but that makes sense. You're you're right. I can understand your point about how would you even keep trying? I mean that that's a huge undertaking. I know there are systems out there that try and do this, but I mean to your point, I think really valuable is, well, maybe we start with our most profitable predictable sellers and we get those online and we test it and maybe the water bottle or the tumbler and the t shirt and the key chains and stuff like. Let's try this and it immediately. He thinks of there's this company...

I follow on Youtube, Um, called REV Zilla. It's for motorcycles and I love riding motorcycles. But this opens an interesting avenue for dealership on the marketing side of this department. Um, because what REV Zilla does is they basically just do reviews on the products that they sell, good, bad and everything in between. And what's interesting about it psychologically, Kaylee, is you don't hate, like they're not worried about oh well, I can't trash talk this product I sell. It's a product I sell. No, they give you, hey, like this helmet. If your head's this shape, you might not like this because of this. But if you're the they go through it all and guess what happens? They make don't don't fact check me on the number, but if butt load was a number, they sell butt loads of product, just going through and I could see somebody, you know from a fixed perspective, simple backdrop, green screen table. Hey, today we're talking about this air intake, Yada, Yada, Yada, and why it's going to help the performance of your you know, twenty, twenty, Toyota, whatever, you know, huge opportunity. What are your thoughts on that? Is that the way of the future? You think? Oh, I think so. I think that dealerships need to do videos and talk about the accessories and enhancements, the things that the the the cars that they're selling. Um, because, I mean, if you think about it, what's after you buy a car? What's the first thing you want to do? You want to accessorize that, you want to buy. I mean, if you're buying a truck, probably the first thing is tires. I mean that's my personal opinion, but and wheels, but Um, but still those should be offered to be able to sell online too. Like, Um, I don't know, it's just there's huge opportunities and I love the idea with Um, what you call it? Um The cycle? Yeah, like Um taking videos and showing them like what all the different areas and how can improve your car, your truck. Um, it just shows people. That's the way of selling really Um, talking about it, showing them. Yeah, yeah, it's best known. Glenn Lundy said this, Um, this past week we were in Phoenix together. You said best known is better than best, and here's an opportunity for parts departments to become best known because I think to your earlier point there. Yeah, sure, okay, they're the second largest profit center, but that doesn't mean they need to play second fiddle, you know what I mean? To to the sales side. They can be their own that they're not even playing the same music. They got to just go be their own band and and you know what I mean, and I think there's a huge opportunity for that. Um. We've talked about online, we've talked about obsolescence, we've talked about where we see things going in the future with online part sales. Does any of this, in your opinion, translate to the metaverse? Are we gonna, like, is there an opportunity for ABC motors, the most popular dealership in the world, ABC motors, to have a dedicated parts department in one of these whatever they call it, dissenter land or whatever? Oh, I'm probably the wrong person to talk about whatever, because when I learned about it I was like Oh, I was just like in shock. You're in shock. You're like, why don't you just go to the real parts department? Well, I mean so, I see value in it. I see value because you have to, Um, you have to appeal to different audiences. So there are going to be people that are going to go more towards that, that style, Um, a way of buying or whatnot. Um. So, yeah, if, Um, I...

...don't even know, if an Avatar wants to buy real parts in the fake world, then sure, that's what you're like. Yeah, that's kind of work on your vehicle in the metaverse virtually and kind of do that. If that's I don't know, because I really kind of don't quite understand it all. Like are you living in the metaverse and doing like virtual things, or are you buying the parts there and then they're physically getting delivered and then you work on your real car. Like that's kind of like what I don't understand of the metaverse right I think it might be more that. I think it might be more like you're there and there's the parts store and you buy the part and and then it shows up at your house and there you go, you got the part. I might be getting old and I wish I didn't feel this way, but I'm like I could probably do it faster on like just in web two, like in in the Internet. That's on the computer in front of me. But I'm always interested. I have to ask everybody, and and it's a mix bag right now. There's half of the people I asked that are like, I don't even get it. So there we are, and then there's this other half that go into this big, long diatribe of why you know, the metais is the you know anyways. So That's interesting, interesting take you men. You had mentioned earlier the D Ms. so when you work with h dealers, as it pertains to forecasting obsolescence, my new favorite word. Um, you said you can kind of do it. It's a little bit convoluted. So are you suggesting that there's a better system, a better way of doing figuring all of this out? Yeah, we have. So we we've simplified the reporting for parts managers. So the management report has always been so there's just a lot of different reports to look I have to go to different areas and I every D MS is different, Um, and we've just taken that and put it on one page basically and showed them their key categories. So then they're able to see, okay, my four category I need to focus more on, or my technical obsolescence. That's your forecast at obsolescence category is is not, Um doing very well and we need to accrue more dollars type thing. So it's just seeing it all in front of you on one page and being able to make the tweaks within the D Ms Too, and your process to be more efficient. Right. And so then that's the back half of parts edges. You've got the consulting side of like Hey, change this, maybe work on that sort of thing exactly, and I'd like to take it to that next level of like we all we we have those meetings to talk about the reports, but then we actually helped them execute the stuff in the DMS. That happened. That's where, that's where. I don't like to say consultant, because consultants kind of tell you what you need to do and we actually kind of like help do it. Yeah, consultants are like, you know what you should do, change everything about yourself. Okay, that'll be x number, and you pay him and you're like, I don't know what that means. So you're saying, Hey, no, let's look at this together, let's understand it together. Now let's let's execute, let's let's put it into an action plan exactly, because every parts department isn't the same. Every level of parts manager is different. So what we're gonna do is different for each level of parts manager really, and we can see by looking at the numbers. Okay, this is where we need to make changes, and then we do that within the D Ms. Yeah, it makes sense. I was chatting with my pal Scott Simons, and I asked him, I said, what's the one problem that you don't believe has been solved for yet? And I mean he's part owner, I mean he's at C M, a Um group lies abortion is their incredible CEO. Um, he's a CO owner. Um, I want to say they're up to nineteen stores. So I felt like he might have some really good perspective. What's the one problem that has not been solved...

...sufficiently yet? You know what he said. What you said made me think of it. He said I wish there was just one quick report that I could look at that was quick, snappy told me what I needed in a way. I go and everything out there currently is I gotta Dig through this report and Cross reference to that report and this and that, and so I think that's really tremendous Um that you guys are solving for a very specific problem, and particularly in the Step Child Department of the industry that doesn't get enough love and attention, love that you guys are solving for that problem. Really enjoyed our conversation. How can those listening get in touch with you to learn more? They can go to our website. So it's just ww dot cars dot com. Um, I'm very active on Linkedin, so connect with me on there. Um. Yeah, I mean just reach out. I'm happy to help anyone that has any questions. Hayley Filio, thanks so much for joining me on the dealer playbook podcast. Thank you yeah, I'm Michael Cirillo and you've been listening to the dealer playbook podcast. If you haven't yet, please click the subscribe button wherever you're listening right now, leave a rating or review and share it with a colleague. Thanks for listening. m.

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