Forecasting plays a huge role in a business’s success. Making good estimates about the demand for their products and what sales will be is the main purpose of forecasting.
In a car dealership, management has to forecast market demand for its cars and order from the manufacturer accordingly. Medium-range forecasting is used for sales planning and budgeting. Finding the right balance of supply and demand allows the dealership to order enough cars to meet the demand of its customers. The financial, marketing and personnel planning is based on the forecasted sales. Giving good estimates for demand is vital to the business as it takes each car ordered 3-4 months to be produced and delivered. Failure to do so would result in having a dealership with no stock and no cars to sell. This would result in turning potential customers away and losing business to other competitors. By predicting good demand, the dealership would have a competitive advantage over others and gain more market share.
I remember when I decided to purchase a new car and when I selected the car, I was told it was unavailable and I would have to wait for two months and had therefore ended up buying another brand.
How many times have you gone to a dealership, liked a car and asked for availability and were told you would have to wait for a month or two? How frustrating is that?
Another vital issue for a dealership and would highly reflect on their image is having a good projection of demand for car parts. Unavailability of parts would result in unsatisfied customers, reflect negatively on the brand image from bad word of mouth and the dealership would end up losing sales. A customer wants a comfortable ride for years and would definitely not purchase a car that has no available parts.
Thus, you can see how important forecasting is to a business and the role it plays in its success.
9 thoughts on “Car dealerships with zero cars to sell!!!”
This have been happening recently in Bahrain, you go to a dealership and they don’t have cars available. You will have to reserve a car that will be coming in 3 to 4 months. This is frustrating since I’m not even ordering the car I want, they give you a list of cars with options to choose from!
So sometimes, you find the options you want, but its not the color you want.. There will be a compromise even though I’ll be waiting for 3 to 4 months.
This made me go to dealerships that offer special orders on cars so I can start customizing and ordering my own car. Almost same waiting time, except, I get what I want.
Car dealers do that just to make sure that they do not sit on inventory which they end up not selling. I can assure you though that they are fully aware that clients might turn away and buy other brands if the car they choose is not available. To the management the costs of having unsold inventory outweighs the benefits of preordering and having cars ready to sell.
What I would like to add here is that the trends seen in businesses nowadays are all about securing money first and holding minimum inventory if any at all. The larger the product in terms of size and price the less inventory you will find of that product. Just to illustrate further, you find pens in stock almost everywhere, when it comes to cars you might or you might not, when it comes to ships they have to be preordered and probably a fair amount of money has to be paid to get your order processed.
Your post is a great example of bad forecasting system. The reason behind it is that car dealers prefer selling all their stock rather than end up with some extras. Before a couple of days I faced the same problem with my car. I took it to fix some parts, but unfortunately the parts needs 4-7 days to arrive. This situation keeps customers frustrated, therefore, dealers should spend more on improving forecasting methods rather that marketing for new customers.
It is very strange for one dealer to have all variety of the brand and models available and ready to be sold while other dealer you have to wait. The funny thing is that those dealers with no cars available or limited options to choose are usually bad in after sale services. So, a customer can predict the services and the availability of parts even before he attempts to buy a car from them. I don’t think it is a bad decision to have cars in stock ready to sale because even if the dealers end up with some unsold cars before new models arrived they can initiate year end promotions or add extra features and customs to their left over cars. Therefore, customers will get tempted to their offers and promotions and the dealers might end up with potential long-term customer loyalty to their brand.
Forecasting is one of the most important steps in any business and is needed in some more than others; I totally agree with you that some companies lose their customers just because they did not have accurate forecasting of the demand. Furthermore I think that for a car dealership it’s even more important given that their customers hate to wait and in fact sometimes change their target just because they have to wait.
Not only that but all your marketing efforts and the ability to bring the customer in the showroom, might be all a waste just because you had inaccurate forecasting of the demand. So showrooms with accurate demand of forecasts will tend to stay longer in business, with more loyal customers walking in year after year.
Forecasting is very important for any business especially those who deal with products because they have to plan their inventory very efficiently by forecasting the demand in the coming months. I agree its very frustrating when a car is being advertisied in the newspapers and tv and then when you visit the car dealership, they inform you that the car is not available and therefore you have to wait 3 to 4 months. This car dealership will eventually lose customers because of their inability to accuretly forecast demand for its products.
i strongly support your statement, especially when a particular series that is already available in the market, the dealer should be in a better position to forecast the demand in its new face-change of that particular car, customers will not wait till you provide them with their cars for several months but will in-turn look for a substitute with the same budget. In this way you lose a lot of customers.
I totally agree with you. I learnt the hard way of how forecasting your sales is a vital step that a company needs to ensure that it has correctly arrived at its target level of production to meet the anticipated demand. If you tend to over forecast then you will need to miserably pay the carrying cost associated with your extra inventory. On the other note, if you under forecast then you will stock out and your competition will take a bigger chunk of your market share as you were not able to fulfill their demand.
In conclusion, a car dealership needs to be able to satisfy the demand of its customers in such away that other dealerships do not steal their loyal customers. They need to deliver the cars in a timely basis such as to be competitive with the rest of the dealerships.