Interview with Jasen Rice President of Lotpop on Inventory and lot management

Zach Klempf: Hello, Zach here, and Happy New Year 2022. We have a great guest on the podcast today. Jason Rice of Lotpop. Thank you so much for joining me today.

Jasen Rice: Hey, thanks for having me. It's been a great New Year.

Zach Klempf: Definitely and let's get started. And for those of us listening, talk about your background in automotive and why you started Lotpop, and what you guys do?

Jasen Rice: Well, to make a long story short, I started 1997 selling at a Ford store off the floor. But then I always liked working the phone better than standing out on the lot. So within six months of actually working there in 97, so that would have rolled into probably 98 we started doing internet sales. So I started selling cars off the internet in 1998 and early 90s and late 90s, early 2000s and cut my teeth; made a living off just taking internet leads instead of ups then and that mean other opportunities like the internet director of a large dealer group, got my feet underneath me pretty well to where I was writing articles for Dealer magazine, I was on a board of directors for digital dealer to get that started in 05/06. And that also led me to GSM at a small used car lot. A little bit of everything. But most 80-90% of my time was spent either running internet departments or selling cars off the internet. But that led me to being introduced to a gentleman by the name of Dale Pollack, if you may know him back in 2005. At that time, he had a product called Mpower Auto, that he was selling to dealerships. He had his core team, and, you know, developer, his assistant and another internal guy, and I was the first performance manager being brought on to help now within eight to 12 months of Mpower auto, which was comparing dealers wholesale cars, how they owned it to wholesale. And those cars, they own bad to wholesale, you want to move quicker with that transition to retail data, or into what you now know as vAuto. So from 05 or so I was at the infancy of vAuto. So that's again, another benefit, you know, seeing being at the beginning of the internet and growing in the internet portion of it. And knowing how to sell cars off the floor and the internet and then going and joining vAuto and how it changed the industry. Been at the forefront of that I was there for eight-plus years. My last year I was director of the Eastern Region. But being in 1000 plus dealerships, I just realized used car managers had a lot on their plate, all the metrics and things they needed to track and trend. You know, it was kind of at the bottom of their list because they are dealing with what was in their face. So I left vAuto in good terms thinking I can help these dealers, I can help them track and trend and do the legwork of the metrics and things they should be doing. And then I'll meet up with them every week to keep them on task. And that just grew into you know, I was manually pulling data once a week meeting them with once a week. And you know, within three years, I started hiring another guy to see if that would work. And we're running things off of Google Sheets manually. Just over the last two years. We took all that data and put it into software. And now here we are eight years later and hundreds of dealerships and you know, 20 employees, and it's just been a fun ride.

Zach Klempf: Wow, what a great story and we've had Dale Pollack as well as a guest on the podcast. So 2020 and 2021 have been surreal from an industry standpoint. What has the pandemic and the chip shortage taught you at Lotpop as well as like dealers about inventory management?

Jasen Rice: Now, obviously, as a business owner, it's kind of a curveball that you know, all sudden we got to figure out how to maintain our clients and stuff but you know, as an industry as automotive wise, you know, kind of reflected back during the recession. 08-09 because again, I was with the auto and you know, these dealers were losing their franchises lost 50% new car sales so it was not a  good time if you be auto cars used cars flourished at that time dealers had to make up some of these sales and Chrysler franchises became a used car operator and stuff so little bit similar and cash for clunkers came into the mix and it made wholesale values really high and you know, similar to that, except for back then we had plenty of cars to sell just people couldn't afford to buy them. And now even on new cars is the lack of supply it. They're still at a 14 plus million almost 15 SARR, you know, new car sales. And 08 it was 10 million. So there was a discipline that had to be learned and a lot of dealers within a few years kind of forgot, you know, we're kind of like elephants, we have short memories and you know, so it was kind of silly. The two things I want to dealers to do is carry what they sell. So with the cary, you got 100, and stock will sell 100 plus. But I also want to do it with gross. And so we focus on the first 30, you can get gross, by increasing the amount of cars you sell in the first 30 days where the profit is. So that's always been our business plan. Because it's hard to get dealers to understand that they don't have to carry 100 150 To sell 100. Right, and they always thought they needed that cushion. So the first wave of I thinks there are two waves of COVID. The first one was the whole volume thing, all of a sudden, cars are flying off the shelf, and they're selling 120 with 90 and 80 in stock. And they're like, Wow, this is great. And so that dealers finally realized that's an opportunity potential and they could actually accomplish that. And the second phase misses here recently. Were cars are going for stupid money, but yet their gross is where the highest dealers, gross profits skyrocketed. And I do think obviously, you know, supply and demand and customers willing to pay more. But I do think it goes back to the first 30 dealerships average age to sell went from 33 days or 34, down to 2022 days are selling them a lot quicker. And so the strategies that we've taught dealers over, you know, a decade now have are almost a decade now. You know, those strategies kind of ring true, they can see those opportunities in this short window of this COVID thing. So hopefully that continues. You know dealers see those benefits.

Zach Klempf: So what were some of your observations in terms of the used car marketplace in q4 2021?

Jasen Rice: Well, I do think there's been a slowdown. I do it used car news on CBT news each week. Matter of fact, this episode this week I was talking about this last quarter was a little bit tricky.. But I think again only has to do with rental companies dumping their 60,000-mile cars and buying the new ones because an all I have seen, at least in our numbers and other numbers I'm tracking dealerships volume kind of slowed down. And new cars were trickling in. So they're getting some trade-ins, but their volume slowed down. They weren't less hesitant at the lane. It seemed like if anything was selling again, it was a lot of the wholesalers and stuff. The other transition, I think and it wasn't just the last quarter. But going back to the COVID question, I think two other things that COVID did. And then again, the last quarter question, one digital retailing it forced more than hands, I think dealers dabbled in it and trying to do everything online, like the Carvanha is of the world. But this kind of forced their hand to get more proactive in it. The other thing it did was acquire vehicles other than the lane. So private party acquisition really picked up. So I think dealers are finding other avenues to buy cars than lanes. And so I think there was just a lot of attention to what these cars are going through at wholesale. But what we're seeing is a slowdown on retail, it wasn't reflecting. So there's this mismatch and going and paying this much but I just don't seem like I can sell it that much and goes back to the economy and stuff inflation's real high. I think customers are sick of overpaying for stuff they may or may not need. They just kind of wanted it. So I think consumers kind of backed off a bit. Because they started seeing the headlines. There's this one recently released, you know, the average used car price was 29,000. Yep. And in that article, it said that, you know, it's finally exceeded what a third of the country you know, makes us average income, you know, so can they afford that for us car and if they are going to afford it? Well, they'd be better off just waiting for a new car. So I think this last quarter of this year. The bad thing is dealers don't react to it. So they feel the pain and I don't think they felt the pain yet. I really do think the tax season is going to be make it or break it for the dealers going in the first quarter. Because if there's not a strong tax season, and I personally think there might not be as one I just read Wall Street Journal. And again, part of my my news this week was there, the IRS is still dealing with 2020 tax filings, there's like 6 million tax filing, they're still catching up and think of COVID and shutdowns and wow, and then all these new letters that people are getting anybody that got any kind of stimulus from unemployment and their childcare credits, they've already received those. So those numbers they're getting letters of one I've seen people getting letters of how much they owe for their stimulus money they got they're gonna have to pay taxes on that to that number and the child credit has to match up. So that's just added workload for the IRS to match these numbers up if it don't add up it's going to get kicked and delayed and, and then so I don't know if that It's going to be as strong as a tax season. And on top of that, with inflation, and higher pricing, I think people and new car starting to trickle in, I think people are just kind of going to be hard. But if it's a strong tax season, then maybe we're okay. And it keeps going. But it's kind of a make it or break it for this first quarter, I think.

Zach Klempf: And looking beyond, you know, the first quarter and tax season and any predictions for 2022?

Jasen Rice: I still think wholesale is going to stay stable, I think it drops off the first quarter of it unless the tax seasons there. Stay strong, though, because going back to rental cars, you know, if the rental car companies and who knows with this new Omicron and new spike, and if they're shutdowns and lack of travel, which lack of rental cars, and so they might not be buying, but if they got to replace and replenish, they're not going to get any cars for a while. So they're going to continue, they're willing to pay up because they can make up their money on renting the car out. So I think they keep that wholesale high. I do think dealers do see an opportunity for private party acquisitions. I think that gets busier and better and more competitive, you'll start seeing more and more companies helping dealers accomplish that private party acquisition stuff. But I, if everything lines up without a curveball, and you can't say that nowadays with this, right? I think in new car inventory continues to come in like it should and build up a little bit not is what it should be. But it should get better and better. I think we've hit that tipping point. And I think consumers are going to be sick of paying retail prices on these MSRP. For these used cars, I think New is going to have a stronger, I bet it jumps back up in that 16 million range. And then, but used I think takes a little bit of that hit because trade ins are going to start coming in private party acquisitions are going to be happening, rental cars, maybe by the end of the year, start getting cars. So I think used cars is going to be the biggest trick bag. Because again, the rate that they increase just doesn't make sense. And unless somebody needs it, I don't know if they get it. Stimulus probably I'm going to come in and pad it like it used to. Also another headline was repossessions, you know are starting to spike back up. So with the stimulus money going away, people are not being able to afford some of these payments that they're getting yourself locked into.

Zach Klempf: Yeah, I know a lot of good points there. And what do you think dealers are sleeping on when it comes to inventory management?

Jasen Rice: You know, is I think really what it comes down to what we're finding is a little bit of the lead management, we're combining, you know, CRM data with the inventory data, because it doesn't seem like inventory cools, talk too much about leads and serums don't talk too much about inventory. And we're finding one stat that I threw out 62% of the dealers active leads are on cars that are sold. So I look, we go look at the last 60 days of the leads. And see how many are still active in their tool that marked loss that mark sold still active in 62% are on cars already sold, that only leaves 38% of your current leads to sell a car to today. So your CRM will if you close 10% of those. So if you have 100 leads, there's only 38 People left to sell a car to today, if you sell 10% of them, that's only four deals. So your CRM is gonna say have a 4% closing percentage on your 100 leads and reality. And so you're gonna think your process sucks your marketing sucks. In reality, it's the cars that are sold, you know, so we're getting a lot of leads on cars that are sold. So the missed opportunity, I think is what are we doing with these 62%. Because if a cut on sold cars, if a customer walked in the door, on a vehicle that sold yesterday or earlier that day, we're going to slow that customer down, figure out if they're open other makes and models or other things and try to switch them to something else. I don't think that's happening on these leads when they're 60 Plus I have a dealer 80% of their active leads are on cars are sold. Wow. Then the other thing is, is 47% of their active leads are on only 10% of their inventory. So if you have 100 cars, only 10 of them get half your leads. So the other 90 Cars are splitting up those 50%. So of these 90 cars that really don't have that many leads. Could we put some of these active leads on sold cars and switch them to these cars to drive that up. So we're just exposing that kind of metrics and those kind of numbers that I think there's a huge missed opportunity on taking active leads on sold cars. switching them to other cars. And, you know, again, it's kind of recycling and reusing that lead into something else. And I think that's the next big opportunity for dealers.

Zach Klempf: So what advice do you have for your average independent dealer, they're sourcing inventory, trying to build a strategy for this marketplace?

Jasen Rice: Well, if I was an independent dealer, one, obviously, if you can have some kind of service department, that would be huge. I do think you know, now the average age of a car on the road is 12 years or older. I think the fact that you think of all these rideshares, the Ubers, and lifts, you think of all these food delivery, and Walmart deliveries, and all these people that are grocery food, even people are taking their cars and delivering groceries, I think the miles the brakes, they're going to be wearing out these cars, and they're too high, too expensive to replace, so they're going to keep them longer. So I think having a strong service department will allow you to, you know, obviously gain some of that, which then allows you to maybe try to trade those people out. This is totally off the cuff, if you have a service department, I wouldn't be too afraid of those late model cars, obviously very price sensitive, and very, so you have to be very in tune. But what I'm saying is like these ‘18, ‘19, ‘20, even these later model cars, these ultimas or rogues, more likely, because their higher dollars customers are going to have to finance and more than likely no one's traveling very far to buy rogue. So it's going to be a local customer. If you do if you have a good service department, and you do a good service walk, you bring it back for service, right. And so you're going to get f&i opportunity, and then that somebody buying an 18, or 19, probably trades in a 12 or 13, that you can't buy it the lane, right? Those are the cars as a lot of independent dealers are chasing that 2014 with 80,000, or 50,000. You know, those are hard cars. Those are kind of a one-off. Though, if I have 2012 with 80,000 miles on it, somebody might drive two or three hours to come by that 8-10 grand car, right. And you don't have an opportunity to get them for service more than likely they're not bringing in a trade. More than likely they might already have drive in three hours or finance already lined up. So don't be too afraid. And I'm a ton of stock all of them. But those later model cars, if you have a service department, those run-of-the-mill cars give you an opportunity for a trade give you an opportunity for service and give me an opportunity for f&i. So I think those I would typically have said stay away from late models as an independent. And I think the Honda's and Honda certified, some of those get a little bit trickier. But for the Ford Focus fusions to ultimas. The key is, you know, the Hyundai's, I think he had an opportunity to bring in some 18, straights and fourteens for them and give them in service and keep them as a local customer.

Zach Klempf: So what are some of the most successful dealers that you guys work with doing differently when it comes to inventory management?

Jasen Rice: One, top-down management, right? The GM GSM are made a part of these decisions when we do our weekly calls with our dealers, and we're trying to push them to, you know, make some hard decisions. If I just have the used car manager on that call, they typically might want to push that decision off and be afraid because of their gross or their boss is telling me but when that General Manager dealer is involved in that and that decision, say no, we need to do this, do it, you know. So one top-down management, everybody has been involved in those decisions. But the other thing is keeping them and carry what they sell and sell what they carry, you got 100 in stock sell 100 if you if you got 100 stock and only sold 60 or 70, then bring your inventory level down to 60 or 70. Now and then if you start selling 80, then carry back up to 80. And then again, going back to this whole first 30 scenario get as many cars as you can sold in the first 30 days. If you can keep your inventory clean and have a good aging policy. I've always thought that, you know prior to COVID before the last 18 months, right dealers were complaining about margin compression and gross profit. I mean, if you think about a lot of times when I went to go price a car and I went and looked at the competitive set the cheapest price cars and they're always the guy that had a 90 100 200 day old car and he's dropped this price to get off of it. Now if I bring in a fresh car, I either got to compete with his lower price, or I got to wait until he sells it and then my price becomes relevant but by then my cars are starting to age and then I dropped my price so think the dealerships that actively have an aging policy. And if every dealer had an active aging policy of 60 days, we can all buy and sell at current market values, right instead of having to compete with somebody. So I think the dealers that keep their inventory, lean and clean, carry what they sell. So what they carry are always going to be the better dealer consistently, in the long term, you might miss a bubble, you might have missed that bubble, when everybody was dumping their cars, and you bought them cheap, and you got to, you know, make a ton of money on the overlap, I'll risk missing that bubble, then trying to be in it, and then all sudden, it pops, I don't want to be that dealer caught when it pops. So the best thing is still being clean. Think of the long game to these Carvana has these Car Maxes of the world. They think of the long game, they're two, three years down the road, they're you know, they're fine losing money right now they're gaining market share. They're thinking long term, I think a lot of dealers think too short term down to, hey, the first half of the month, second half a month, what do we do? You got five, five minutes to hit your bonus? Right? What did we do last month? You know, we're so short term focused, what's our front end what's versus what's in the long game for us. And that goes back to a strong service turnaround gets sell somebody, even if you only make 200 bucks, and that 2018 Altima, you got a trade that you're going to make money on, you do a good service walk, you get them back in the door, they take three or four years in your service department, and then you sell them another car. But a lot of dealers are just wrapped up in that, oh, the stimulus only made 200 bucks on their car, and not thinking of the long term. So I think that's gonna be a big key too.

Zach Klempf: So more of a technical question, kind of putting my software, you know, founder cap on? Why is it hard to build inventory management software? You know, what are what were some of the challenges and getting Lotpop the software platform to market?

Jasen Rice: Well, it wasn't so much getting it to market is, you know, working out the best practices and the metrics that really matter, I count myself as a lot management tool, not an inventory management tool. I'm not, I'm not here to compete with the Vautos and the Max Digital's of the world there, there are already a ton of those. I'm looking at the lot. But as an inventory management tool, you're at the one of the things that I've realized over the last eight years at pop is that market data man is you know, I emailed cars.com. And I said, Hey, I bet half the cars listed online are inaccurately listed. And they have a tool called autocorrect it which you know, basically is like a build-out sheet and will show missing features on cars. And they said that 37% of what they saw 37% of the cars were listed inaccurately, either missing trims or key features, or options that the car and transmissions so like 22% of the cars missing transmissions, you know, I've got examples of a car listed. It's a truly you could tell it's an XL F150. It's cloth seats, but it's listed as a higher trim. So as inventory management tool, snowfall to them, they're only as good as the data put on the sites. And that data is only as good as what the dealer puts on there. So until that data is cleansed and is accurate. Meaning every car listed as a build-out sheet with every feature, it's going to be hard for that data to be that accurate, if like I said of cars.com is saying 30 actually did a study with the 25 door dealer group 29% of that dealer group inventory was listed on in some of their stores had 50% of their inventory listed without key features, trends and stuff like that. So I think, to build out an inventory management tool, and until that data is cleansed, that's tough. And again, I want to focus on what they have to focus on. And that's their lot and what I can control there and then use as my first point of reference, and then use the market data. And you know, as the second point of reference, just because again, no order to trust the market data, I gotta trust the guy down the streets doing his job. And is he ever even as a great operator? So I've talked to a ton of great operators, every one of them will tell them they could do they could do a better job than what's right.

Zach Klempf: So lastly, Jasen to kind of close things out what's coming down the pipeline from the Lotpop team.

Jasen Rice: I just said you know, the inventory part we've we've been running pretty good for last eight, nine years. We've helped the dealers on the internet lead management over those eight, nine years also because of our background, but that was a lot on Google Sheets. And we're just starting to dabble some of this internet information are those two stats I gave you about the you know 62% And so, and that kind of blew my mind, you know, running internet departments for years closing percentage leads to appointment ratio. All those were important metrics to gauge lead providers in my performance on my team. But when I look at that data now I'm like, I don't know if I trust that metric anymore. So we're going to be exposing more and more of these metrics when you combine the two. So, you know, we're going in nada. And I'm hoping to have a lot more of this integration between lead management and car management. Because we do that physically, every day on the lot. We're making sure cars are good and our customers are taken care of, but digitally, that's kind of tough for one system to do one thing one system do you know, but when you combine it, these metrics are, I think we're gonna have quite a bit of eye opening stuff when we start really digging into some of that data. 

Zach Klempf: And Jasen, really appreciate you joining the podcast today. It's been a great episode. Thank you so much.

Jasen Rice: Thank you very much. Thanks for the opportunity.