Pricing by Retail Rating - The new metric in velocity trading

During the last few months I have been researching the intro and exit price positions of stock on Autotrader, broken down by Retail Rating (formerly desirability).

In order to analyse the data, stock was segmented into 4 categories: Platinum, Gold, Silver and Bronze. Stock is categorised as ‘Platinum’ if it is highly desirable, and ‘Bronze’ as the least desirable,

predicted to be the slowest to sell. It is no surprise that the higher the Retail Rating, the higher the margin achieved and the faster the stock will be to sell. However, there is only a small segment of

stock that falls into the higher ‘Platinum’ category, and in many cases some franchises only reach the Silver’ category.

This analysis highlighted a trend that ‘Bronze’ stock was typically exiting at sub 98% of market price, yet in many cases dealers had initially positioned the price far higher and gradually reduced the price over time. This highlights the question, “why waste marketing spend” for those first 30 (in some cases 45) days?

A number of questions arise from the data, which can perhaps be answered by the integration of tactical strategies:

1. Why promote highly desirable stock on higher cost 3rd party platforms during the first 21 days?

During the first 21 days, consumers will seek out highly desirable stock on the dealer’s own website, which can be optimised as a lower cost marketing channel relative to 3rd party platforms.

2. Should we only stock highly desirable stock?

Unfortunately, present market conditions mean that all price segments will need to be stocked to fill the forecourt. However, understanding the correlation between Retail Rating

and Days to Sell will help understand the most realistic actual purchase price, enabling the dealer to better position the retail price from the outset in order to turn the stock more quickly and still make a margin, whilst reducing advertising and stocking costs.

3. Should we move away from pricing used cars based on Days in Stock?

The ‘Retail Rating’ and ‘Days in Stock’ metrics can run in tandem; however you will quickly see the reduction in days in stock and be able to say goodbye to any overage issues by considering the Retail Rating when stock is initially priced. 

Obviously, the basic velocity metrics, such as speed to market and merchandising, still apply - if these are not met then the Retail Rating metric is irrelevant. However, following the Retail Rating

metric will enable dealers to increase efficiencies, invest less in stock, turn stock more quickly, experience fewer wholesale losses and increase sales volumes.

There are a number of strategies that can be implemented based on this analysis at segment and brand level. If you would like more information, or just an industry conversation please get in touch.

Ian Godbold

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