I understand the concept of absorption, but I’ve never believed in the philosophy. For those who don’t know, for dealerships, it’s a metric where you see how much of the total dealership expenses that the fixed ops department can cover (absorb). Get to 100%, and all of the gross profits in the sales department are essentially your net profits.
Depending on how much of the kool-aid you have consumed, there is a school of thought that if the vehicle sales go away, the dealership can survive on fixed ops. My issue with this metric is that a lot of a powersports/marine/RV dealership’s fixed ops sales are directly tied to the sales department. If the vehicle doesn’t sell, we don’t get the labor to build the vehicle, nor the parts sales to accessorize it.
Early into this pandemic, for many dealers service sales have remained strong, but parts and accessory sales are off by significant amounts. The whole concept of absorption is starting to break down, sometimes with catastrophic results.
What are you seeing in your dealership? How has your parts and service business been impacted by the COVID-19 pandemic?
#dealership #dealerships #dealers #powersports #absorption #rv #marine #spader #service #parts