The news of our demise has been greatly exaggerated…

 

By: Rob Volatile

 

I am writing this as it appears: One man’s interpretation of the current data as it applies to the retail automotive industry. Nothing more, nothing less. 

 

In my 30 years in the business I have seen and been involved in a lot of things. I have seen markets collapse and rebuild. I have seen recessions, a great recession, and I lived through 9/11.  The current pandemic is certainly as major an event as anything I have seen and will be evaluated and referred to from this point on.  I would like to take the time to discuss the business aspect of the pandemic playing out and what I believe will take place in both the short and long term…and its not all doom and gloom.

 

The Data:

Thus far I have contacted 4 major national administrators to determine their production drop off in April 2020.  This is based on data from the sale of F&I products so these numbers are not based on volume of vehicle sales, rather results of F&I. I am not a scientist and this information not pure but it tells a story that is worth looking into. Here is what I found:

• The April 2020 national market was around 53% of April 2020
• Southeast was 69%
• Northeast was 42%
• Northwest was 52%
• Southwest was 54%

Obviously in areas where the pandemic was the hottest, the numbers were much worse than less affected areas.  In certain states (Pa.) dealers were forbidden to sell cars for the better part of 5 weeks with the threat of their licenses being revoked.  The rest of the Northeast has been crushed as the numbers indicate and as you move south past northern Va, the numbers steadily improve to as high as 80% in the Carolinas.   In other words, your location plays a major factor in your current production.

So, in the worst-case scenario at the height of pandemic vigilance (April 2020) the floor for production was around 40%.  Obviously, the floor is an unsustainable number, but it is a data point for an expected low end and that is important vs. modeling that does not involve context or flexibility.  In other words, data suggests we should move higher from here minus any relapses in shutdowns.

 

Digital Retailing:

If you are looking for a one size fits all solution to convert your dealership into an online digital retail platform, please stop.  There is no silver bullet or magic software solution that can be plugged in and turn you into an online retailer.  Sure, there are some nice programs out there to assist you in your journey like Roadster or AutoFi, but do not mistake them for all-in-one programs that allow a full digital transaction. 

The truth is that most dealers will adopt a hybrid scenario that allows for some parts of the sale and transaction to be conducted without the customer present.  There is a HUGE difference between this hybrid scenario and digital retailing. As a dealer you need to understand this clearly before moving to a solution.  Also, digital retailing is a cultural construct that most dealers are not ready for within the framework of their total operation.  This isn’t bad news, its just an honest look at the situation from an outside perspective.  But don’t worry: The hybrid scenario is actually AWESOME FOR EVERYONE!!!

 

Happy Customers:  The Ultimate goal

 

Customers biggest complaint about the car buying experience is the time it takes to actually purchase a vehicle.  This is a fair and accurate complaint, but the customer is forgetting that they are part of the “time” problem.  Customers do not like to haggle (until they do) and the standard “road to the sale” process used by most dealers is not explained correctly and causes confusion which leads to distrust. 

Allowing the customer to shop online, come to terms on the phone or camera to camera, and take delivery at their home is a terrific solution in this moment and should be carried forward beyond the pandemic as one of a few options of purchasing from a dealership.  The primary reason is that a customer’s happiness leads to loyalty and long-term profitability.

This assumes that the dealership has a bullet proof F&I process that ensures a camera to camera explanation of available financing and protection options before the physical delivery takes place offsite.  We have had TERRIFIC RESULTS with this specific process mainly because the customer is comfortable, allows the time we need to discuss options, and is willing to listen.  F&I PVRs have risen to pre pandemic levels and in some cases exceeded the numbers and it has everything to do with making sure the customer is comfortable and happy.  I call that a WIN!

 

This might just be the answer:

 

The question that has been asked for many years is: “How do we compensate salespeople in an environment where the profitability on the front end of a new car sale is often very little?” Consider this hybrid sales scenario from an overhead and workload point of view for a moment:

• If a customer is willing to do much of the transaction online and is willing to schedule specific times for F&I review and ultimate delivery, how much time has been saved?
• Is it feasible that good salesperson / consultant could handle twice the number of sales in this scenario vs. the pre-pandemic model?
• If so, how much more consistent could the dealership be?
• How much could a dealer save in overhead with a reduced / better salesforce he or she had pre-pandemic?

This is a MUCH HEALTHIER scenario for any dealer if it comes to fruition and us, as a business force it to become a reality.  We could focus training on far less people and pay them more money which would greatly curtail turnover.  Our social expense in employees would dramatically reduce.  Our Salespeople would become a group of sales managers and our customers would be better taken care of and happier. The positives are massive for the dealer and the customer.  Talk about a win-win!!!

 

Conclusion:

 

Will the next few months into next year be bumpy?  Of course, it will.  There are going to be a lot of factors involved in getting the economy back to some sense of normalcy.  But change is never a bad thing, its uncomfortable but necessary for growth.  The idea of “disruptors” is nothing more than a new age way to describe change and new ideas.  Not every change is a threat and not every disruptor is a harbinger of things to come.  I truly believe that we are about to reinvent the retail automotive franchise landscape in multiple ways that ways that are better for everyone involved.  We have nothing to fear from hybrid digital retailing if we truly understand where we will end up and move in that direction quickly.  This will be the “new normal” if everyone understands and embraces it. I for one am gearing up all of our development and training activity to fully embrace this scenario and help my partners succeed and exceed their previous records.

Imagine a world where the customer gets to choose from friendly sales process models on how to buy a car from a dealer. We will still sell vehicles as we did in the past when this situation is behind us but it will be the customer’s choice to do so.  Each choice is a different process and in the end the dealer is made more capable by these customer choices.  Overhead is reduced, quality people are paid more, customers are happier and more loyal, and profitability is increased overall.  It can happen…and I know WE can make it happen.

 

Stay Safe!

 

 

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