The Ultimate Guide to Dealership Growth in 2022

How to turn the auto industry’s top challenges into opportunities to accelerate your revenue growth this year

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Building Your Growth Plan

2021 was a year of record success for dealerships, despite enormous challenges. Many were forced to reevaluate how they tackle sales and talent as they faced an ongoing pandemic and shifting customer preferences combined with existing industry challenges.

As a result, many of the key trends we identified for 2021 — like digitizing the customer journey, increased demand for used vehicles, and reducing employee turnover — will still be relevant in the coming year.

The automotive retail industry is changing faster than ever, so on top of these existing challenges, there are a few additional concerns to consider for 2022:

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Each of these are expected to define the industry in the coming year and beyond.

With so many hurdles to clear, it can be difficult to forge a path forward. We’ve put together this ebook to help you move in the right direction and achieve new levels of growth in 2022.

Let’s dive in.

Enter: Our free Ultimate Guide to Dealership Growth

Turning the top 4 challenges for 2022 into solutions

CHALLENGE #1

Inventory shortages

The pandemic created numerous supply chain disruptions, including shortages of both materials and workers. As a result, car microchip manufacturers struggled to keep up with demand in 2021, impeding the overall vehicle production process and leading to vehicle shortages (which are expected to continue throughout 2022 as supply chain disruptions resolve).

Shortages have been compounded by an increase in personal car ownership. Stimulus checks and a decrease in ride-sharing and public transportation mean that demand is high, and both new and used vehicle inventory is in short supply. According to Wards Intelligence’s report on U.S.

Light Vehicle Inventory from November 2021, dealerships that previously operated with an average of a 58-day supply in 2020 are now working with 26-day supply, less than half of what dealers and customers are used to seeing on the lot.

Source: Wards Intelligence

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In response to low inventory and limited options, consumers are more open to sold orders. Haggling, test-driving, and discounts are less common than they once were, and many cars are sold — sight unseen — before they even arrive on the lot.

Used cars are also more popular thanks to low inventory — from March 2020 to September 2021, used car prices increased by almost 40%. For some people, purchasing a used car that’s available right away is a more attractive and realistic option than waiting weeks or months for a new car to arrive.

With inventory in short supply and used vehicles gaining in popularity, dealers have more opportunity than ever to earn more per deal both on front- and back-end profit.

Comparing 2020 vs. 2021 YOY, the average dealership experienced...

132%

Increase in
F&I gross

406%

Increase in
front-end gross

203%

Increase in
total gross

Source: JM&A Group survey of 1700 dealerships

Get the solutions you need to grow your dealership today. →
THE SOLUTION

Because total sales volume is down, it’s more important than ever to strategize for downstream revenue. That means building customer loyalty and emphasizing offerings like F&I. Virtual F&I in particular can offset inventory challenges by helping you create a consistent process, earn more sold orders, expand your audience, and maximize every deal.

To-Do

  • Take a customer-centric approach to build loyalty and trust.
  • Ensure consistent, quality customer service in all departments.
  • Maximize every deal with F&I offerings.
  • Leverage virtual F&I to meet customers where they’re most comfortable.
CHALLENGE #2

Increasing demand for omnichannel options

Consumer expectations are changing across industries. Convenience and choice define the customer experience, with more emphasis on on-demand reservations, purchases, and deliveries.

In 2020 and 2021, the need for contactless options forced many dealerships to offer online purchasing experiences for the first time. Now, the same omnichannel experience consumers have come to expect for grocery shopping and other retail experiences also applies to buying a vehicle.

In the past few years, consumers have become more comfortable with buying vehicles online. Here’s a quick look at the numbers:

55% of franchise dealerships and 39% of independent dealerships say their customers have been completing more buying process steps online.

55%

Franchise dealerships

39%

Independent dealerships

Source: Cox Automotive

37% of consumers can envision a future where new vehicles are purchased entirely online. Another 28% can envision this future for both new and used vehicles.

37%

New vehicles

28%

New and used vehicles

Source: Carsales

These statistics reveal that while many consumers are willing to complete some steps online, a significant portion would still prefer at least some of the buying process to take place in person. Still, even as more people become comfortable with in-person buying again, the convenience of virtual options will continue to play a huge role.

THE SOLUTION

To meet consumer expectations, dealerships need to create a seamless, omnichannel retail experience. Customers should be able to complete the entire car-buying process online, in-store, or mix and match depending on what’s most convenient for them.

Perhaps the most obvious component of an omnichannel retail experience is the technology that enables it (retail software, mobile apps, etc.), but that’s not the only ingredient for success.

It’s also important to fine-tune your sales process to operate efficiently across channels and properly train your team in omnichannel sales.

In short, stay focused on modernizing your dealership to give your customers options in the sales process.

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To-Do

  • Leverage omnichannel retail technology to create a seamless buying experience.
  • Adjust your sales process for maximum omnichannel efficiency.
  • Train your team so they have the skills to tackle sales both in person and online.
CHALLENGE #3

More focus on electric vehicles and direct sales

As climate change remains a concern for many consumers, more eco-friendly vehicle options — including hybrids, plug-in hybrids, electric vehicles (EVs), and even hydrogen fuel-cell vehicles — are transforming the automotive industry.

EVs still make up a relatively small percentage of car sales, but their popularity is growing rapidly:

x3

Consumer interest in electric
vehicles has tripled since 2018.

Source: Ipsos

201%

In 2021, Q2 electric vehicle sales
grew 201% year over year.

Source: Cox Automotive

To keep up with consumer expectations, both traditional and new manufacturers are placing a lot of focus on developing electric vehicles.

Volvo and Jaguar have already committed to being 100% EV by 2030, while EV startups like Rivian and Lucid are looking to compete with Tesla by selling directly to consumers.

Before they can move forward with direct-to- consumer sales in certain states, car manufacturers might need exemptions from laws that require them to sell vehicles through franchised dealerships. While some manufacturers have lobbied lawmakers for those exemptions, many dealers worry that the proposed legislation could result in millions of dollars of lost sales.

icon-1-in-4

About 1 in 4 global consumers say they’re “very likely” to make a battery-powered car their next vehicle.

Source: AlixPartners

THE SOLUTION

All hope is not lost. Some manufacturers, like Ford and VW, have committed to continuing to work with dealers on EV sales even if laws do change. No matter what happens, it’s critical for dealerships to offer — and successfully sell — hybrid and electric vehicles.

To-Do

  • Ensure that your fixed operations department is set up to enable revenue streams from EVs.
  • Train salespeople on how the sales process for EVs differs from traditional vehicles.
  • Offer a wide array of F&I products for EVs.
CHALLENGE #4

Evolving recruitment and retention challenges

Hiring the right people, placing them in the right roles, and keeping them engaged is directly tied to your results and revenue. Recruitment and retention were already huge challenges for dealerships, and now there are even more complications to consider.

“The Great Resignation” was a topic of much discussion in 2021, and this trend will likely continue in 2022. A significant number of employees are leaving their jobs, or intend to do so.

In 2022, 5% fewer employees plan to stay at their current jobthan in 2021. The difference is even larger for middle managers— 14% fewer plan to stay at their jobs in 2022.

5%

All Employees

14%

Middle Managers

Source: Qualtrics

However, the auto industry is seeing the reverse, especially in sales and F&I roles. With record dealership profitability and employee earnings, these teams are having a banner year, making them more likely to stay in their roles for as long as the tide is high. However, as auto inventory and sales regulate in 2022 and into 2023, be on the lookout for staff who are dissatisfied returning to pre-pandemic expectations.

Additionally, as baby boomer retirement rates accelerate, millennials are in the recruitment spotlight.

But with a new generation comes new retention challenges — almost 60% of staff hired by dealerships are millennials, but the turnover of those employees is over 50%.

icon-suitcase

The U.S. employment landscape in 2021

Over 38 million U.S. workers quit their jobs during 2021.

Source: Business Insider

These stats are concerning, but not necessarily surprising. There’s often a significant disconnect between what millennials want from employers and the experience and culture dealerships have traditionally provided.

For example, many millennials who might consider entering the automotive field are turned off by what they perceive as outdated attitudes about sales. They dislike the practice of haggling and don’t envision themselves giving a traditional hard sell. The overwhelming shift to quick and convenient online buying translates directly to the way they prefer to sell.

In 2022, dealerships that place too much emphasis on individual sales performance — especially without providing adequate training and support — will find it difficult to recruit and retain employees.

THE SOLUTION

Dealerships need to keep burnout and millennial expectations in mind as they develop recruitment and retention strategies. Luckily, there are steps you can take to tackle both issues at once.

First, make sure that your dealership does not align with outdated practices. Instead, create a dealership culture that can adapt to employee preferences such as offering competitive, flexible pay plans reflective of the level of stability millennials require. Show that you are interested in creating a friendly atmosphere and flexible work arrangements — things millennials place high value in.

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Secondly, concentrate your efforts on training and developing employees to help them become true experts. Providing opportunities to develop new skills (along with the necessary training and support) is crucial for attracting talent and preventing burnout.

This also has customer experience benefits, as today’s shoppers come into the dealership with a lot of information accumulated from online research, and expect your staff to be as knowledgeable as they are about the vehicles. By creating a team of engaged, helpful and skilled employees, you can please your customers in every department of your dealership.

To-Do

  • Understand the workplace expectations of new generations.
  • Make a plan for reducing employee burnout.
  • Optimize your talent to get more ROI from each employee.

5 areas for revenue acceleration in 2022 and beyond

Modern dealerships rely on every department to drive profitability and enhance the customer experience. Your sales and F&I staff should be skilled at making handoffs during the sales process to ensure the customers convenience. This is especially important to practice when the interaction takes place online.

With inventory shortages abound and consumer expectations higher than ever, dealerships must give equal weight to all service centers and profit drivers to maintain their competitive advantage. Service pipeline alignment can create a streamlined end-to-end buying experience, allowing F&I and fixed ops professionals to play a more active role in the sales process.

For the best results, dealerships should prioritize these five improvement areas:

By taking a closer look at the five critical revenue acceleration areas for 2021 and beyond, you can envision how they fit into your plans. The right combination of these priorities can lock in reliable revenue growth, keeping your dealership thriving.

Finance and Insurance

F&I is a reliable value center for auto dealerships. Even in the midst of inventory shortages, finance and insurance offerings remain strong, enduring sources of revenue by helping dealerships:

  • Ensure a consistent process
  • Earn more sold orders
  • Expand sales beyond their neighborhood
  • Maximize every deal

How to improve your performance

One way to lock in value in the F&I department is optimizing the mixture of products available through your dealership. When your people are selling F&I products that deliver clear advantages for the customer, they are not only increasing revenue, they are building those buyers’ satisfaction and loyalty, which is a long-term path to value.

Your F&I team can reach new levels of success by integrating customer-friendly innovations such as virtual F&I into their workflows. With the technology and processes in place to support VFI meetings, your F&I Managers can give customers a smooth, digitally enabled, omnichannel buying experience that may lower their stress and encourage them to buy.

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Enhancing the way you track F&I sales can have a big impact as well. More data means you can focus closely on both individual performance to develop improvement plans tailored to each employee, as well as determine which products are your most reliable sources of revenue. Experts can assist your team in both these avenues using daily progress reports to get an extremely granular look at your F&I department’s performance and potential.

Focusing on F&I can and should also mean putting increased emphasis on compliance. Especially in the age of connected data, it’s critical that you and your dealership staff are aware of the laws and regulations that impact you and especially your customers.* The best way to protect your business and reduce your risk is through comprehensive training and employee development courses.

*Consult your dealer counsel and dealer association for information on your state’s regulatory requirements.

icon-resource

Resources

Check out our resources on offsetting margin compression and VFI best practices to change your F&I performance for the better.

 

Learn how to boost margins with expert F&I solutions. →

Fixed Operations

When looking for sources of revenue to enhance your bottom line in 2022, fixed operations is a clear choice.

Limited inventory and prices above MSRP can create friction during the buying process, so it’s vital to focus on improving the overall customer experience and building trust and loyalty.

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How to improve your performance

Rethinking the workflows behind the service lane and other fixed operations centers is the best way to solidify your revenue from these functions. At their heart, these roles are about customer service and creating a positive experience. Tracking key performance indicators and implementing coaching programs based on creating great customer care is, therefore, a good fixed operations tactic.

It pays to have specialized plans in place for developing service department leadership. These supervisors will set the tone for process improvement in fixed operations, and having their buy-in allows progress to take hold. When the day-to-day leaders of a department are agents of positive change, that’s when transformation becomes permanent and sustainable.

A revamped fixed operations department will sport transparent policies that build trust and loyalty among customers.

With people eager to engage with service departments at the dealership of purchase — especially for more technologically advanced new cars — you have a readymade audience for the fixed operations personnel to serve. With a new workflow in place, these shoppers will stay with your dealership for the long haul.

74%

74% of buyers who receive service where they bought their cars say they’re likely to buy their next car there.

Not only should fixed operations procedures be designed with customer comfort in mind, but they should also be standardized, quantified and repeatable. You should take a scientific and exacting approach to process improvement in the service lane. The results, in the form of solid ongoing revenue, make the effort worthwhile.

icon-resource

   Resources

    Learn much more in our Fixed Operations Guide.

Drive revenue and create efficiencies in your service drive. ⟶

Recruitment and Retention

Recruiting and retaining great team members is an evergreen concern for dealerships, and it’s especially true now because of the shift in customer and employee expectations. Optimizing your talent pipeline is necessary for breaking the turnover cycle.

How to improve your performance

Every step of the talent pipeline is ripe for optimization. This starts at the very beginning with searching for ideal candidates. Your talent searching strategy should be closely aligned with your dealership’s overall business goals to ensure the people coming in for interviews have skills and backgrounds that match your specific objectives regarding sales processes and the customer experience.

Of course, no employee comes to a company fully formed. Building skill and productivity over time can be a matter of personalized coaching, with processes designed to match the team’s needs regarding onboarding, team building, personal development and longterm retention.

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A modern approach to talent development is based on science and numbers, no hunches required. By calculating key performance indicators relevant to employee contributions, you can make sure your personnel have opportunities to grow and to stay engaged with their work. As their skills develop and their value to the team increases, you can watch that ROI grow.

A great employee is someone who comes into the team ready to contribute yet gets better over time through a mix of training, development and collaborating with teammates across departments. By bringing out the best in your talent and holding onto top performers for years, you boost the bottom line through their contributions and eliminate the cost center of constant talent searching.

icon-resource

Resources

Learn about our data-backed approach to creating and growing a high-performing team.

 

Learn how to optimize and retain your dealership team. →

Insurance and Risk Management

From the pandemic to supply chain disruptions, dealerships have (hopefully) learned to expect the unexpected. Actively anticipating what could be around the next corner will continue to be important in 2022 and beyond. The right mix of insurance and risk management programs can decrease the strain of a number of challenges auto dealerships face. Taking a close look at your options can have a significant and positive effect on your risk management efforts as well as employee retention.

How to improve your performance

Your dealership has a few specialized insurance and risk management requirements that go beyond those of other businesses outside of the automotive sector. This means you should find a specialized coverage provider that can provide the insurance plans and products reflecting your operations.

A great first step to improving your insurance and risk posture is to assess your needs. A comprehensive examination of your business will reveal opportunities to reduce your risk and defend the bottom line, whether that means purchasing a garage liability policy for vehicles on your lot or taking a look at plans that will help you hire and retain top talent.

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Some of the most impactful insurance products for your dealership are the plans you offer your employees. Dealing with turnover is one of the most common problems facing the auto sector, and it has been for years. One way to secure loyalty is to offer affordable, flexible benefits packages that will make people want to stay. From 401Ks to health, dental, life and optional coverage plans such as 529 College Plans, you can build a mix that appeals to your workers.

Insurance and risk management have the potential to go overlooked in dealership improvement strategies, but this shouldn’t be the case. If you put extra effort into creating the perfect mix of products for your business, you can build a more secure and reliable operation, one with appeal to its employees and resilience against potential problems.

Find the right plan to secure every area of your dealership and increase  associate retention. ⟶

Training and Development

Just because demand for vehicles is high doesn’t mean sales are a piece of cake. Due to low inventory, many consumers will be looking at vehicles they’re not thrilled about, and that requires a different sales approach than selling someone their dream car. You may need to adjust your sales team’s training to account for the challenges that come along with very low inventory.

Plus, with the rise of omnichannel retail, your talent will need more than traditional sales skills. You’ll need to train your team members to provide the best possible customer experience — both online and in person.

How to improve your performance

Whether you’re engaging in full instructor-led training courses, online learning modules or a hybrid program, you should make sure your materials of choice are tailored by function, or even by individual. No two people are the same, even if they hold the exact same job description. By investing in employee education that is highly personalized, you can unlock extra value.

Your salespeople play a vital role in your dealership’s profitability and financial growth, so investing in their success and developing their skills is key. And we’re not talking about the standardized materials of the past. Effective training solutions have stepped into the modern world, offering both in-person and virtual courses that are customized to your needs to ensure their effectiveness in the short- and long-term.

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Your team members shouldn’t just train, they should cross-train. While it’s important for every staff member to know the ins and outs of their own department, it’s not good to develop tunnel vision. If employees in each department know how their own products and services fit into the overall sales cycle, exciting new revenue opportunities open up:

  • Salespeople should understand F&I to ensure they are seeding potential upsells early in the buyer’s journey.
  • Fixed Operations staff should understand how vehicles are being sold to provide consistent messaging in the service lane.
  • F&I managers can better convince customers of the value available in fixed operations if they have been cross-trained.

One of the main ways your dealership can present a unique value proposition is to provide a great experience for your customers. Despite the rise of digitization, automotive sales, financing and service are still person-to-person experiences. If your staff has been better trained and prepared than competitors’ teams, that will be reflected in the way your customers perceive the dealership.

icon-resource

Resources

Read our Modern Dealership’s Training Playbook to find out how this can work for you.

 

Get your personalized training plan today! It's free and there's no  obligations. ⟶

Growing with dealership revenue acceleration

It’s clear that there are dozens of forces impacting the auto industry at any time, some helpful and some damaging. By keeping an eye on the trends shaping the industry, we can prepare to adapt to the diverse and complex nature of our business and continue to grow together. By seizing the opportunities that come with changing conditions, you can thrive.

The key to growth in challenging and fast-moving times is revenue acceleration. Every department provides chances for new and strengthened revenue streams. By partnering with the right people, products and processes, you can implement flexible and forward-looking new processes across departments.

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What many of these changes share is focusing on one steady goal, no matter what changes come down the pipeline: creating an outstanding customer experience. When treating your customers well guides your decisions, it’s a positive differentiator for your dealership, one you can take pride in.

Reach out to JM&A Group today to learn how you can prepare for the industry challenges ahead.

Get the solutions you need to grow your dealership today. →
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