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There’s been an undeniable shift in the way dealers plan for their long term growth. It’s hard to keep up and be the best you can be for your dealership and staff. And the pace of change makes it tough to plan ahead.
We get it. You’re busier than ever, and it seems things are changing more rapidly than they ever have.
Maybe you’re trying your hand at digital retail or diving into social media. You need to get new customers in the door and continue developing relationships with repeat buyers. At the same time, you need to address turnover, training and process improvement. It’s enough to make your head spin.
So then… where to start?
What are the right growth opportunities that will help you have a breakthrough year? There are a ton of resources out there, and everyone has an opinion.
We’ve done a lot of the work for you. Here is our guide to making the most of 2020, combined with the research and insights from plenty of industry experts.
Let’s jump right in.
With so many new challenges on the horizon, there will be winners and losers.
You know that more and more, consumers are shifting toward used vehicle purchases and attitudes about car ownership are changing. And as younger people enter the job market, you have to keep up with new employee preferences in order to recruit and retain great staff.
As the forces behind the car market shift, new opportunities (and yes, difficulties) will continue to present themselves. Guiding your auto dealership to success means facing down those challenges, rather than shying away from them. Your response to these challenges will make a huge difference in how you recover from them.
We won’t sugarcoat it. Let’s take a look at the major challenges you’ll need to tackle in 2020.
Buying a car is one of the most persistently offline, in-person retail experiences left. In the age of Amazon and ubiquitous e-commerce, this is something you shouldn't take for granted. Due to the convenience they've experienced buying anything and everything smaller than cars online, customers are increasingly interested in automotive e-commerce. More than anything else, dealers see this as the biggest threat to their bottom line in the immediate future.
Automotive News recently reported that despite the fact that even the most heavily digital car purchases still involve a few physical documents, the push toward a more digital experience is very much underway. Dave Smith Motors' Reuben Robinson told the publication young customers are interested in taking an "Amazon approach" to auto buying - that is, doing as much as possible from the comfort of their homes.
The key to turning this problem into an advantage means giving customers what they want.
Even in cases where people want face-to-face time, they still want to complete some steps online. In a survey by Cox, 83% of customers reported wanting to complete at least one digital purchase related to the car-buying experience. Take note of how many buyers come into your dealership having done extensive research online, and you'll see how willing people are to complete a significant portion of the auto search digitally.
The key to turning this problem into an advantage means giving customers what they want. After all, people are still turning to dealerships when they shop online. The question is, which dealer will those individuals buy from? If your suite of online offerings, from informational resources to financing and e-documents, delivers a better customer experience than competitors' versions, you may find you're able to win over millennials and Generation Z shoppers who want their car search to resemble an Amazon transaction. Remember, the goal here is delivering a seamless and accessible customer experience.
Your dealership is only as strong as the employees who make up your staff. Bringing in talented new workers easily, holding onto salespeople and enabling them to become experts at their roles is key to your dealership’s success and your bottom line. Unfortunately, staffing difficulties have become relatively common across the North American auto industry. A misalignment between millennial expectations and traditional sales models may be to blame.
The Wall Street Journal reported that the young employees hired by auto dealerships are turning over at worrying rates. Nissan representatives stated, for instance, that sales team members experienced a 100% turnover rate in the course of a year. These employees may resist the stereotypical car sales approach where staff drive prices down as low as possible to earn bigger commissions.
If you can succeed in breaking through to younger employees, this may act as a springboard to more effective sales to millennial car buyers.
Add in the fact that customers are performing more at-home price research than ever makes haggling extremely difficult, and auto retail becomes a questionable prospect for millennial applicants.
The auto sector at large is burdened with those expectations, but you can do your part to proactively reach out to Generation Y job-seekers. Some dealerships have already begun doing away with scaled commissions and simply give bonuses based on the number of sales closed. This could help reassure young employees that they won't have to play hardball to be well compensated.
If you can succeed in breaking through to younger employees, this may act as a springboard to more effective sales to millennial car buyers. Your job is to make sure your workers learn all there is to know about the vehicles you offer - highly informed shoppers become disillusioned when they know more about the cars on a lot than salespeople do.
People are drawing the connection between car emissions and global climate change, meaning a shift in selling points and approach for your dealership may be necessary. Actual retail effects of greater climate consciousness have yet to manifest, but ignoring the issue could leave your business vulnerable and appearing out of touch.
A recent survey from Autolist shows 65% of car buyers now make the connection between car emissions and global warming. These individuals greatly outnumber the 18% who don't draw any correlation between fuel economy and the climate and the 17% who are still making up their minds.
As of now, relatively few of the concerned shoppers are actually acting on their worries, with 35% of people saying they choose to buy cars based on environmental motives. Most customers are not yet considering the climate when choosing sizes or styles of car, but you should be prepared for those issues to come to the forefront nonetheless - climate anxiety and engagement are particularly pronounced among younger generations, who are in the process of aging up into car buyers.
While it remains to be seen whether climate considerations and retail interest align more closely in 2020 and beyond, it's always a good idea to use fuel efficiency as a selling point - 50% of Autolist respondents said more efficient cars designed to suit tighter emissions standards save them money. You can adopt this stance now, seeking both short- and long-term connections with the buying public as expectations and priorities change.
The rise of advanced driver-assistance features - and the predicted advent of mainstream autonomous vehicles - is a complicated trend to track.
The uncertainty lies in what level of autonomous features will be welcomed by auto dealership customers and how to best position and explain those capabilities as advanced technology to hesitant buyers. In looking ahead, the question remains, should you plan on self-driving cars becoming a major part of your offerings in the near future, or will the trend not make an impact for a decade or more?
Dealers can begin to prepare themselves today for what autonomy brings tomorrow.
According to The New York Times, early projections about 2019 being the year of the driverless car turned out to be too optimistic. While automakers planned to deploy fleets of autonomous taxis to major cities, they found themselves stymied in their efforts. The rethinking around automation has led to new alliances such as a collaboration between Ford and Volkswagen to develop more reliable self-driving solutions at higher levels than before.
The disparity between expectations and reality on the timeline of self-driving cars comes down to the fact that some of the necessary components have proven far easier to develop than others. The New York Times reported that while companies have 80% of the systems needed to create autonomous cars, the remaining 20%, including reliable software, is slow and complex to get into a market-ready state.
Will your customers expect self-driving features in their cars in the next few years? At least when it comes to full automation, the likely answer is no. But the technology is being developed and dealers can begin to prepare themselves today for what autonomy brings tomorrow. A string of Tesla crashes changed projections about the short-term viability of driver assistance features. While Tesla has made such tech tools a critical part of its appeal, these events made them less inspiring than they could be.
One additional point of complexity and uncertainty in the automotive industry comes from the increasing partnerships and mergers between competitors. The alliance between Ford and Volkswagen to bring better self-driving cars to the market is one of these new alliances, alongside the decision by General Motors and Honda executives to work together on next-generation technological plans. As a dealership, continuity and predictability on the original equipment manufacturer side of the industry can be helpful to your strategy and projections, but conditions are changing rapidly.
The GM and Honda project, designed to bring a new Cruise autonomous electric vehicle to market, as well as a Volkswagen/Ford collaboration may represent significant breakthroughs in emissions reduction and overall automation improvement.
The question now is how to prepare.
The Ford and Volkswagen collaboration involves investment in Argo, another autonomous vehicle company, and is explicitly aiming at the ride-sharing market, according to The New York Times. App-based car services such as Uber and Lyft represent an alternative to vehicle sales even before factoring in the use of autonomous technology in addition to - or instead of - live drivers. The fact that automakers are explicitly aiming for this segment of the car market is worth watching over the next few years.
A combination of market forces is driving demand for used vehicles. Depending on how you engage with these changing factors, the trend may prove either helpful or damaging to your bottom line.
Automotive News reported that inventory for pre-owned vehicles has tightened around the country. New and lightly used cars are increasing in price, but buyers want to purchase vehicles that cost between $10,000 and $20,000. This has driven them to consider cars with significant mileage.
The preference for used vehicles, including older and more heavily used models, shows price-consciousness and a willingness to skip new technology in favor of savings.
Many of the new cars debuting today are technologically advanced and loaded with features. While these may look impressive in the showroom, they come with higher price tags that may be out of reach for buyers. Providing lower-cost and higher-mileage options is one way to bring these cost-cutting buyers back into a dealership, but finding inventory can be challenging. Trade-in rates are lower today than in the past, and this has led some dealers to try new strategies.
Purchasing more pre-owned vehicles has become a viable strategy for some dealerships that are mostly concerned with car sales. Even if these vehicles aren't useful as full-priced used cars, they could still sell at auction to bring in some funds. Auto dealership owner Mike Stedem told Automotive News there is now a market for high-mileage cars (200,000 miles +) that did not exist 10 years ago.
The preference for used vehicles, including older and more heavily used models, shows price-consciousness and a willingness to skip new technology in favor of savings have become prominent among the auto customer base. Whether or not your dealership currently operates in the used-vehicle space, it's becoming clear that in the years ahead you will at least have to compete with other dealerships that are taking advantage of the shifting trends.
Will ride-sharing and hailing apps such as Uber and Lyft lead to lower car ownership?
The increasing ubiquity of these services and their companion apps makes this one of the most pressing questions to face the auto retail sector in recent years. It's easy to imagine a consumer who makes infrequent trips beyond the range of local trains of buses deciding that a car isn't worth owning because it's easier to hail a ride. However, such situations may not tell the whole story of the Uber and Lyft era.
Riders may be switching from buses and trains to ride-sharing in greater numbers than car owners deciding not to use their own vehicles.
A recent Moody's report on the rise of ride-sharing noted that the apps may not take as much money as expected from the auto industry. After all, the private vehicles used by Uber and Lyft drivers are purchased through dealerships, and many of the customers riding in these cars would not have been drivers in any case. In fact, Moody's proposed, riders may be switching from buses and trains to ride-sharing in greater numbers than car owners deciding not to use their own vehicles.
The analysts suggested that the actual impact of huge market penetration by ride-sharing may be concerned with the types of vehicles being sold. Cars that have fewer "bells and whistles" may become more popular, with differentiation declining and practicality becoming the uniting factor for the industry. Moody's noted that the endgame of such a market could involve mergers between car-sharing services and OEMs.
As for used vehicles, the report explained that the immediate future of the preowned car market is very bright. Ride-share drivers are likely to be very interested in used vehicles that have been well-maintained and are ready to handle thousands more miles of responsible use. The speculative distant future of used car sales is less sure, as cars used by Uber and Lyft drivers may stay in circulation for a decade, never ending up in dealer inventory.
It's clear that there are dozens of forces impacting the auto industry at any time, some helpful and some damaging. At any given moment, automakers are pursuing technologies, partnerships and advancements to evolve into true mobility companies. 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.
The primary value that should guide your operations over the next few years is flexibility, paired with a willingness to read the signals coming your way. Dealers that cling to too rigid a business model may end up unable to cope with the latest challenges and developments facing them. As long as you don't fall into that category, even the most initially concerning projections for the dealership space shouldn't be a cause for worry.
With so many changes coming, one way to differentiate your dealership and find success is by focusing on delivering an outstanding customer experience.
It’s clear there’s no shortage of challenges facing auto dealers. As a leader, you can prepare for what’s to come, but that’s just one piece of the growth puzzle.
Read on to learn strategies your team can start using today to respond to today’s automotive buyers.
Building a sustainable digital presence has become a top priority for today’s car dealers, especially considering how much time consumers spend researching online. According to the latest Car Buyer Journey report from Cox Automotive, vehicle shoppers spend close to 60% of their time online, which averages out to around 14 hours per buyer. But how do you turn online visitors into in-store shoppers?
The short answer: Digital marketing.
Dealership websites and social media profiles can add a lot of value to a car buyer’s journey, as only 1 in 3 shoppers know the exact vehicle they plan to purchase when starting out, per Cox Automotive.
Vehicle shoppers spend close to 60% of their time online, which averages out to around 14 hours per buyer.
Considering how competitive the auto retail industry has become, it’s crucial to offer consumers as much upfront information as possible. To make your dealership website successful, you need to treat it as an integral part of your overall sales process, not an afterthought.
An intuitively designed and user-friendly website can help drive dealership visits, increase brand visibility and engage potential customers before they’ve ever set foot in your showroom. When designing or updating your website, it’s important to make sure all information on pricing, incentives and services are accurate, transparent and consistent with your brick-and-mortar dealership. This can help create a valuable throughline between your online and in-store sales processes, which may help encourage shoppers to swing by in person.
Car buyers are more informed about their vehicle options than ever before, which can put your sales team in a bit of an awkward position.
Keep in mind, over half of modern car buyers make their first contact with dealerships by walking in unannounced, according to research from AutoTrader. This means that you need a knowledgeable salesforce that is prepared to answer a wide variety of product- and service-related questions on the fly.
While it may be unreasonable to expect your sales team to memorize every detail about your inventory, encouraging them to stay up to date with trends in the automotive industry is a no-brainer.
Over half of modern car buyers make their first contact with dealerships by walking in unannounced.
That’s right, one of the best car sales techniques is to simply understand the products you’re selling and anticipate consumers’ questions, concerns and objections. This can not only help your dealership build credibility with potential customers, it can also provide your sales team with more opportunities to upsell specific vehicle features, F&I products and more.
More importantly, employee training and development can help eliminate many of the siloed business practices that have been holding dealerships back. For example, annexing finance managers to the final stages of the car-buying process can prevent them from making a compelling case for add-on insurance or financing packages. Considering that many car buyers are not researching how to finance their vehicles (resulting in approximately $37 billion in missed savings), per research from LendingClub, there’s a clear incentive to shift toward a more team-oriented business model.
Even the best car sales techniques can be worthless without understanding who you’re selling to, what they value and how they shop.
That’s why this car selling strategy is all about understanding the motivations behind customers' buying decisions - especially their objections. While thinking about the “psychology of selling” is nothing new in the retail sector, returning to the basics can help you find creative solutions to all sorts of car selling challenges.
Rather than rushing through the small talk, a strong sales team should relish the opportunity to ask qualifying questions that can help determine where a customer is on the path to purchase.
The truth is that many car buyers want an easy path to purchase - close to 48% of 17 to 24-year-olds intend to buy a car on their first visit to a dealership, according to AutoTrader. Figuring out how to streamline your sales processes means getting to know customers on a more personal level.
Every customer’s journey is unique, which is why generic sales pitches are quickly falling out of practice. Rather than rushing through the small talk, a strong sales team should relish the opportunity to ask qualifying questions that can help determine where a customer is on the path to purchase.
This process is perhaps best summed up by a popular quote from Zig Ziglar, a renowned author and speaker in the sales world: “Every sale has five basic obstacles: no need, no money, no hurry, no desire, no trust.” Learning how to overcome these obstacles is crucial for increasing new vehicle sales and cultivating the sort of profitable relationships that will extend beyond the point of purchase.
Whereas understanding your customer’s motivations is meant to help your sales team map out the buying journey of potential customers, this car selling strategy is focused on how to meet them on the road. Modern consumers have developed a keen sense for picking apart marketing strategies, as many can tell when a sales rep is desperate to secure their business. Even if you can infer why a customer may be hesitant to follow through on a purchase, it often takes a high degree of empathy to truly understand their point of view.
Truth be told, that’s the foundation that nearly all effective car sales techniques are built on: Understanding your customers as people, not dollar signs.
The move toward customer-centricity in the automotive industry is already well underway, but there are still plenty of opportunities for continued innovation.
For example, offering consumers the ability to start the buying process online or schedule an in-store visit can help establish a mutual relationship earlier in their journey. Ultimately, it comes down to meeting customers where they are rather than pushing them to the outcome you’re hoping for. When qualifying a prospect, car sellers should look to answer some of these key questions:
Starting to notice a pattern? Being an empathetic car salesperson is all about figuring out the why and taking steps to address those concerns. By doing so, you may be able to figure out if a customer is ready to take the next step or if they need more time to think through their options.
Until now, we’ve largely focused on car selling strategies that have wide appeal and applicability, so it may be useful to offer at least one technique for specialized cases. Today’s car buyers have near limitless information at their fingertips, allowing them to develop a detailed game plan before ever setting foot in a brick-and-mortar dealership.
These high-intent, highly informed customers already know what they’re looking for and how much they’re willing to pay, which can make it difficult to negotiate.
In these scenarios, it’s often more effective to act as a signpost on the path to purchase rather than an enthusiastic tour guide. While you may be tempted to flex your automotive expertise, it’s more important to acknowledge that the time they spent researching was productive and valuable. After all, if they’ve taken the trouble to visit your dealership in person with a brain full of vehicle information, there’s a good chance they’re ready to buy.
Keep in mind that around 87% of Americans dislike shopping for cars at dealerships, according to research from Beepi, so the more you can do to streamline their visit, the better. Chances are, these types of high-intent customers have already given a lot of thought to their purchase decisions, so trying to get them excited about new vehicle features may not be the best approach. Instead, a car salesperson should focus on integrating F&I offerings into their conversations in ways that feel natural while ultimately helping you boost your margins.
Our guide covers some of the biggest challenges and opportunities coming your way in 2020.
If you are looking to take a deeper dive to plan your strategy for growth this year, we offer personalized consulting and training services that can help your dealership prepare for the future of auto retailing.
We are automotive experts with a proven track record. Whether your 2020 goal is to start optimizing your sales processes, improve your digital retailing efforts or secure long-term sustainability, a great place to start is with our free 2020 Opportunities Assessment.