Commentary: The Future of Automotive Dealerships
Instead of having what your customers want immediately on the lot, ordering a customer’s next vehicle is now taking weeks for delivery. Anything you have in stock right now might be gone in hours.
If you’re like me, you find inspiration anywhere.
For the past few years, my eyes have been glued to YouTube to watch several different channels of interest. One of those channels is from a salesperson at a Livingston, New Jersey Chevrolet dealer called “Dave B Sells Chevy.” Dave Baranauskas shots videos of his progress at Schumacher Chevrolet, including inventory movements and his daily routine.
As supply chain issues cause more issues within the automotive industry, Baranauskas shows us how his dealership has suffered from production stoppages and other industry issues causing changes within automotive retail.
Baranauskas’ YouTube videos are not the only evidence that automotive retail is suffering along with the rest of the industry. You are if you are among the professionals in automotive retail reading this website, then you might be feeling the same impacts that Schumacher Chevrolet are dealing with right now While used car inventories have fluctuated, new car sales have become a challenge. Instead of having what your customers want immediately on the lot, ordering a customer’s next vehicle is now taking weeks for delivery. Anything you have in stock right now might be gone in hours.
The challenge of microchips, rubber, glass, and metal supplies have translated into a challenging time for all of us. It is affecting automotive media, too. After all, we are reporting these issues and trying to calm our readers, social media followers, and everyone else down.
Of course, there are solutions to these issues. A news story pointed to Ford wanting their dealerships to change their model to become a strictly made-to-order model. A customer comes in and places an order for a vehicle – just like they did some decades ago – and it arrives when it is completely prepared and ready for customer delivery.
It almost seems like Ford wants to truly become Ferrari. Or, Bentley. Or, Aston Martin. Would a Ford showroom resemble an atelier-style room at a Porsche dealer where you have paint chips, upholstery swaths, samples of steering wheels, seats, and trim finishes for you to look at towards your custom-made F-150 Lariat SuperCrew 4X4?
There was a time when Ford dealers – among other domestic brands – had all of that available to the customer. Obviously, things have changed since 1970.
The reason why this change might not occur is that dealerships already invested millions on real estate, including showrooms, service bays, and lot space. To ask them to trim back in these important assets is not an easy task to do without incurring massive losses from your most loyal retailers.
It does bring up a question about what the future of automotive retail would look like.
Before I answer that question, I must emphasize what customers want from an automotive transaction. They want to see, feel, touch, and drive the product. That is foremost in the transaction process. You cannot simply put up a photo of a used vehicle without someone viewing it in person. That way, you can tell if there was damage to that vehicle or if some work needs to be done before final delivery to the customer.
With all due respect to Carvana and Vroom, but the process of selling a vehicle to a customer with a limited view of the vehicle online – along with an honest evaluation of the vehicle, including minor damage or mechanical issues that need to be addressed after the vehicle is dropped off at your home – is not exactly comforting to even the average customer.
Let’s not forget about the possible issues that can happen between getting a vehicle delivered to a customer to its arrival at their home or place of work.
Understanding that the customer would prefer to see the vehicle – whether new or used – is a priority before completing the transaction, we have to understand how to shape the car dealership of the future. That will help frame my thoughts on what a new car dealership will look like in the future – even within the “next normal” times.
Already, you can tell that I am advocate of displaying vehicles to spur on customer interest. You can still have two of your hottest vehicles of the current model year on display inside the showroom. A new car dealership should have demo models available for test drives by potential customers. These demonstration models can form the basis of an order by the customer to their specifications.
A new car dealer should still be in the business of selling used vehicles. An ample inventory should not take up acres of land, but rather enough to have a quicker turnaround to not have units stay for over 30-45 days in inventory. Priority should go to certified pre-owned vehicles, as they have a connection back to the manufacturer and can yield profits from the additional coverages and services provided for those select vehicles in inventory.
Yes, this model would put pressure on inventory and used car sales managers. However, a lean inventory model would mean attracting fresh customers towards them. This could also help get leverage against online car sales outlets, such as Carvana and Vroom.
The most important piece of a new car dealership is its fixed operations. The term “fixed ops” mainly refer to its service and parts departments. These are the most vital functions of a new car dealership, as customers are looking for quality and robust support for their vehicles. In particular, when it comes to warranty repairs and issues.
Whether it is sales or service, could we expect to see more home pick-up and delivery programs? If a new car dealer wants to be in competition with Carvana and Vroom, they have to take it a step further. For over a year, these services have been offered. To date, the take rate on pick-up and delivery has been around half at the peak of the COVID-19 pandemic. Probably less than half these days. However, with more professionals opting to work from home than returning to a physical office, these services not only should be promoted as a standard practice, they need to be emphasized by using a personal, customer-focused touch to accomplish the goals of the transaction or service being performed.
What about streamlining the process of buying a vehicle? Some dealerships still use paperwork to accomplish that. However, you can have a paperless transaction combined with an onsite data facility to house the servers and hard drives needed to store electronic documents of these transactions. It may also mean a one-time scan job for all remaining paperwork to be put onto these drives and servers for archival reference.
Would this all mean a total reduction in a new car dealership’s property? Possibly. It would also mean opportunities for new construction in some cases. For example, creating stand-alone Genesis showrooms at Hyundai dealer properties that sell their luxury brand. Exploring building a stand-alone, brand-themed Lincoln showroom at currently combined dealerships with Ford to offer brand-specific services. These are ideas to fill in those empty spaces that used to house new car inventory that are tough to fill these days.
It sounds like a major investment to streamline the new car dealership. Think of the rewards when you do. Or, rather, if you pursue these changes and adjustments to the automotive retail business.
The bottom line is that the new car dealership is not dead. There may be some changes to the way they will operate and present themselves to its customers.
After all, they need to continue being creative to fill the empty acres of lot space until these changes come online.
All photos by Randy Stern