The end of the year lends itself to reflection and taking stock of where things sit. So what has been happening to the auto retail sector?
As we enter the New Year I normally use the January article to predict possible happenings for the coming year. I am not going to do that this time around.
For those who are interested, you can read my January 2014 article online at canadianautodealer.com under the Aspects of Ownership column. The comments are largely applicable to 2015.
More importantly, I have had the opportunity of late to spend time talking with dealers and OEM executives. There are some common themes that I would like to share with you. I believe 2014 was a watershed year for auto retailing. Here are a few trends to watch:
Heightened consolidation means the big will get bigger by absorbing groups:
This is a big shift and indicates the changing of the guard at many dealer groups of yesteryear. Former dealers who would be on the acquisition trail are now themselves being acquired. This is significant on two fronts. Firstly, as I mentioned the big are getting bigger, and secondly the pool of properly financed potential acquirers is getting smaller.
The emergence of private equity to finance dealer acquisitions:
Dealer groups now have access to capital from several sources, some of which is long-term private equity. Not the traditional private equity that OEMs do not like, i.e. those with a five to seven year investment horizon but rather family office type investors looking for long-term return on investment from highly levered auto retailers.
The continuing shift of more franchise like relationships between dealers and the brands they represent:
The Internet has created an environment where brands can have a relationship directly with customers, bypassing the dealer. Dealers are still an important part of the process but what was once a relationship dominated by dealers is now evolving to include the brand directly. Just like static on a radio, there is much interference in the dealer message to customers.
The retail war is solely based on customer treatment:
In years gone by, the product was the differentiator. With all brands now producing excellent product, and with the smaller differences between mainstream volume vehicle quality and luxury vehicle quality, the vehicle is no longer the battleground. Vehicle quality, safety and design are assumed by consumers these days. Customer treatment is the new playing field in the competitive retailing game.
More outsiders are chipping away at the dealers’ domain:
The number of outsiders that now are carving away pieces of the dealers business is increasing. Car share organizations are gaining in popularity in Canada’s large urban centers. Broker type websites are on the rise. Organizations such as Google and Kijiji now influence large numbers of car buyers. Big box and group purchasing retailers like Costco are in many ways direct competitors for dealers.
Outside service providers continue to bombard dealers with new and improved products and services:
Services like Google Analytics, and various CSI and customer retention software as a service offerings and social media sites are becoming more mainstream and a vital necessity for dealers to comprehend and adopt.
I could go on, but I will call it quits there. Suffice to say that the auto retailing world is changing right before our eyes. To remain competitive requires new skills — skills that were not needed even just five years ago. The pace of change is rapid. As dealers, we must keep our eyes and ears open at all times, making sure that we at least give ourselves a fighting chance to be competitive in our local markets.
Much of what I have described above requires a different type of employee to execute our game plan. This assumes we as dealers have one that is designed to allow our business and people to thrive in the new world of auto retailing in 2015 and beyond.
ALL ABOUT THE PEOPLE
It’s still very much a people game and in many ways more of a people game today than ever before. Today’s mix of people and technology skills is at an extremely high level.
Not only do we as dealers need to perfectly and consistently execute the basic blocking and tackling of auto retailing, we also must exercise our skills and rights as dealers in the new technology enabled consumer driven retailing world.
Consumer expectations have never been higher than today. The expectation gap will only increase. Those dealers that get it will thrive while those that do not will slowly see their businesses erode.
Our brands are increasing their expectation, both from a market share and a dealer performance basis. Today’s brands are monitoring dealer performance from sources that did not even exist three to five years ago.
Competitive comparisons are easier than ever. The data is readily available. Brands are interested in new vehicle sales. That is their prime measure. Items like customer retention, brand loyalty and instant customer satisfaction ratings, however, are monitored and have become leading indicators for potential future new vehicle sales.
Sites such as Google Reviews and DealerRater provide instant feedback and visibility by prospective and returning customers and by the brands we represent. Those ratings can be both a blessing and a curse. Negative ratings seem to live online forever, long after the customer has been satisfied or the issue causing the problem is resolved. Brands try and tie those ratings to retail success both in terms of sales penetration and dealer profitability.
In today’s auto retailing world manager skills are more important than ever. Managers by definition execute the dealer’s vision. The dealer’s vision today is heavily influenced by their brand’s vision in addition to their own individual ideas and creativity to best service their local market vehicle consumer.
MANAGERS ARE KEY PLAYERS
Managers that “get it” by sharing and living the vision, and helping execute to steps necessary to increase the likelihood of success, are critical to your dealership’s success. That means that you, the dealer, must invest time and money in your managers to ensure they understand your vision and have the skills necessary to execute your vision, as their own, and spread it throughout to all the people in your organization.
Silos should be a thing of the past and all managers should be working together, 100 percent focused on doing the right thing for your present and future customers, over and over again, day after day, week after week, month after month.
Managers need to delegate and empower their staff to do the right thing for your customers. Micro management should be a thing of the past. Delegation and employee empowerment are critical to getting everyone to buy-in to your vision and building an organization founded upon strong values and consistent execution. In this way, your dealership is poised of profitable growth.
Ask yourself: do your managers actually manage and have you given them the vision to build the successful customer-focused dealership you want to own?
