Laureate winner shares predictions on the future
The last article in this space was based on a presentation given at this year’s ADESA remarketing forum by Steve Chipman, 2010 CADA Laureate and president of the Winnipeg-based Birchwood Automotive Group.
Birchwood was founded in 1964 and now consists of 10 dealerships, two collision centres, a leasing company, a rental company and an independent used-vehicle store. Being at the forefront of so many operating units gives Chipman a great vantage point to assess where our business is heading and the content of his presentation was quite compelling that day.
This second installment outlines some of the key developments Chipman sees coming our way in the next few years.
Connect with your web-savvy audience
Looking to the future, Chipman believes that marketing will likely continue its evolutionary trend as the demands on dealerships become more intense and more complex. Dealers will have to address the fact that retail customers are using the Internet in more innovative ways and expect their service providers to adapt and support such mechanisms. The majority of vehicle purchasers have done research online and an increasing number of them are even finding their next vehicle by searching dealers’ online inventory.
In the immediate future, dealers wishing to reach such customers must be ready to provide online content and market via the Web, specifically through social networking applications such as Facebook and Twitter. Current and future generations of purchasers may rely almost exclusively on their mobile devices for the information they need to make buying decisions and dealers wishing to remain viable must be ready to interface with users in that environment.
This will continue to present challenges to dealers. There is a learning curve to understanding new media and how best to utilize it. There is also the matter of cost. Effective use of technology will require new skills and potentially, new people. It may also require investments in hardware and software that were not previously contemplated. Social networking is conditioning people to expect near real-time interactions with friends, colleagues and, increasingly, suppliers. As a customer, the retail vehicle buyer will want prompt attention and dealerships need to be staffed accordingly to meet this demand.
There is also the issue of managing the transition from traditional marketing channels to those that are on the leading edge and will appeal to modern customers. For example, most dealers will not be comfortable with completely ceasing their use of newspaper advertising, yet they will have to actively shift resources away from this forum if they are going to be successful in the long-run. Chipman notes that within his own stores, the shift away from traditional marketing is substantially complete. His staff is actively using the Internet to drive showroom traffic and is now beginning to embrace video as a tool for reaching more customers and providing value-added content online for those customers.
New- versus used-vehicles
The next several years will also bring changes in the competitive landscape as dealership consolidation continues and a challenging new-vehicle sales market drives more dealers to shift into used-vehicle operations. Chipman believes that independent used-vehicle dealerships will get larger as a result of consolidation and much more onerous requirements for in-stock inventory, technology and service provision will follow. The small corner lots will find it difficult to compete due to their relatively limited resources. They cannot stock the volume of vehicles that will be required to capture the attention of web-based shoppers and they will struggle to deploy the marketing infrastructure that reflects the desires of an increasingly mobile and connected public.
Chipman suggests that there will also be a decline in private used-vehicle sales. Owing to regulatory changes in many provinces, both in-force and planned, it will become more challenging for a private seller to meet appropriate standards of disclosure. Combined with the growth of certified pre-owned programs that are driving higher quality used-vehicles into the market, many buyers will simply prefer to deal with larger entities that can take much of the guesswork out of the transaction and, perhaps, put a better quality vehicle on the road at a competitive price.
Supply and demand
Perhaps the largest issue facing dealerships in the coming years will be sourcing used-vehicle inventory. The post-credit-crisis decline in leasing volumes will begin to impact the number of used-vehicles available in the wholesale market in 2012 and Chipman expects this lower off-lease volume to result in supply constraints in the wholesale market. He also expects to see fewer off-fleet units, given that manufacturers are reducing sales into this market and rental and corporate fleets are beginning to keep vehicles in service longer.
If retail used-vehicle demand remains at historic levels, there will be increased competition for inventory and this will be felt at auction and in dealer trade-in acquisition. As a result, Chipman notes that the value of used-vehicles will likely increase. He also predicts a more robust dealer-to-dealer trade market, as dealers attempt to find the inventory they need to meet retail sales demand. Chipman expects to see better tools and services to help dealers interact with each other in this trading market. Finally, he notes that with the strong Canadian dollar and used-vehicle demand remaining strong, Canada will continue to see U.S. vehicles imported into both the wholesale and retail markets.
Chipman is excited with what the Birchwood Automotive Group has accomplished, but he does not discount the work still to be done to ensure his operating units continue to adapt as the landscape changes. Like Birchwood, we must all be prepared to adapt.
