After two years of online events, the packed TalkAUTO event at the Universal Event Space venue in Vaughan proved that the industry was ready to meet in person again.

The conference featured an impressive lineup of guest speakers ready to take on this year’s theme of ’An Industry in Transition.’ They each shared their perspectives on subjects like the future of the global market, the growth projections for electric versus internal combustion engine vehicles, supply shortages, redesigning the customer journey, and creating a more inclusive and diverse automotive industry.

As an automotive journalist, I have been to other Canadian Black Book and automotive events like this through the years. As the conference rolled on, a slight change could be observed around the room.

From the attendees in the seats to the speakers on the stage, diversity and inclusion played a significant role at the event. Canadian Black Book, the event’s organizer, made sure there were plenty of women and people of colour.

There are usually some women at events like this, many occupying marketing and communication roles.

But today, the women were stepping on stage and sharing their industry knowledge. During a panel discussing changes to the customer journey, Alan H. Bird of taq Automotive Intelligence pointed out that he was the only gentleman on the stage. His four fellow female panellists were Sarah Hindle (Lithia Motors), Stephanie Lamb (CIBC), Rachele Fiore (Bond Brand Loyalty) and Maggie Mo (Clutch Canada).

As the day progressed, various speakers continued to provide their findings on what is to come as they dove into the future of global economic and automotive markets. They also discussed topics like diversity and inclusion.

Now while I am accustomed to being the “one of the only chips in the cookie” at industry events like this, you can imagine my joy when Accelerate Auto took to the stage.

Accelerate Auto is a coalition of Black professionals and allies working together to bring about a much-needed change in the automotive workforce. What I found impressive was that they demonstrated not only the challenges the industry faced, but more importantly, they came with answers to the problem.

Founding members Christopher Nabeta and moderator Todd Philips, Senior Editor of Canadian auto dealer, shared solutions to reduce diversity gaps in the industry so that it is more representative of its clientele.

Yolanda Biswah, Senior Vice-President and General Manager of Canadian Black Book made it clear in her opening statement that what I observed was very deliberate. She stated that as a Black woman executive in the automotive industry, she wanted to create a smooth inclusive road for those coming up behind her. If this event was any indication, she is well on her way.

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The game has changed. Here’s what you need to know.

Great business leaders manage their operations through Key Performance Indicators (KPIs). It’s an efficient way to look at your organization from “30,000 feet.” Every industry has them, and the automotive industry is riddled with them. They’ve become buzz words rather than metrics used to drive performance. And this, to me, is a shame.

KPIs are metrics used to evaluate the success of an organization or a particular activity. By definition, it’s a historical observation. A comparison of two things. One is better. One is worse.

Dealers succeed when they stay ahead of the curve. Ahead of their peers. To do this, they are constantly calculating and comparing themselves to others. Ratios, lead times, efficiency rates, productivity. I often feel that the dealership world has fallen into “analysis paralysis” mode.

In my opinion, the calculation itself is of little importance. It is more important to know how you compare to your benchmark. That’s the key. And here’s another secret. Benchmarks change. They are as alive as goldfish in a bowl. That means you must spend as much time understanding your benchmarks as you do calculating them.

COVID-19 has taught us a lot. Dealers must throw away historical success measures and create new ones. They must use entrepreneurialism to redefine what success looks like in the automotive industry. A successful Saturday in a dealership is no longer defined by the number of “ups” in your store. It’s now defined by your ability to convert appointments into sales.

You see, the game has changed.

Let’s deep dive into two KPIs and how they’ve changed:

Used-to-new ratio (retail)

This is the classic KPI in retail automotive. Calculated as Total Used Retail Vehicles Sold/Total New Retail Vehicles Sold, it has been around since dealerships first began. The benchmarks, however, have changed significantly.

According to NADA statistics, in 2017 the average dealership delivered 0.76 used vehicle units for every new vehicle sold.

By April 2021, this ratio had grown from 0.90 to 1.00. That’s an 18.4 per cent growth rate.

Dealers have had to completely change their operations to meet this requirement. And they have embraced it. Market leaders have carved out new revenue streams around it. But I find this exceptionally odd.

More capital than ever is being spent on manufacturing and selling the newest and most technologically advanced vehicles. Showrooms look like expensive shopping malls. New cars are so sophisticated that they drive you now. Purchasing a new vehicle has never been so appealing. So why are so many customers choosing to go backwards and purchase a pre-owned unit? It doesn’t make sense!

The environment has changed. I fully expect this KPI to hit 1.00 to 1.00 by the end of the year. The current semiconductor chip shortage has made this a sure bet. And as environmental factors continue to change, so will benchmarks. The challenge for dealers is to understand the trend and adapt accordingly. Be proactive, not reactive. Manage the business, don’t let the business manage you.

Net-to-sales rate

Automotive retail is a complicated business. However, simple calculations like the “Net to Sales Rate” (calculated as net profit before tax as a percentage of total sales) can truly tell the story of a dealer’s success. This KPI has stood the test of time. It’s informative and, if dissected properly, can present real opportunities to the analyzer.

Successful dealers net anywhere from 2.5 per cent to 5 per cent on sales. In other words, for every $100 in sales, they put $2.50 to $5.00 into their pockets. Very small in comparison to other businesses in the world.

Dealers must throw away historical success measures and create new ones. They must use entrepreneurialism to redefine what success looks like in the automotive industry.

According to Yahoo Finance, in 2020, Alphabet Inc.(Google) netted 22 per cent. It really speaks to the high overhead costs associated with running a dealership. Things like employment costs and rent factors drastically dilute net profit. So while traditional operators love to quote this KPI, I wonder if it is still relevant in today’s environment.

Every business is different. Retail automotive is changing. More and more retailers are moving to digital selling. I can see a future when brick and mortar dealerships go away. Moreover, in 2020, COVID support money has contributed hundreds of thousands of dollars to dealership bottom lines.

The question we must ask is: how should these be considered when calculating a typical net-to-sales benchmark? Should it be normalized? How do you normalize? What does normal even mean these days?

Whatever your answer, the point is that KPIs must be fluid. The goal is not to beat your peers. The goal is to understand the story. Understand the opportunities being presented. What activities are driving the KPI. What factors can be controlled.

The goal is to optimize your dealership, not to compare. This is not a one-size-fits-all situation. KPIs and benchmarks are different for everyone. It’s personal. Just like your favourite brand of scotch.

The post KPIs or KP Whys? appeared first on Canadian Auto Dealer.

Benefit from a consistent flow of used vehicles to your dealership.

All we seem to hear about in the news is how vehicle production is down because of supply chain issues caused by the global shortage of microchips. With new vehicle production down, the focus is now squarely on used vehicles.

Recent Cox Automotive studies show that over 68 per cent of consumers are in-market for a used vehicle right now, and this has been increasing by four per cent year-over-year for several years.

This is not a new phenomenon; it is just amplified now because of the shortage in new vehicles. While some dealers are “waiting it out” others are taking the matter into their own hands, and are using a strategic approach to building their used vehicle pipeline.

How do you build a used vehicle acquisition pipeline?

There are many sources for acquiring used vehicles, and every dealership has its own approach. The most organic way to acquire used vehicles is through trade-ins, service drives, and tapping into your owner base. Most of you are doing this already, and if you are not—you 100 per cent should be.

With new innovative technology available to dealers now, some dealers are looking beyond the obvious. Some car dealers are now setting up digital buying centres and opening B lots, while others are targeting private sellers (that are advertising on Trader, Kijiji and Facebook Marketplace) up to 500 kms from their dealership.

We asked Terry Haitas, General Manager of Welland Honda, how his team is adapting to this changing marketplace. His response? He knew the vehicle shortage was coming.

“We have been stockpiling used vehicles for a few months now and we have opened a B lot to showcase these used vehicles, and we created a new brand to promote these cars,” said Haitas.

When prompted, he went on to say that “we cannot sit here and wait, this is the opportunity we have been waiting for to capture more market share—and we are making it happen.”

Mindset matters when building used vehicle inventory

Looking at used vehicle inventory levels at dealerships across the country, it is a story of the haves and the have nots. Why are some dealership back lots filled with used vehicles, while others are struggling to find inventory? Many believe that with every problem there is an opportunity, and the way you see things will determine the actions you take.

Todd Shivers, General Manager of NewRoads Chrysler, said “we cannot be worried about the things we can’t control. It is what it is. What we can control is used inventory, so we plan to use any means necessary to stockpile our inventory with the used vehicles our customers are asking for. We expect to win!”

The global pandemic has certainly added to the complexity of the situation. The daily car rental companies are not feeding the used vehicle pipeline like they normally do, further reducing the available inventory.

Michael Carmichael, Owner and President of UpAuto, said the number of new vehicles coming their way is limited.

The global pandemic has certainly added to the complexity of the situation. The daily car rental companies are not feeding the used vehicle pipeline like they normally do, further reducing the available inventory.

“I think the real opportunity for the foreseeable future is in used cars,” said Carmichael. “We have some exciting plans in the works to maximize this opportunity. We really don’t want to waste this opportunity that the global pandemic has provided us.”

Will you ride the wave when customers flood your dealership?

While many Canadians lost their jobs and suffered financial hardship during the pandemic, others remained employed. This has resulted in an unprecedented increase in savings in 2020 of roughly $5,800 per Canadian. With these newfound savings, many believe it will be the return of the roaring twenties.

Some dealers have worked diligently to ensure they have enough used vehicles to better serve their customers when customers start flooding their dealership. This includes Adam Gladwin, VP of Bruce Auto Group, who said they are ready to “ride this wave.”

“We are a nimble group and we have modified our approach to acquiring used vehicles,” said Gladwin. “Our amazing staff has embraced this change and not only are (we) winning more used deals now, but we are well positioned to keep winning.”

Dealers are jockeying for position and winning (or losing) market share. When customers start flocking to your dealership, will you be ready to ride the wave?

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