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Is a Perfect Storm Approaching?

Several factors are brewing what could be the perfect storm for auto dealers, but no fear. Dealers are highly resilient and will weather the coming storm, just as they have weathered all previous storms. However, taking steps now will help your dealership come out ahead.  

What is contributing to this perfect storm? Increased inventory levels and interest rates are spiking floor plan expenses, and despite earlier promises, it doesn’t look like we’ll get significant rate cuts this year.  

Interest rates and inflation are also having a severe impact on consumer buying decisions. The consumer’s dollar has a lot of competition, not the least of which is that people tend to prioritize rent or mortgage payments and putting food on their tables. 

Another consideration is the massive amounts of auto loan delinquencies piling up. Remember all those vehicles sold for $15K over list during Covid? Many owners are now flipped, underwater, and no longer making payments. This could take a couple of years to work itself out. 

Iceberg, Dead Ahead! 

As dealers plow through rough seas created by current economic conditions, an even bigger threat lies below the surface, like a hidden iceberg. Recently, a dealer who owns a sizable auto group told me that 70 percent of his salespeople and 50 percent of his managers were all hired during Covid or post-Covid. 

Maybe the percentage is not that high at all dealerships, but what if it’s 50 percent of salespeople and 25 percent of managers? That means fully half of your salespeople have no idea how to sell a car beyond taking orders. And many desk managers have never had to train their people and negotiate with customers. 

Untrained salespeople can have a seriously negative impact on the customer experience. I saw this firsthand when I purchased a vehicle earlier this year. The poor salesperson had no idea what he was doing. He was like a mushroom that has been kept in the dark. He didn’t know how to calculate lease payments and ran to the manager’s desk every five minutes. It was frustrating, to say the least, and I have connections! 

Negative customer experiences are amplified by dealerships’ boasting about their excellent customer experience for the past several years. As a result, consumer expectations are much higher, which makes the experience that much worse when customers encounter incompetent staff. 

To be clear, your staff is not the problem. The vast majority are great people who are trying hard. They just don’t know what they’re doing. 

Another factor to consider is that despite the great hoopla during Covid-19, digital retail has yet to really take hold. Consumers have some useful shopping tools, but few complete transactions happen online. This is why it’s critical to have salespeople and managers who know how to sell in a competitive market like we had pre-Covid.  

Batten Down the Hatches 

To prepare for rough waters, I always advocate going back to the basics. These three strategies should help you weather the storm. 

Identify Your Differentiators 

New vehicles in the $50,000 price range are in a crowded space. Many are for sale, but there’s not a lot of differentiation between the various makes and models. This means that dealers can gain an edge by differentiating themselves. 

Ask your sales team to name three things your dealership does better than anyone else. If they stare at you like deer in headlights, you’ve got some work to do.  

Identify at least three– and up to five– things that your dealership does better than your competitors. It could be social media or sending lead-response videos to customers, follow-up calls, confirming appointments, or time to purchase a vehicle. 

Ideally, if you do these things well, you will reach your goal. Keep it simple. Make sure your sales team knows what the things are, then train them to focus on those things every day.  

This can be a challenge because everyone has 50 million things to do. But prioritizing helps reduce the noise and overthinking that occurs. Your team should know that if they focus on those three to five things every day, they will be successful. 

Train, Train, Train 

There are several ways to go about this. I used to work at an auto group that purchased training content from an outside company, but we didn’t use their trainers. We had an in-house trainer and a certification process, and our salespeople would get certified at different levels as they came up through the organization. 

This is an ideal approach for auto groups as it provides a consistent training process for all salespeople, so when they go to another store, the process is the same. 

Another approach is to hire an outside trainer and/or organization and use their content. This works, too, but the downside is that it’s not customized to your store’s processes. 

Training is not a cost but an investment that will pay dividends in a better customer experience, more sales, and staff retention. In fact, training should probably be one of your differentiators! 

Mystery Shop 

Remember mystery shopping? When was the last time one of your senior executives mystery-shopped your website and submitted a lead? This is critical because your website is where car shoppers start their journey and how they decide which dealership to purchase from. 

Mystery shopping is an essential best practice nobody likes to do, but if done, it never fails to yield results. Trust me, you will be amazed at what you find. 

Retail automotive is sliding back into a competitive market- and quickly. A few factors are brewing what could become a perfect storm for auto dealers, but going back to basics gives your dealership’s staff the knowledge and tools to navigate their way to success.  

– Good selling! 

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Bill Wittenmeyer
Bill Wittenmeyer
For over 25 years, Bill Wittenmyer has been a noteworthy leader in the automotive retail space. You may know him as the Chief Sales Officer of DealerOn. Still, Bill can also be credited with contributions to Elead, CDK Global, and the thousands of automotive dealerships he’s guided in retail operations. Bill is a business and technology executive specializing in sales and marketing to help take automotive companies to the next level in growth and profitability. His career extends to leadership across business strategies, organizational development, operations, corporate sustainability and information technology. He has been featured in several well-known news publications and media outlets, including Automotive News, Wards Auto, CBT News, Digital Dealer/Dealer Communications, AutoSuccess, and more. Bill is proud of his philanthropic work, speaking to students at Northwood University and the University of Michigan Stephen M. Ross School of Business and supporting charitable organizations like Patriot Paws Service Dogs, Planes of Fame Flight Museum, Orca Network, and various other outreach programs.

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