Preparing for the rest of 2020

While late Q2 results delivered a glimmer of hope for the auto industry, dealerships are still doubling down on cost-cutting measures to weather uncertainty

By Matthew Isaacs

July 13, 2020
4 minutes read

The close of the second quarter of 2020 brought some signs of recovery in automotive retail. While April and May were dismal, we’re entering Q3 on a relative positive note. As Ward’s Auto put it, “June Auto Sales Improve, But Just a Bit.”

There is plenty of speculation about ways supply shortages for in-demand vehicles like pickups (or their components) could further disrupt Q3 sales. The same can be said, of course, for how renewed spread of COVID-19 in many U.S. states could further dampen buyer enthusiasm.

As we all hope for continued signs of improvement, a lot of change is happening to harden businesses against these threats of an extended economic downturn due to the coronavirus pandemic.

For one, OEMs and dealer groups have been working to provide dealerships with floorpan relief in recognition of slow sales, while simultaneously offering historic incentives to consumers.

Along with those incentives, new out-of-dealership experiences will hopefully contribute to more sales than could be expected without things like online buying options, at-home test drives and new-vehicle delivery.

Some dealerships might even pivot, temporarily, to new models (the most extreme example being Dream Motor’s move to supply personal protective equipment during the pandemic – read that story here).

For most, however, doing anything they can to boost sales while finding ways to cut costs is the name of the survival game right now. In an interview with Automotive News publisher Jason Stein just before the July 4th holiday, Adam Chamberlain, vice president of sales for Mercedes-Benz USA, said the company will “aggressively” examine the “cost of retail,” and that contactless services and “digitally-assisted sales” are here to stay.

To our ears, that signals a longer-term budget shift away from the amenities that make dealerships enjoyable places to wait. We also expect dealers to accelerate a shift in advertising strategy to rely less heavily on traditional ad channels and focus on more affordable digital ads, which can direct customers into maturing digital sales channels.

These efforts are a great start to increasing dealership profitability and limiting expenses and risks. In fact, data presented during a recent NADA webinar showed dealers who were equipped to sell cars online saw an increase in gross profit per vehicle sold… during April 2020, the worst month of the COVID-19 pandemic so far.

Similar efforts applied to bring customers in for service should also help dealers find balance during the pandemic slump. While it’s typical to spend more marketing dollars in support of sales, the average customer today is potentially using a personal vehicle more often, according to data collected by Cars.com; they might be looking to take a road trip and want service beforehand; and they may be more likely to need repairs if their vehicle has been sitting for some time.

There are plenty of free ways dealers can improve on existing fixed ops’ ads, too. Update Google My Business pages with images that depict your cleaning efforts and splashy images showing current specials. Similarly, use social media channels and your websites to advertise specials and facilitate value-added services like vehicle pickup and delivery for service appointments.

The other side of extracting more profit from service is, of course, reducing fixed ops’ costs and finding new ways to generate revenue. We’ve talked before about the virtues of experimenting with fleet use cases, given industry wide expectations that business won’t return to normal until sometime in 2021.

However, the best fleet experiment dealers can undertake right now is working to recover the costs of operating a fleet. New Dealerware customers are regularly surprised by just how much they were losing on fuel, tolls, damage and unsettled customer balances for all of the above.

Dealerware automates these charges to ensure that dealerships can recover the costs that add up across a fleet. On average, our customers recover $65/VIN each month, and many report that they can even turn a profit on fleet operations after optimizing their cost recovery strategy.

As we enter the third quarter of 2020, we expect to see fixed ops’ play an even larger role in dealerships’ COVID-19 survival strategies. Americans are overwhelmingly in favor of car travel over any other mode of transportation right now. A June survey from travel marketing consultancy MMGY Travel Intelligence found that 67 percent of Americans are likely to travel by personal car in the next six months. Of those, one third are ready to drive 300 miles away from home, and 20% are willing to go 500 miles or more.

Bolstering fixed ops’ ability to market their services, deliver elevated customer experiences and recover costs will be critical for dealers navigating both a sales slowdown and inventory shortages that make it hard to meet demand.

For a live look at the ways Dealerware can help you better track and automatically recover fleet costs, contact [email protected] or click the button below to schedule a demo.