Dealerships look to take a ‘back to basics’ approach to overcome looming threat to profitability

Dealerships look to take a ‘back to basics’ approach to overcome looming threat to profitability

Fraser Brown, MotorVise Managing Director

Get back to basics and quickly.

That’s the intent of many main dealer groups as they experience a decline in footfall for the first time since the start of the pandemic, says motor trade expert Fraser Brown.

The founder and managing director of consultancy MotorVise Automotive, warns that while dealers may continue to enjoy a profitable bottom line due to a healthy order bank of vehicles, those failing to make immediate improvements to their business will likely suffer a sizeable dent in their profits in four to six months’ time.

Fraser says: “As existing vehicle orders are fulfilled and that order bank runs dry, the fear is that those dealers not currently driving sales will have a lack of new cars to deliver in late Q3 and Q4. This, compounded by a lack of part exchanges, will have a big impact on profits.

“As a result, the motor trade could see a split in the pack, where the stronger dealer groups power ahead in terms of profitability, while the weaker ones descend into loss in the run up to 2023 – and I include some of the new disrupters in this group.

“Many dealer groups have fared well over the last 24 months because it has been a sellers’ market. Some automotive groups have used this time to strengthen the foundations of their business, using profits to invest in training and people development to create a strong and resilient team.

“I’ve spoken with numerous directors in the automotive industry over the last week and it’s been interesting to hear their views. However, their main message is: ‘Get back to basics and quickly’.”

So, what can dealers do to mitigate the effects of a spiralling cost of living while continuing to drive profitability?

-As used car prices fall, the speed of preparation and pricing of vehicles is more important than ever, and dealers must ensure they have slick automated preparation processes to maximise ROI and speed of sale

-Dealerships must respond to customer enquiries within seconds or minutes, rather than hours, and ensure this is done in a friendly and knowledgeable way that builds trust

-Banish paper files and manual customer signatures by installing systems that remove the need for duplication and time consuming administration

-Stress test systems and procedures by conducting mystery shops to ensure a dealership is not driving customers away

Fraser adds: “A basic test is to Google search your dealership to see where it ranks, then pick up a phone or email and follow the customer’s journey through to point of sale.

“This often throws up some shockers, like phones not correctly routed or even answered, or that the dealership doesn’t appear on Google!

“Another important focus must be the sales management team. Do they spend their time filling in reports and completing admin, or are they in the showroom welcoming customers, introducing a salesperson, and ensuring those customers are delighted by their experience?

“Enquiry leakage is an age-old problem solved by showroom systems that automatically ingest leads from enquiry sources, removing the need to input customer details at all, never mind multiple times. But it’s worth checking that a dealership is using the right systems.

“Outside of the showroom, the GM should look at the service department by sampling completed retail job cards to check time is correctly billed, that the VHC process is completed, and service advisors are skilled at selling.

“These suggestions are part of a back to basics approach designed to ensure dealerships maximise efficiencies and profitability that will enable them to meet the challenges going into 2023.”

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