NADA 2018 REVIEW APRIL 2018 - BDO Australia
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NADA 2018 REVIEW APRIL 2018
NADA 2018 REVIEW APRIL 2018 CONTENTS 1 INTRODUCTION 2 LEVERAGING THE DIGITAL GIANTS: GOOGLE, FACEBOOK AND TWITTER 3 CONVERT FACEBOOK ADS TO OFFLINE CUSTOMERS 4 10 MOST IMPORTANT SOCIAL MEDIA TRENDS 5 7 HABITS OF HIGHLY EFFECTIVE CAR PEOPLE 6 NOT ALL CUSTOMERS ARE CREATED EQUAL 7 MODERN SALES MANAGEMENT – BREAK PLATEAUS & DOMINATE TODAY’S MARKET 8 THE SCIENCE OF MANAGING, MOTIVATING AND MARKETING TO MILLENNIALS 10 GAME CHANGERS DRIVING WHOLESALE EFFICIENCY AND INVENTORY VELOCITY 12 THE DEALERSHIP OF TOMORROW – AN UPDATE ON A 2016 STUDY 13 THE DEALERSHIP BUSINESS MODEL OF TOMORROW
NADA 2018 REVIEW
APRIL 2018 // PAGE 1
INTRODUCTION
The 2018 National Automotive Dealers Association Conference There were a number of sessions about the dealership of tomorrow
was hosted in Las Vegas. This annual event continues to be the and although the speakers concluded that dealers need to fully
largest dealer convention in the world, this year with over 25,000 embrace social media, data mining and other on line tools available
people attending from over 50 different countries. BDO Automotive to them, they did not see the overall dealership model changing
attended and here is what we took away from this year’s convention significantly. They envisage some reductions in the number of
and how it will affect Australian dealerships. dealerships, but recognised that consumers still want the final
interaction with the dealership at their site, including a test drive.
There were 60 different seminars with 102 educational sessions
and in the following pages we share the key points and learnings Staff retention continues to an issue in the sector and this coupled
obtained from the sessions we attended. The convention is based with a perceived lack of trust by the consumer in salespeople formed
around a huge exposition where over 550 suppliers to the motor the basis for a number of seminars. The millennial generation is the
sector, including all the largest manufacturers such as Ford, General largest to date and will in the next few years become the dominant
Motors and Toyota, showcase their goods and products. This generation in the workforce. They have different views and attributes
enables the attendees to see at first hand the new technology, new and as business leaders, dealers need to understand this group.
products and systems available in the sector which may benefit their They are more mobile than previous generations, want to make
dealership. a difference and want to work collaboratively, dealers need to
incorporate these values into their employment proposition.
Staged around the expo are the workshops and seminars that
continue to provide not only “best practice” and new ideas for If you would like to discuss any of the topics raised in the document
dealers to consider but also, and just as importantly, remind dealers please do not hesitate to contact us.
of some of the basics and how important it is to get these right. They
cover topics from HR to legal and accounts, sales and after-sales to
social media and technology.
For the first time the conference included peer to peer sessions
where dealers could discuss and learn from each other with these
sessions being facilitated by the relevant speakers. The motor sector
in the US continues to fare well with sales in 2017 over c17.5m
vehicles which was in line with 2016. However, they are starting to MARK WARD RANDALL BRYSON
see a slowdown in the sector but this would appear to be behind NATIONAL LEADER, AUTOMOTIVE PARTNER, AUTOMOTIVE
that in the UK where new registrations started to slow twelve
months ago.
NADA 2018 REVIEW
APRIL 2018 // PAGE 2
LEVERAGING THE DIGITAL GIANTS: GOOGLE, FACEBOOK AND TWITTER
PHIL SURA, PETER LETO (Google), PHILLIP RATHER (Facebook), CHAD RUMMINGER (Twitter)
This was promoted as a “super” session and focussed on how dealers In terms of a good budget for digital marketing, Google Facebook promoted their “dynamic ads” to drive dealership traffic
could leverage Google, Facebook and Twitter to drive sales and recommended a minimum budget of $100 per vehicle sold on and quoted a dealership ‘Darcars’ who used them to increase
service bookings. Each speaker was an automotive Tier 3 specialist Google Ad solutions (based on it driving 60% of your traffic). All website traffic resulting in over 45,000 vehicle detail page views in
and were head of their respective industry groups with a view that speakers warned against evaluating digital effectiveness based three months, at 92% lower cost per view than other ad streams.
95% of the auto sales and service intenders can be reached if you on the “last click”, as the path to purchase is complex from early Facebook also showed examples of “messenger bots” which they
leverage digital channels appropriately. discovery, to research and finally purchase. They all agreed on said were perfect for sales and service.
the importance of video with 80% of online traffic being video
A key message from the speakers was unsurprisingly that the most
consumption by the end of 2018.
effective digital campaign encompassed all three mediums. Google
was all about intent; “where else can you go looking for customers In terms of aftersales the speakers thought that much more could be
where they actually raise their hand and indicate they want to buy?” made of digital to “make customers for life” and showed examples
Facebook is unique as focussed on the social aspect of buying a car; of contact with customers after their purchase including a dealership
you log in as you and share your intent, and learn from people you who used Facebook to reach current owners who had never brought
know. Twitter argued that their users discovered content outside of their car back for a service with a coupon for a cut price oil change.
their social network and 8 in 10 twitter shoppers want to see dealer Google argued that shoppers who service their vehicles at your
information on the platform. dealership are three times more likely to buy their next car from you.
NADA 2018 REVIEW
APRIL 2018 // PAGE 3
CONVERT FACEBOOK ADS TO OFFLINE CUSTOMERS
SCOTT MEYER
This was a lively, entertaining and really interesting session and one A professional set-up on Facebook allows you to measure Facebook measurement allows you to upload CRM sales data, and
we would recommend that you catch up on as most of the content conversions, integrate with your inventory, and manage your then matches to Facebook users and measures how many customers
is available in video format from Scott Meyers’ website. marketing team and partners. Scott advocated the set up of the saw an ad before purchase – very powerful!
following items to best use Facebook and there is a free video course
Meyers explained that Facebook aggregates attention, which means The ability to select audiences based on geographic, demographic,
on his website – 9clouds.com/nada:
it can easily add or highlight specific content, including its own CRM-based custom audiences and engagement audiences was
video content (like Netflix), their own Marketplace (like Craigslist) • Facebook Business Manager – business.facebook.com fascinating if not a little scary given the level of data held by
and their own ads. Facebook controls data and attention through Facebook.
• Facebook Pixel – Ad account>tools>pixels –
four of the most popular apps and websites (Facebook, Instagram,
(this tracks behaviours)
Whatsapp and Messenger).
• Facebook Offline Events – Business Settings>Offline Events –
The average person spends over 50 minutes per day on Facebook.
(this measures effectiveness)
It is the best place to find potential customers. What’s more, email
address and contact information on Facebook is reliable and, • Facebook Catalog – Business Settings>Catalog –
compared to emails in your database that may be out-of-date (to enter vehicle data).
or quickly entered by staff, Facebook emails are a perfect way to
connect with customers. Facebook also allows dealers to sell used
cars for free to other Facebook users.
NADA 2018 REVIEW
APRIL 2018 // PAGE 4
10 MOST IMPORTANT SOCIAL MEDIA TRENDS
JOEY LITTLE | AUTOALERT LLC
Joey started the workshop by stating that every dealer should look to the future. You cannot sit still as what works now will likely not work in the future.
He then discussed the 10 hottest social media trends for 2018.
01 AUGMENTED REALITY 05 OTT – MESSAGING PLATFORMS 09 FACEBOOK SPACES
Whether it be virtual showrooms or virtual walkarounds, we There are many messaging platforms which can prove A new development in Facebook Spaces means it’s no longer
will soon see this happening within the industry. Joey stated confusing. Dealers need to choose just one platform to use just a place to hang out with friends and family in your list:
that if you think you will continue to sell cars and repair orders and then make sure that someone administers this effectively. you can also use it to form bonds with people in the Groups
from the dealership site in the future then you are wrong. you’re in. You can now host or join a VR Space with up to four
06 LIVE STREAMING people from a Group, so you can discuss shared interests in
virtual reality. The social VR app allows you to connect with
02 INSTAGRAM STORIES Increasingly important, live streaming can be done through
new people in a deeper way and dealers should consider it as
Dealers need to be aware that most people are on Facebook or Instagram. However, dealers need to beware as
another channel to use as it becomes more prevalent.
Instagram (especially young people). Dealers need to look there are no “rules” about this and you need to be careful
through their customer’s eyes rather than through their own. what your staff post. If you are not live streaming then you
How do they communicate and socialise? The answer is are missing out. 10 STRONGER GOVERNANCE POLICIES
mainly through Instagram. Dealers should know what compliance their manufacturers
require and know what they allow you to do. Ultimately, your
07 RETHINKING TWITTER
brand can be destroyed by some misplaced online content.
03 INFLUENCER MARKETING Joey believed that Twitter has lost its way as it is not seen as Therefore, you need to ensure you carry out reputational
This is already happening and anyone using an employee as a multigenerational. It needs to get better but dealers should monitoring and management. Ensure there is no fake news!
marketing person is using influencer marketing. Joey stated on stick with it at present.
average people have 365 friends on social media. If you have
100 employees then you can get a significant amount of ROI 08 DIGITAL HANDOUTS
from them by getting them to market your business through Generation Z are all over this and they are becoming more
their social media channels. Joey finished the workshop by noting that you need to know
face to face social. This potentially will lead to better
what the social content policy is for your business. Have a
communication platforms. Dealers should consider how they
clear plan and goals for what you want to achieve. Find your
04 GENERATION Z could use these for sales meetings etc.
voice and your ‘why’ and then consider how you can stretch
YouTube is king for the latest generation meaning dealers your reach through social media.
really need to embrace this. YouTube is the second most
streamed search site behind Google (who actually own
YouTube). Dealers should ensure they post regular videos
whether it be how to buy a car, how to change the oil etc. Joey
did note, however, that in research 60% of Generation Z still
want face to face contact and want to test drive. Therefore,
bricks and mortar dealerships are not going anywhere at the
moment.
NADA 2018 REVIEW
APRIL 2018 // PAGE 5
7 HABITS OF HIGHLY EFFECTIVE CAR PEOPLE
KAREN BRADLEY | CEO – DEALER SYNERGY
03
Put first things first
Neither a dependent or an independent employee are great as they both
have negative qualities that can stunt the business. What you want is an
interdependent person. Someone who works together with others to achieve more.
What employers need to do is stop trying to work on a person’s behaviour and instead
work on their paradigm ie how that person sees the world and their general outlook. The
ultimate paradigm is that the individual sees that what they do directly drives results and
therefore what they in turn receive in terms of reward, satisfaction and progression.
The most effective people cut out useless meetings, they are time wasting. You should
challenge what the point of the meetings are and what do they achieve. Do they achieve
what you want them to?
Karen finished the workshop by stating that the work/life balance is so important in this
current age. You need to ensure that you take time out to renew yourself to be the best you
can be whether in body, heart, mind or soul.
NADA 2018 REVIEW
APRIL 2018 // PAGE 6
NOT ALL CUSTOMERS ARE CREATED EQUAL
JONATHAN DAWSON | SELLCHOLOGY
10 METRICS TO DEFINE, ATTRACT AND JONATHAN ASKED THE QUESTION: WHO ARE MY BEST AND SO HOW DO YOU ATTRACT MORE SERVICE LEADS?
MOST VALUABLE CUSTOMERS? • Utilise equity mining tools
CONVERT HIGHER QUALITY CUSTOMERS? Do all following customers have the same ROI to the dealership?
• Place literature in the service department
COST OF ACQUISITION • Service customers
• Branded gifts
What does it cost me to attract and sell to this customer? • Referral customers
• Assign and train key personnel to convert
• Ad-based customers
COST OF MAINTAINING THE RELATIONSHIP • Unique brands and campaigns
• Repeat customers
What does it cost to keep them? • Offer special loyalty incentives.
• Customers prospected by your sales team
EASE OF ACQUISITION HOW DO YOU ATTRACT MORE REPEAT BUSINESS?
• Walk-in.
How easy is it to get them to buy? • Utilise equity mining tools
Which customer is more valuable? Where does the time and energy
go to on the above. Jonathan believed that the majority is likely spent • Consider pay plan changes
EASE OF CONVERSION
on the bottom two which are the most difficult to convert. • Offer special loyalty incentives
How easy is it to get them to say “yes”?
Whilst we probably spend the least on the two most desirable, being: • Encourage salespeople to develop their own brands.
SPEED OF SALE
Service customers – geographical convert from service to sales,
How fast can I sell to them? HOW DO I TRACK MORE REFERRAL LEADS?
lower cost of sale – highest value prospecting customer.
• Train on referral techniques
REFERRAL POTENTIAL Repeat – second best, they are easier to convert and most profitable.
• Ask the customers for referrals as and when they buy.
Will they refer or endorse me? HOW DO I ATTRACT THE MOST ATTRACTIVE CUSTOMERS?
HOW DO I TRACK REFERRALS?
FREQUENCY OF SALES CYCLE Jonathan stated you should consider the following areas in your
dealership: • Sales people need to understand the importance of referral
Will they buy from me again? business.They need to follow up and take ownership. If they
• Communication – what you pay attention to and discuss in your create it then they take it more seriously rather than you
UPSELL POTENTIAL meetings with managers and sales staff giving the leads to them.
Will they buy accessories or F&I products? • Pay plans – are your pay plans rewarding more for selling to the
highest value clients? Finally Jonathan posed the question: how do you cut
RECURRING INCOME POTENTIAL • Creative strategies – are you using marketing strategies that advertising waste? He believes you can achieve this through
Will I generate residual income? attract today’s consumer? the following three ways:
• Budget allocation – do you have a budget to attract the more • What are the 10 metrics to determine who your best
INITIAL SALE PROFITABILITY customers are?
valuable types of customers?
Will I make any money on their first purchase?
• Management focus – what do you spend your time and energy on? • Who are my best and most valuable customers?
• How do I attract a massive number of the best customer?
NADA 2018 REVIEW
APRIL 2018 // PAGE 7
MODERN SALES MANAGEMENT –
BREAK PLATEAUS & DOMINATE TODAY’S MARKET
JARED HAMILTON
Jared a popular speaker and regular NADA presenter asserted that It is critical that dealers create a process to reduce salesperson
poor salesperson engagement can lose dealers significant amounts attrition so that you can build a sales team that can deliver a
of profit. He recommended that dealers should upgrade their customer experience that has the following basic attributes:
processes to deliver on customer expectations and build a powerful
1. Builds trust and is “likable” – if the team can deliver empathy,
sales team in the transparent and digital age to boost profits without
build rapport and has been empowered then it should increase
investing anymore in marketing, real estate or inventory. The core
closing rates by 47%
duties of the sales manager have changed; it used to be looking
at available credit and closing deals, but now it should be about 2. Transparency – a team that when questioned (i.e. on price) is able
building high performing sales people. to give a direct answer should improve closing rates by 44%
There are three plateaus that now face the average dealership: 3. Flexibility – 68% of customers do not have to drive the exact car
before they purchase, 50% of customers said they would reject
1. Annually adjusted average rate of vehicle sales in the US are
the dealership if a test drive is required before getting to a price.
around 17m so the challenge is how to increase profit without
selling more cars
JARED SAID THERE ARE TWO MANAGEMENT TRUTHS
2. The average number of cars sold per month per sales person –
which in the US is eight Good managers manage activities and not results
3. Sales person turnover, this is around 70% in the US which could
Process consistently delivers high performance
be losing dealers around five deals a month per sales person as
new staff take time to build up to the average of eight.
WHAT IS YOUR PROCESS FOR CREATING HIGH PERFORMING EMPLOYEES? This would result in:
A Human Capital Management process that dealers could consider is:
Include accountability of
required achievements.
Create development plans
with a competency framework Form high performing habits 05 HIGHER PERFORMANCE
including process, skills,
product knowledge and a
temperament that can be 04
resilient against rejection
Create a modern manager Define a career path to reach HIGHER RETENTION
mindset where at all levels a senior sales person (which 03
they realise they are entrusted could take two years)
with the company assets
including brand and customer 02
relationships
LOWER NUMBER OF HEADACHES!
01
NADA 2018 REVIEW
APRIL 2018 // PAGE 8
THE SCIENCE OF MANAGING, MOTIVATING AND
MARKETING TO MILLENNIALS
GABRIELLE BOSCHE | THE MILLENNIAL SOLUTION
Gabrielle started the workshop by asking attendees what the biggest
challenges were for business owners working with millennials and
the following were noted:
Retention Attention Motivation No Urgency Respect
Social Skills Attendance Cell Phones Attendance Report that user-generated
contents on company websites
MILLENNIALS 84%
262%
has at least some influence on
The Millennial generation is a huge part of the population, what they buy.
significantly larger than Generation X. Millennials are taking over and
we need to engage with them. Gabrielle noted that by 2025 they will
be 65% of the workforce. MORE LIKELY
Gabrielle stated that the average cost to replace a millennial is about TO BE
150% of their salary so it is very expensive. INFLUENCED
BY SMARTPHONE Check for coupons or promotions on
However, their mindset is one of mobility. Millennials stay in a 43% their smartphones while in a store.
job on average two to three years; however, at the start of their APPS
employment they think they will stay for five. So why do they quit
early?
• Direct relationship with their supervisor
• Training and development opportunities.
Use their mobile devices on social
They want their work to matter, see it as more of a relationship 52% media to note they like a brand.
andwant to leave their mark. Whereas, Generation X’s view on life
was that you pay me and I take benefits until retirement.
Gabrielle stated that 65% of next generation employees are looking
for other jobs right now as they do not want miss out.
Generation Z are those born after 2001. They are the first generation
that truly embraces diversity. They live their life solely on their
mobile phone!NADA 2018 REVIEW
APRIL 2018 // PAGE 9
THE SCIENCE OF MANAGING, MOTIVATING AND
MARKETING TO MILLENNIALS (CONT’D)
GABRIELLE BOSCHE | THE MILLENNIAL SOLUTION
WHAT DO MILLENNIALS WANT? TO SUMMARISE MILLENNIALS ARE:
They want more technology, more fun. Millennials in the first six weeks will work out how long they are going to stay in the business – do • Mission driven
they have a career, opportunities etc. As an employer you need to set expectations early and often. They lead from the middle, they like to
• Change minded
collaborate (whereas Gen X want people to get on with it on their own). Millennials do it together and want to collaborate. If you do not
collaborate, they see it as a weakness. • They crave leadership – empower them with it. If they are part of
the story that is good
You need to provide clarity and content. Their biggest question is why? As they want to know the context. This is the most important thing –
to set the context. Ensure you answer why before what or how. • They demand feedback – Ask them to write their three
expectations at the start of their employment so that you can
Millennials are all about the experience. They want to know what the experience is and what it looks like.
help deliver on it
• They demand transparency
• They want mentorship
MILLENNIAL NON-MILLENNIAL
• They want to be brand ambassadors.
32% More likely to focus on 21% More likely to focus on
Gabrielle noted the things you should never say to the next
generation:
RESPECTING IDENTITIES RESPECTING IDENTITIES • That’s how things have always been done
• Wait your turn
35% More likely to focus on 19% More likely to • Because I said so
• We tried it before and it did not work.
UNIQUE EXPERIENCES focus on RELIGION & Ultimately, they want a relationship with you their leader. This drives
DEMOGRAPHICS ownership and transparency.
29% More likely to focus SO WHAT DOES THE FUTURE LOOKS LIKE?
on IDEAS, OPINIONS, & 25% More likely to • Collaboration over competition
• Change is assumed
THOUGHTS focus on EQUALITY • Less labels
• Authenticity and accountability
• More careers, less “experience”.NADA 2018 REVIEW
APRIL 2018 // PAGE 10
GAME CHANGERS DRIVING WHOLESALE EFFICIENCY
AND INVENTORY VELOCITY
SUZY HYMES | COX AUTOMOTIVE
Suzy commenced the presentation by stating that Gross margins The key to dealership success is the speed to market which correlates
in the used car market continue to decline – so dealers really to inventory turn and then profitability.
need to focus on their stock control and stock turn. Suzy did not
So what are game changing dealers doing today to propel used
see the trend changing over the next few years. A survey carried
vehicle efficiencies and speed to market in order to drive profits?
out by NADA during 2017 showed the average transaction price
has increased by $5,000 to $20,000 in the 12 year period to 2017, 1. Set volume and ROI goals
whilst the front end gross has reduced from $1,800 to $1,400 –
-- Improve turn rate: from 8 to 12
a drop of 42%.
-- Used to new ratio: From 1:1 to 1.25:1
However to counteract this drop F&I has been making up for
-- Gross return on inventory: From 100 to 120
declining profits with F&I revenue accounted for as a % of gross
profit increasing from 25% in 2005 to 41% in 2017. However as we -- Cycle time (recon and transportation): From 12 days to 7
are all aware F&I regulation is increasing and dealers need to ensure -- Aged inventory (under 30 days): From 55% to 70%.
they have robust systems and controls in place. 2. Have a strategy with goals for each of the following
So what is limiting dealers used car performance? Lack of stock is -- Acquisition
one of the key points, understanding your market and demand and -- Pricing
how you drive the speed to market are the other two.
-- Reconditioning
Suzy talked about operational efficiency; however, it comes back -- Merchandising.
to buying the right car at the right price. “Dealers must leverage
technology and most importantly data and predictive analytics to
drive dealership success in the future.”
GROSS MARGIN AS % OF SELLING PRICE WHAT CONDITIONS ARE HOLDING DEALERS PERFORMANCE BACK?
New Used
16%
1
14% 2
12.1% 3
12%
37%
10% 34%
31%
8% 26%
23%
6%
15%
4% 2.9%
2% 9% 9% 9% 8%
0%
2011 2012 2013 2014 2015 2016
Consumer
Confidence
Marketing
Conditions
Limited
Inventory
Competition
Credit Availability
for Consumers
Expenses
Credit Availability
for Business
Regulations
Staff Turnover
Consumer
Transparency
in Pricing
Source: NADA
Source: Cox Automotive Dealer Sentiment ResearchNADA 2018 REVIEW
APRIL 2018 // PAGE 11
GAME CHANGERS DRIVING WHOLESALE EFFICIENCY
AND INVENTORY VELOCITY (CONT’D)
SUZY HYMES | COX AUTOMOTIVE
GAME CHANGERS: VEHICLE ACQUISITION GAME CHANGERS: RECONDITIONING
TRADITIONAL DATA-ENABLED TECHNOLOGY DRIVEN TRADITIONAL RECON & EFFICIENT RECON & LOGISTICS
ACQUISITION STRATEGY ACQUISITION STRATEGY TRANSPORTATION STRATEGY STRATEGY
• Experience/Instinct Driven • Data driven, disciplined • Priority of shop on wholesale reconditioning • Priority of shop on paying customers
• Preference For In-Lane Purchases • Up-front emphasis on profit • Mechanical, Body/Paint and detailing in • Centralised transport loads for lower costs
separate locations • Close proximity for inspection, mechanical and
• More effort/time with less reward • Less time researching, more time buying & body work
serving customers • Employees dedicated to recon and moving
• More risk of paying too much, aged units
vehicles
• Online emphasis for efficiency
Average Dealers complete Top 20% of Dealers to
ONLY 52% of Dealers are satisfied with the wholesale process recon work in 7-10 days VS complete recon work in less
than 4 days
GAME CHANGERS: PRICING GAME CHANGERS: MERCHANDISING
TRADITIONAL RETAIL PRICING DYNAMIC MARKET-BASED PRICING TRADITIONAL MERCHANDISING DYNAMIC MERCHANDISING
STRATEGY STRATEGY
Retail price is calculated based on: Retail price reflects each vehicles real time market • Upload to individual properties • Distribution to website and third-party sites in
conditions: real-time
• The dealers’ acquisition price • Photos taken at dealership several days after
• Vehicle’s age arriving • Photos taken at the time and place of detailing
• Retail price plus mark-up to cost
• Current market demand • Invest majority of time and budget on TV, • Majority invested in digital assets
• Sales staff generates the same gross profit
regardless of cost • Your own desired front-end profit Newspaper & Radio • Transparent pricing
• Focus on leads/getting the consumer in the store • Seamlessly personalised purchase experience
from online to in-store
Average Dealers get their Top 20% of Dealers get their
98% Top 60 Dealers Price to Market inventory merchandised and VS inventory merchandised and
online in 12.5 days online in 4 daysNADA 2018 REVIEW
APRIL 2018 // PAGE 12
THE DEALERSHIP OF TOMORROW – AN UPDATE ON A 2016 STUDY
GLEN MERCER
The “Dealership of Tomorrow” was a project designed to stimulate SPECIFIC UPDATE ON PREDICTIONS MADE IN 2016
long term planning (10 years) written only for dealers to give them • The Sales Annually Adjusted Rate would remain at 17m to 2025
a perspective of “what does it mean for dealers” and Glen started – this is holding true, although against all predictions millennials
by admitting that if his views contained any bias then it was that he were the largest market segment
tried to avoid the common trait of “exaggerating change”.
• Physical dealerships still exist even if much activity is on line
FINDINGS • The dealer ownership model continues and OEM’s have not tried
• There would be no significant disruption to the current underlying to change this (one quote was that they already control 95% of
business model what the dealers do!)
• There would be evolution not revolution • The slow consolidation of dealerships from 18,000 to 16,500
• The biggest risk was that the developing technologies of Mobility is happening
Services and Autonomous Vehicles would combine to challenge • On a similar vein the number of owners will reduce from 8,000 to
the need to own a car 6,500, although it was reported that Warren Buffet was investing
• Dealers would continue to evolve from entrepreneurial unique which was seen as an encouraging sign
dealers to factory controlled standard dealers. • Profitability will be lower but balance sheet ratios such as
Return On Equity will increase as working capital levels become
more efficient
• There will be a shift from margin to volume and OEM bonuses are
becoming an increasing percentage of dealership profits (almost
a department in their own right)
• We will not see entirely new business models emerging such as
mobility services ie UBER
• With an increasing digital market the OEM will gain even more
control and cybersecurity will be a significant risk.NADA 2018 REVIEW
APRIL 2018 // PAGE 13
THE DEALERSHIP BUSINESS MODEL OF TOMORROW
ERIN AND RYAN KERRIGAN | KERRIGAN ADVISORS
Erin started the workshop by stating that whilst there is a lot of fear RYAN THEN NOTED OPERATIONAL STRATEGIES THAT DEALERS CAN NOW IMPLEMENT:
and negative press the existing business model is not going away,
she is seeing more of an evolutionary process. There are changes on
the horizon mainly through new types of drivetrain. It is estimated
that electric vehicles will account for 25% of the market by 2030. EVALUATE YOUR HUMAN CAPITAL INCREASE BUSINESS EFFICIENCY
Erin stated that car ownership will change with the development • Evaluate your HR, 84% of females help buy the car but • Simplify the product access and the transaction. Make it
of self‑driving cars. It is interesting to note that currently half not many work in the business convenient for the customer
of people doubt the safety of self-driving cars however this is a • Look at medium tenure graph why is staff turnover so • Sites need to be time efficient. Pick up, drop off, after
26% improvement on the previous year review so consumers are high and getting worse 5.30pm, and servicing overnight
gaining more confidence. To date over $80bn has been spent on
autonomous vehicles so they will be coming. • Most gross profit comes from after sales, however • Move from a model of Gross profit per transaction to
dealers pay the sales team most. Are you interested in Gross profit per customer.
Self-driving cars could change car ownership, 90% of time cars the after sales staff? Where are you placing the best
do not move so why does the consumer need to own a car? As • Increase business efficiency – an examination of costs
talent and spending your time?
electric cars are becoming more viable this might result in more needs to happen, the increase in employees matches
of a subscription ownership model for cars. She stated that electric your increases in sales, therefore groups are not
autonomous vehicles are the big game changer. becoming more efficient.
Large dealers are already offering subscription models so using it as
a service model is not so far-fetched. Following on from this, buyers
will become more payment driven.
Online stores will become more prevalent and Erin noted the
significant number of dealerships that closed in 2017. These online
sales are driving consolidation and consumers are becoming ever
more convenience focussed.NADA 2018 REVIEW
APRIL 2018 // PAGE 14
THE DEALERSHIP BUSINESS MODEL OF TOMORROW (CONT’D)
ERIN AND RYAN KERRIGAN | KERRIGAN ADVISORS
RETHINK THE SALES PROCESS ASSESSMENT OF GOODWILL MULTIPLES
• Focus on customer experience – dealers have fallen behind other 8.75x
retailers, the need for retail experience has increased as a car
becomes more of an expression rather than a need 6.75x
• 72% of consumers feel that an improved buying process would
motivate them to visit dealerships more often 6.00x
4.00x
• Leverage technology – Update pricing weekly, monitor what is
sold, ie make model, colour etc 3.00x
3.00x 3.00x
• Review advertising as nearly half of all advertising is in a 2.00x
declining medium
Average Collision Average Used Car Average Blue Sky Average Blue Sky
• Structure your CRM around your business model (ie not just Centre Goodwill Platform Goodwill Multiple Non-Luxury Multiple Top Luxury
Multiple Multiple
around new cars) – you should reconfigure it around your 3.00x 4.00x 6.75x 8.75x
HIGH
highest grossing customers rather than new cars especially as AVERAGE 2.50x 3.50x 4.88x 7.38x
manufacturers get closer to the customers. LOW 2.00x 3.00x 3.00x 6.00x
Erin then concluded the presentation by noting how you can
create value for the expected future value of the business.
• Dealers need to increase economies of scale – to achieve
what you want you need to be bigger. The US is expecting a
25% drop in the number of dealership owners over next five
years
• You need to grow intelligently – be concentrated as it creates
brand equity, which then leads to value
• Invest wisely and carefully in real estate. Real estate is the
most important asset you own
• You need to focus on high customer retention and ROI – fixed
after sales are so important as is social media. This can affect
your goodwill value
• Have professional accounting processes
• Capitalise on new business opportunities.1300 138 991 Distinctively different – it’s how we see you
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