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In 2022, the auto market is looking to recover – albeit slowly – with new vehicle sales growing at rates comparable to 2021. While analysts expect the sector to catch up to pre-pandemic levels in 2023 and beyond, many automakers will still struggle to satisfy recovering demand in the current market.
Staying afloat requires identifying and addressing several auto dealership challenges plaguing the industry worldwide. This article discusses five such challenges every dealer should keep in mind while game-planning for the latter half of 2022.
5 Auto Dealership Challenges
While the auto industry is constantly evolving and dealers have many dynamics to consider, they might pay close attention to the following five developments.
1. Inventory Shortages Continue
The 2020 COVID-19 shutdown caused numerous supply chain disruptions, including material and labor shortages. Car microchip manufacturers struggled to meet demand the following year, causing delays in manufacturing and global vehicle shortages.
Further complicating the inventory shortage is the growth in personal car ownership. This increase is primarily due to pandemic-driven events, such as:
- Increased cash from stimulus checks
- Less ride sharing
- Infrequent public transit use
Depleted inventories make consumers more receptive to preorders. As a result, dealers are selling more unseen cars before arriving on the lot. Preorders result in many skipped steps in a traditional car-buying journey, such as:
- Price haggling
- Discount offers
New vehicle shortages also increase pre-owned sales. Many consumers find that immediately buying a used car is more practical than waiting weeks – if not months – for preorders to arrive.
With used cars becoming more popular, dealers now have more opportunities than ever to make more money per deal on both the front and back ends. However, this opportunity might only last for so long without an influx of new vehicles for which consumers can trade their current ones.
These disconnects will likely continue through the rest of 2022 as companies still struggle to ramp up production.
2. Demand for Online Services Grows
Due to the growth of decentralized marketplaces, dealerships must rethink their sales models as consumers opt to complete as much of the purchase process online as they can.
Accommodating these evolving demands for online services will require strategy adjustments to provide better digital experiences. These adjustments might include the following:
- Online-friendly showroom layouts
- Revamped websites
- Online test drive and service bookings
- Mobile apps
However, dealers must continue accommodating in-person buying experiences. While many consumers look to spend as little time in a showroom as possible, most still prefer buying their vehicles on-site.
As a result, dealers must implement sales tools that offer an online/offline composite, allowing customers to begin the shopping experience remotely, but visit the dealership to complete the transaction.
3. The EV Surge is Accelerating
More eco-friendly vehicle options, such as hybrids, plug-in hybrids, and electric vehicles (EVs), are altering the auto industry as more and more consumers consider climate change ramifications.
Conventional and new manufacturers are putting substantial effort into producing EVs to keep up with anticipated consumer expectations and legislation aiming for 50% electrification by 2030.
These trends will have far-reaching implications for dealers, affecting almost every element of their operations. There are many issues for dealers to consider concerning business plans and operating procedures.
Those considerations include:
- Additional training for maintenance employees to safely service high-voltage powertrain systems
- Training for front-line sales staff to answer consumer questions competently
- Finding alternative cash flow opportunities to replace the lost fixed op due to fewer EV service appointments
4. There is Increased Competition for Customer Attention
Vroom, Carmax, and Carvana, among others, provide low-cost methods with easy access to vehicles. As a result, dealerships are facing greater competition than ever before, and dealers must devise new strategies to stay competitive in the market or risk losing customers in a hurry.
Car purchasing and selling is already a competitive business, but current economic trends have exacerbated the situation. Analysts project retailers will continue seeing limited sales as financing rates and energy concerns rise, especially for newer automobiles.
These factors imply that dealers will have to compete with more competition for fewer customers.
5. Recruitment and Retention Challenges Persist
The success of any dealership depends on:
- Picking the right employees
- Staffing them appropriately
- Finding innovative ways to motivate them
In 2021, “The Great Resignation” was a red-hot issue, and the trend of people quitting their jobs – or at least planning to leave in the short term – continues hamstringing many businesses. There was a record 11.5 million job openings at the end of March, indicating that employees were going without the immediate intention of returning.
In addition, as baby boomer retirement rates rise, millennials are gaining traction in the job market. However, with a new generation comes new retention challenges, including:
- A tendency to stay at the same job for short periods
- A preference for online interactions over in-person ones
- An overall gap between what millennials want from their employer companies and what dealerships typically offer
For example, many millennials who may contemplate a career in the automotive industry might shy away from what they perceive to be outdated sales attitudes and strategies. They are unaccustomed to haggling and have little interest in making a traditional hard sell.
Dealerships that overly emphasize these sales tactics, especially without sufficient training and support, may struggle to recruit and retain staff during the second half of 2022 and beyond.
Stay Prepared for Change with the Right Technology
Amid a dynamic market, dealerships face ongoing problems but are working hard to overcome them. Long-term success requires adapting to shifting consumer preferences and expectations while establishing new sources for revenue streams.
It is critical to be proactive to stay relevant, whether it is due to increased competition or a lack of inventory owing to worldwide shortages. Dealerships should also place a greater emphasis on developing EV sales strategies and providing expanded online services.
While auto dealership challenges will always exist in the auto market, staying on top of trends and educating your employees for a fast-changing market can help secure your operation’s survival in a constantly changing environment.
However, fully accomplishing this requires the right technology to keep pace in an evolving digital landscape.
Contact us today and learn how Affinitiv’s innovative data-driven solutions can help you keep up in an ever-changing market, combat current auto dealership challenges, and drive more revenue.
All | August 11, 2022