Recently, I read an article in Automotive News about CarMax and how much more competitive the industry leaders in the pre-owned market are expecting the next six months to be. For those not as familiar with the business model of CarMax, they focus on knowing their market demands, turning their inventory quickly, and operating efficiently with back-end revenue. With a fluctuating Manheim Market Report (MMR) and potential excess product pending – both rental and off-lease inventory – consumers are cautiously shopping for a deal and are researching everything. The belief that dealers will lose pre-owned traffic for the foreseeable future, meaning we may have a massive reservoir of “water” to move, makes it imperative that dealers know their market and execute aggressively. The reality is this problem is not just about companies like CarMax – it’s about how you react and reestablish your business correctly and quickly.
At this point, you might be asking how this applies to you and your dealership. With the production shutdown, some manufacturers have not yet recovered from the strike, and markets that were stifled with COVID-19 are beginning to re-open. For some, new inventories are lean. Buyers are enticed with the latest creative incentives (some at all-time highs) looking for the best deal. Depending on your pre-owned inventory supply, you might not be able to meet the demand if your current inventories are weak. Keeping your pre-owned inventory fresh is another critical problem for everyone, no matter what your new inventory position is. To compete, you must have the correct mix for your market. You will not succeed with just the standard stock rental fleet products. No, you need your core products. Inventory that is in demand in your market (not just what your competition is listing). You must strategically strive to have the very best visibility, the most effective advertising, the right timing, and the commitment to providing exceptional customer service.
Three Steps to Improve Visibility
For the most part, customers are at home these days. They are not happy watching the news and forecasts on COVID-19 all the time. They are on their tablets, laptops, and phones, seeking distractions, entertainment, and shopping. Ask yourself, and your marketing team or agency, “how are you going to stand out to get their attention and their business (both now and in the future)?”
One approach that my dealer clients have found successful in 2020 has been participating in your communities. Food drives, equipment for first responders, and similar involvement efforts are going a long way. One example that one of my dealers offered was picking up personal vehicles for nurses, first responders, etc., and sanitizing them so that they could return home safely. Another generous dealer raffled off a vehicle and donated the proceeds to a local charity. Brainstorm with your staff and come up with ways to help and stay visible in your market.
The Right Timing:
As the economy starts to move, the auction lanes will re-open in some fashion. The Independents have already opened, and the online entrepreneurs are out inspecting lease returns digitally via live feeds. The flood of dumped and stale inventory will exceed demand, and prices will fall. This is an opportunity for each market with planning and caution. It is more critical than ever to get this area of your business right. Know your market, be intimate with your inventory, and turn it aggressively.
Additionally, manufacturers have begun marketing aggressively with cash incentives, leasing/re-leasing deferred payments, 0% financing for 84+ months, and more. You likely have heard that they “can’t lose market share,” so you will need to time your marketing efforts for maximum performance. Buyers are very interested in the 0% interest offers by most manufacturers, think about how you can capitalize on this attention.
Exceptional Customer Service:
Everyone knows that quality customer service helps you win over many of your customers, and providing a quality experience is something that will never change. It is important to remember though, that even after all markets open back up, customers will continue to be cautious. Once again, this is an opportunity for your dealership. Below, I have outlined a few questions to get you thinking about what exceptional customer service will look like post-pandemic.
- How can you make it easy and convenient for all your customers?
- Can you offer pick-up and delivery at home?
- F&I often takes the most time of any deal. How can you speed this up?
- Can you speed up your other processes, so customers don’t spend too long in the store?
- How can you help to make your customers feel safe?
- What continued social distancing measures are you keeping in place?
- How are you highlighting and implementing cleaning processes or dedicated cleaning staff?
While our industry has never seen a pandemic halt our economy like this before, we have survived and evolved through numerous down markets. Each time, we found resourceful solutions to our business challenges and discovered new opportunities that were not there before. Today, we face a new set of problems, and together, we can find new ways to serve our customers and drive revenue into our organizations.