With the automotive retail industry, a full decade from the depression of 2008-2009, and with vehicle sales relatively flat over the past few years, a series of industry trends are emerging that will drive the local franchised dealer and their state dealer associations closer together.
State dealer associations, along with local metro associations and NADA, play a vital role in protecting, promoting and educating the Nation’s franchised car and truck dealers. From annual family conventions to insurance program, from the local DMV to lobbying the Statehouse, the state and local dealer association has a very hands-on approach to pro-actively identifying and solving dealer issues and concerns.
Additionally, while the history of state dealer associations can span greater than a century, the emerging issues that dealers face today, and the interconnected trends faced by dealer associations, may be unprecedented. The following are five industry trends that will likely compel dealers to reach out and engage their state or metro dealer association.
Dealership Consolidation
With more than 10,000 baby boomers retiring daily, and the leading edge of the baby boomers now approaching their mid-70s, a generational transition is fast approaching for many of America’s small to mid-sized franchised dealers. Nationwide, dealers are debating the merits of selling their dealership to a larger, consolidated chain of stores versus passing the store down to younger family members.
This dilemma, compounded with a marketplace that is experiencing profit margin compressions, and increased demands by the OEMs, may lead local independent dealers to look favorably on dealership consolidation.
Dealer consolidation, however, often leads to challenges for the local or state dealer association. Whereas in the past, the local, community-based franchised dealers were generally most active in the State association, the larger, multi-franchise, multi-state dealer groups, are generally not actively engaged in the policy-setting roles of the association.
As such, with fewer dealers to direct and oversee the policies and programs of the state association, it will be progressively more important that the remaining local dealer, as well as the larger stores, take a more active role in crafting the policies, programs, and legislative initiatives of their state dealer association.
Increased Regulations
Regardless of the political landscape of the dealers’ state, countless regulations are passed at the Federal, state, and local level that impact the day-to-day operations of dealerships. The local dealer association, as a core tenet to protect their members, has an incumbent responsibility to work in partnership with their membership to address these regulations and if needed, educate the dealers on their operational impact. As additional rules are promulgated, it will be essential that dealers and the dealer association work together to address the ever-changing regulatory landscape.
Emerging distribution channels
For the past 20 years, there has been a constant dialog between OEMs and their dealers about a better, more effective way to sell today’s vehicles. From the Ford-owned retail network in Indianapolis in 1999, to the Volvo’s subscription sales program today, the three-tiered distribution channel has been tweaked, challenged, and reshaped over the past few decades.
Today’s challenges to the distribution channels are slightly unique in that a confluence of four evolving factors may ultimately restructure the way that consumers purchase vehicles and/or “transportation services.” The factors that will have the greatest impact on the distribution channel, and thus provide the state dealer association with an opportunity to proactively educate dealers, are:
1) the increased use of digital technology in purchasing “mobility services” 2) The advent and maturation of Chinese-made vehicles in the US marketplace
3) Subscription services or “vehicle” sharing by consumers and
4) Internet-connected vehicles allowing immediate access to the dealership or the OEM
Each of these trends has the ability to significantly impact the current retail marketplace while, at the same time, provide incredible opportunities to the local state dealer association to be on the cutting-edge of working with dealers to better understand these marketplace dynamics.
Increased consumer scrutiny
Consumer groups are becoming increasingly more assertive in their efforts to oversee and impact several aspects of the vehicle sales transactions. From dealer fees to vehicle service contracts, and from consumer disclosures to overall vehicle financing, multiple aspects of the sales transaction are facing greater scrutiny both locally in the states as well as in the nation’s capital.
Local and state dealer associations are generally well structured to work with the local dealers, as well as the local regulators and or legislators, to proactively plan for and educate dealers on the best practices related to consumer sales transactions. As greater scrutiny increases, local dealers will engage their state dealer association for advice and guidance to mitigate dealership risk.
Data ownership, management and manipulation
One of the growing issues in the automotive industry involves the collection, ownership and ability to manipulate a dealership’s consumer data. With a possible duopoly in place by the two leading DMS providers, the ability of a dealer to freely, or at a very low cost, manipulate their data is being challenged.
Local dealer associations have the ability to seek remedies, via legislation or litigation, to allow dealers access to their own customer data. Additionally, dealers working collectively through their state dealer association can seek to work proactively with the DMS providers on a solution that benefits the dealers.
In summary, dealers are facing unprecedented and significant emerging trends that could materially affect their profitability as well as significantly reshape the franchised car and truck marketplace. The impact of these trends, combined with today’s economic uncertainty, presents both a challenge and an opportunity for today’s dealers.
By being actively engaged with the state and local dealer association, via any of the programs and projects offered by the association, the local dealers will be better suited to make an informed, timely managerial decision to proactively address the emerging trends. It is critically important, at this time, that franchised dealers, both large and small, reach out to their state and local association to make a difference in the future of their dealership as well as the future of the entire industry.
