The auto industry is changing fast, and smart dealership groups are finding innovative ways to adapt, both on the retail front end and in the back office.
Finance leaders from dealership groups and software providers to the industry shared their future-proofing strategies over the course of a day at AutoNsights16, held last month at the Harvest Inn in St. Helena.
Changing what cars are about
Autonomous vehicles, ride sharing services and big data are changing the very notion of what cars are about, noted Greg Goodwin, CEO of Kuni Automotive. He envisioned a world where transportation is mostly delivered as a service. Instead of owning a vehicle, drivers can get access to a variety of vehicles for different needs, for example a luxury car for the weekend or a four-wheel drive sport vehicle for a road trip.
Cars and trucks will become part of the Internet of Things, nodes on a network, transmitting data to insurers and traffic routing apps among others. Efficient autonomous vehicles will relieve the strained capacity of highway systems, and traffic tickets will be a thing of the past.
“I’m wondering if my kids will ever learn to drive a car,” commented one attendee who identified himself as the father of toddlers.
In this new landscape, sales of cars are expected to spike initially as new operators build out their fleets, and then decline dramatically. However, utilization will go up, which could mean increasing demand for service and repairs.
Disruption upon disruption
All this comes as dealerships are in the midst of adapting to the impact the Internet has already had on the way cars are sold. Previously, customers visited a dealership an average of five times before making a purchase, according to data shared by Justin Sprague Division Vice President, Product Marketing, North America at CDK Global. Now they come to the store armed with information and ready to buy on the first visit.
That’s meant lower profits, and it’s also meant that dealerships need to focus not just on selling a car, but selling an experience to an increasingly disloyal customer. According other research shared by Sprague, only 12% of iGeneration born in late ‘90s early 2000s are brand loyal when it comes to cars.
These consumers value a paycheck less than work life balance, and experiences over things. They expect high levels of engagement from companies they do business with, and that engagement needs to span physical and digital channels.
“There’s a future in the auto business, but only for those who are realistic about the changes,” said Goodwin.
Small dealers will likely struggle as these changes unfold. Bigger dealership groups that can achieve economies of scale will fare better, but they will have to centralize accounting and make smart technology investments to root out inefficiencies.
Automation and tough love
To that end, Patsy Price, director of operations at Peterson Auto Group, a five store-chain in the Boise area, detailed how she consolidated accounts payable, taking the company from driving “coffee stained invoices from store to store” to an automated end-to-end process. She drew multiple rounds of applause for her distinctive blend of automation and tough love.
“I’m giving you 45 days to get rid of that filing cabinet,” she says she told her team. “No scanning, no paper invoice files.”
Executives initially balked at approving invoices online instead of on paper, seeing it as doing AP’s work for them. Price told them, “If you want to touch something, touch the screen.” Once they experienced the visibility and control of the online approval process, she no longer had to argue the point.
With AP automated from invoice ingestion through payment, now she says, “We manage our business instead of it managing us. If it takes you longer than five minutes to do a task, you have to have a conversation with me.”
If increasing operational efficiency is one strategy for thriving in this new world, increasing community engagement is another. In the opening keynote from Kuni Automotive CFO Laura Carlisle, she shared the company’s journey creating a culture of community engagement and giving through a long-standing partnership with the local chapter of Big Brothers Big Sisters. The organization currently brings a school bus full of kids to the Kuni Garage to meet with their Kuni mentors weekly.
The benefits of community involvement cut both ways she said. It’s an opportunity to increase employee engagement, leadership skills and also retention. “By the way” she said, “It also sells cars.”
Policy’s closing fireside chat neatly bookended the community engagement theme. He regaled the audience with stories neatly from his time helping build the San Francisco 49ers dynasty of the 1980s. One of thing that made that that era legendary, he says, was the organization’s ability to develop a culture that goes through the whole organization but also becomes a viral offshoot that attracts others.
The next decade will bring sweeping changes to the auto industry, bringing both pain and new opportunities. Car dealerships will not go away, but they are likely to look a lot different. Finding new operating efficiencies and ways to tie themselves more closely to the communities they serve are two keys to reinventing the dealership for a vastly different future.