By Champ Rawls, Succession Advisor, The Rawls Group
The U.S. economy has been experiencing one of the strongest upward surges in years. The Bureau of Economic Analysis(1) reported that the real gross domestic product increased at an annual rate of 4.1% in the second quarter of 2018. And judging by the record upward trend of the stock market, we have been seeing strong growth in the U.S. across a diversity of sectors. Due to this, it is no surprise that automotive retail dealers are experiencing really good times. And to be fair, much of it is deserved after what the industry experienced a decade ago. However, those reading this know how hard this industry is and the demands it takes to be successful with shrinking margins, rising interest rates, irregular incentives, critical customers, and a stagnating sales environment. With that, dealers need to be looking forward, more than ever, for the potential potholes that can damage the economy and further impact the economical ‘good ride’ we’ve been on.
As we leap into another year, it is critical that we are ‘forward’ facing on the journey of growth and sustainability. Considering factors that may impact the automotive retail space means paying attention to not only the economy, but all those other things creating major changes and shifts in how we do business.
Recently published by Bernstein, the “U.S. Portfolio Strategy: How much trade-war damage is already priced,” reported that the industries exposed to trade risks include automobiles, auto components, and machinery. This should be a startling jolt for retail dealers nationwide. The trade tariff changes from earlier this year are increasing exported Chinese goods from 10% to 25%. And with increased costs, how are you going to plan for these costs to ultimately be passed onto you? Are you going to then pass it on to the customer? How will these increased costs impact your day-to-day, as well as your ability to sustain and grow? The Chinese goods is just one example.
Labor and talent are another potential ‘red light’ for dealers. We are seeing record low unemployment rates, shrinking the available labor pool and increasing the fight for talent stronger than it has been in decades. Furthermore, those that are available or willing to move are asking for financial packages that exceed the norm essentially because they can. In fact, finding talent right now is one of the biggest struggles we hear across the country. Hireology(2) reported in June 2018 that the unemployment rate fell to 3.8%. Not only is the unemployment rate low, few of those graduating from college are considering working in a dealership as a career option. Therefore, retail dealers have a perception issue to overcome in order to attract and retain key managers for the future. This is just one issue related to labor and talent. Others include motivating multi-generations in the work place, shifting thinking to more flexible work arrangements, and trusting in the younger generations coming up to lead.
Trade tariffs and talent are just two examples that are having an immediate potential negative impact on retail automotive dealerships. A recommendation as you are looking strategically at your future and for ways to protect against the unforeseen would be to consider these few questions:
- What makes your dealership unique and different and what is your mission?
Answering this question will provide insight into why your customers do business with you, and why your people choose to work for you. You will also find the answer may provide you with an opportunity to create a tangible ‘unique and different.’ Defining your missions will also provide a purpose to your employees and a clarity in business during impending erratic times.
- What are you doing to motivate your people?
Answering this question will give you the opportunity to identify IF you are in fact motivating your people, and if so, are you doing it effectively. A one-size-fits-all approach will no longer work with a diverse, multi-generational and intelligent workforce. You need to invest in being authentic with them and providing motivators that engage them and make them want to stay under your leadership with your dealership.
- What are you wanting from your dealership in the next three to five years?
Identifying what that looks like, takes a strategic thinking session that doesn’t stop with simply creating your vision. An identified action plan needs to detail what your next three to five years look like. No doubt, they are ripe with additional challenges and forces that will cause additional change. Answering this question will help you reevaluate your strategic, and maybe even your vision. Putting a plan in place will ensure at least one thing; you are proactively (rather than reactively being the victim) looking to engage the challenges ahead.
There is no crystal ball into what to expect in the future, or when things may occur that will have an impact on our economy and environment. However, we have two very telling “change factors” knocking on the door of the retail automotive world – and that knock keeps getting louder. Perhaps it is time to truly start looking forward, before you find yourself looking in the rear view, and asking how you got there.