ACV facts & figures
Traditionally, dealerships have been perceived as reticent to fully embrace digitized operations. To some degree, this is valid, as digital technology has not fully replaced most of the car buying and sourcing experience for dealerships. However, times are changing rapidly. Post-pandemic, customers are more likely to spend less and less time on the lot making car-buying decisions. The competition for sales between dealers, and between used cars and new cars, is going to intensify in the coming months. That competition is going to compress margins, necessitating a need for more efficient inventory management operations to preserve them. Digitization is going to be critical to success, both during this unusual pandemic era and in the times following it.
Why Go Digital?
In 2017, Bain & Company prognosticated that the role of car dealerships would fundamentally change, and it has a lot to do with the way Americans are purchasing goods online. Hugely successful online retailers have figured out through countless hours of research what works. Expectations set by behemoths like Amazon and others have created a digital vortex. Younger generations take to it natively, and their parents and grandparents are finding it easy in many ways too. It stands to reason that car buying will be expected to follow suit.
However, instead of dealers taking the lead, third-party companies have embraced digital-first car shopping. Third-party digital channels for research like Autotrader and Cars.com are enabling pricing transparency and giving consumers all of the information, they need to compare and contrast favored car picks. Carvana, Shift, and Vroom are growing in popularity, allowing consumers to buy cars directly, and thus deepening the digital divide. These trends are limiting your ability to influence your customers on the front end and to maximize revenue.
At the same time, dealership profit margins aren’t getting any better – while there are some indicators of YoY margin stabilization, margins have declined from 6.5 percent to 5.9 percent in five years. With that much pressure on bottom line, just selling more cars isn’t going to cut it – dealers need efficiencies of time and resources to see more of their hard work end up in their wallet for the foreseeable future. Employees need to do more with their time to contribute to the bottom line. Inventory needs to be acquired with greater efficiency to ensure it sells quickly at the right margin. That efficiency comes with data – by digitizing operations, you can analyze and tweaks your dealership operations to be more efficient and profitable.
Despite all these benefits, a recent study from Ernst & Young uncovered that only 20% of dealers plan to invest in their digital presence through 2020. Are you part of the 20% moving forward or the 80% standing still?
Future digital success starts here
If you have your eye to the future, your digital efforts will create a way forward that will keep you one step ahead. At each step of the process, your customer wants a digital trail to follow. If you establish the path and make it easy to see the road signs ahead, you’ll lead them right to your door and the sale will be all but closed by the time they arrive.
- Streamline the customer experience: As you read this, manufacturers around the world are adapting as quickly as they can to serve up information on a digital platter for easy consumption by the media and dealerships. The trickle-down effect to consumers is the digitalization of the purchasing process makes sense. As a result, your digital customer experience needs to meet and exceed that expectation:
- Consumers are expecting an experience personalized to them – they want to be able to find and receive information about available inventory, the value of their trade in and the options for financing that are specific to their budget, location and desired outcome
- Consumers want to trust that the information they receive online carries over to the on-site dealership experience. Information on financing, trade-in value and accessories should be the same as what they are promised online. This will become even more critical as consumers look to minimize exposure in a physical retail environment while still preferring to close the sale in person.
- Consumers should be able to replicate some of the on-site experience, so they are more confident in what they want when they show up to close the sale. Items like virtual test drive technology and video walk arounds
- Shore up your digital sales and marketing tools: Paper is passé; customers carry everything they need in their pockets on a little screen. In fact, research by cars.com shows that 63% of car shoppers use a mobile device even while physically shopping your lot. In the spirit of making your customer experience better than ever, ensuring your backend operations are streamlined is just as important. Give your sales team digital tools and devices and help them become part of the process instead of a side distraction. For example, arm your team with tablet-based apps that gives them instant access to used vehicle valuation algorithms. They should also have the inventory at their fingertips if a customer wants this particular make and model with a specific color and add-on package. As a result, they won’t waste the customer’s time – or yours - to find out if it’s in stock and if not, where you can procure one.
The connection from online to in-person purchasing starts with a first digital impression; that means ensuring your first point of client interaction, your site, is mobile-friendly and accessible. Is your site fast? Is it optimized for every channel where your customers find you? If it’s not, don’t wait another day to address those roadblocks.
Some of the channels you’ll want to address include:
- Information: digital brochures, videos both on your site and on a YouTube channel, and product specifications via downloads, texts, and chatbots
- Engagement: online interactive tools, videos, and virtual reality experiences to help the customer envision a vehicle and validate their decisions
- E-options: virtual documentation and e-signature
- Speed up the finance and insurance process: For as long as anyone can remember, buyers are not excited about length of time it takes to get through the finance and insurance process. Digital tools can give you the edge in your customers’ eyes by shortening the time it takes to seal the deal. Today’s buyers want to know before they visit your dealership what their payments will look like as well as their finance and insurance options. Show them that you respect their time and prior research, and you can provide a valuable service: clear, easy-to-understand calculations they can compare to their homework right there in the hands of your salespeople.
- Saddle up your digital inventory management: Assuming you’re using some type of inventory management software, you should be able to see at a glance what your inventory looks like, the vehicles that have been standing on your lot for too long, and where you have a surplus or gap. Information is power, and power, in this case, means more sales at higher prices because of less inventory depreciation In conjunction with your inventory management strategy, you have the opportunity to both acquire and divest your inventory from the comfort of your desk through online auctions like ACV Auctions, online automotive marketplace that allows you to access an extensive inventory for your business and bid on vehicles in real time.
Getting your dealership ready for the post-COVID-19 uptick now is a smart move. Meet your customers where they are now, and they’ll find you more easily next time.