Help Build the Perfect Dealership

When reflecting on what it means to be a perfect dealership, every agent must assume their dealer clients are working towards a customer-focused approach to selling cars, parts, and service while providing a professional work environment with opportunities to grow.

However, there is a huge gap between what was just described, and what present-day car dealership owners actually do in their everyday services. 

It’s no secret that car dealership owners are in constant scuffles with their state attorneys general and consumer protection agencies. A Nissan dealership in New York is paying $298,000 for jamming F&I products; a New Jersey Hyundai dealership is paying $136,00 for the same offense; and the list goes on. Although some dealers might say this is the cost of doing business, pretty soon, they will have no means to pay for these fines as their clientele runs dry. Why? Because automotive dealerships continue to resist the automation and technological tools available today, thereby solidifying their future irrelevance.

If things do not change, the brick and mortar dealership model will be gone in less than 10 years. You will be unemployed.

As an agent, you can help your dealers turn things around by following the practical steps listed below. Now is the time to take action. Let’s discuss the top three threats to your dealer clients right now: 

1. The Current Stateof Affairs: Customer Dissatisfaction

Autotrader famously released findings that only 17 out of 4,000 people are content with the current car-buying process in America today. This dissatisfaction is not just within the sales department either; it carries over to F&I and service, too. In an age ruled by transparency, with everything detailed and supplied to consumers through Amazon and Uber customers expect the same kind of experience with automotive dealerships. Unfortunately, they are not being met with what they seek when they arrive at today’s dealerships.

2. Motivated Investors

Who are these motivated investors? They are Tesla, Carvana, Vroom, and Amazon, looking to do whatever it takes to disrupt the brick-and-mortar way of sales. Cars are being sold and delivered online all over the country, capturing a market segment that will now never even need to set foot on your property.

At the same time, something concerning is happening. Amazon is buying up every little marketing component in an attempt to rule over everything that is ecommerce — and it’s working. Amazon is planning to sell cars and will start doing so in Europe shortly. Right now in America, Amazon owns Whole Foods, and will certainly make its way to the car sales industry. One easy way would be for them to snatch up AutoNation, the No. 1 automotive retailer with 360 locations and a market cap of $4.3 billion. Amazon has no problem working with tiny margins to absorb what they want for a greater market share in the future.

3. Industry Consolidation

While Amazon is busy buying up the world, public and private auto groups and private equity firms are searching for dealerships in order to compete on size, scale, and efficiency. Larger groups get better deals from DMS providers and market vendors, not to mention savings that come from centralized accounting and reconditioning.

How can you and your dealer clients remain profitable against the ecommerce giants, industry consolidation, and customer dissatisfaction? We have some tips:

• Improve transparency. Customers want to know everything from start to finish. They don’t want to be lied to — and they don’t have to be! You can start by displaying F&I products online for their public vetting and reviewing. At this point, 99% of consumers do some online research before they buy a car. The Internet is freely accessible and doesn’t require them wasting time or spending on gas. You need to provide as much information as possible, making it instantly accessible for clients to schedule appointments. If you’re afraid of exposing your F&I products as a last remaining profit center, understand that Tesla, Amazon, and so forth have no problem doing it. You have to remain competitive and follow the new trend.
• Follow up with unsold F&I customers. After posting your F&I product information online with explainer videos, photos, and so forth, now you need to be aggressive about product sales and follow-up. To increase product penetration, much like retailers with leftover clothing items in their online shopping bins, you need to follow up about unsold items and why they are remaining unsold. Be sure to determine who is conducting the follow up. We recommend selecting F&I managers, as they come with the right training and knowledge.
• Standardize F&I pricing. There is never a right way to justify charging different prices for the same product. You need to set non-negotiable prices so clients understand that you aren’t trying to pull a fast one on them. Your dealership clients should be able to set predetermined allowable deviations to justify a reduction in price, like advance limited by lender, customer’s inability to satisfy monthly payment, discount for ancillary packages, or dealership incentive. Set some kind of standard.
• Improve the public perception of F&I. There is an overwhelming amount of negative information about F&I products online. We’re sure you’ve seen a video or two about it before. As an industry, we need to create positive content about F&I products to overrule the majority of negative, scam-based content today. That starts with public relations. It’s time for TPAs and general agents to hire PR firms and work to improve the overall perception. This investment will be helpful at every level of negotiation with clients today.
• Develop your human capital. It’s hard to find quality finance managers who are willing to work long hours in the dealership. You need to work with them. Human capital has become a huge investment today, with more companies enabling workers to make their own hours and work remotely if possible. Try and cut the schedule down so these individuals can still live normal lives.
• Additionally, do not cut pay plans. It’s such a common offense in the automotive industry and one that encourages significant turnover. If anything, the cost of employee turnover is worse than cutting pay plans.
• Compliance Training. Compliant and ethical behavior needs to be the foundation of a dealership’s culture. A combination of onsite audits and online training will really help you to curate and promote a fair and accepting company culture that is good for your employees, as well as your clients. Lastly, don’t keep your compliance programs a secret from dealership customers. Proudly display certificates and so forth in the F&I offices, increasing your prestige and reliability as a firm.

Making the Change

Now, it will be hard to make these big changes overnight. It’s going to take time, patience, and willingness from your team to make the change. It’s going to essentially be a total change in company culture, and everyone needs to be prepared for it.

There are tectonic shifts in automotive retail happening before our very eyes. General agents are in a pivotal position to influence dealers in order to avert catastrophe between dealers and consumer shopping preferences. Luckily, it’s not too late to make adjustments to the selling process while embracing digital retail today. It’s all about the customer experience, and that starts with a willingness to open up your processes and become truly transparent. Tesla and Amazon are real, living threats to your business. You have to fight the good fight to stay afloat — it’s part of being competitive. 

 

Max Zanan is the president of Total Dealer Compliance, providing onsite compliance audits and online compliance training for all departments of a car dealership. Leveraging 15 years of experience running dealerships and consulting car dealers, Zanan is also the author of “Perfect Dealership: Surviving the Digital Disruption.”