2023 will require dealer principals and their teams to fire on all cylinders to successfully weather the numerous challenges on the horizon. Economic uncertainty, evolving dealership sales models, fluctuating profitability targets, persistent staffing challenges, and continued growth in electric vehicles (EVs) are just a few of the issues which will impact retail automotive dealers.
There is plenty room for optimism for those dealers who put strategic plans in place, implement focused training protocols, bolster pricing models and fixed operations, and keep an eye on compliance. Let’s break down some of the opportunities for dealers to succeed in 2023.
EVs, sales models and customer connections
Growth in EVs and the hybrid instore and online sales model has highlighted the issue of strengthening and maintaining customer connections at the dealership. As more EV manufacturers sell direct to consumers, and consumers become increasingly comfortable buying a vehicle online, dealerships face challenges communicating with customers before, during and after the sale. Dealers who invest in implementing targeted sales processes and training will exit 2023 with more profitable businesses, greater employee retention, and stronger customer relationships.
The ’order-taker’ sales model of 2022 will likely change in 2023 as sales decline due to waning consumer confidence and economic uncertainty. Whereas many dealers netted sizable net pre-tax profits without added F&I revenue in 2022, the story will be different for 2023. As vehicle prices stabilize and competition resumes, dealers will struggle to generate sufficient revenue on the front end of the sale. Sales staff will need to re-learn how to be salespeople and how to provide quality customer service. The sales cylinder will need to be fully functional for a successful 2023.
Focus on fixed ops
According to AAA, the average vehicle owner spends 9.68 cents per mile, or $1,452 over the course of a 15,000-mile year on maintenance and repairs for a new vehicle. As consumers seek to get more value from their vehicle during economically uncertain times, dealers have the opportunity to boost service drive revenue. Rather than relying on service drive revenue to simply cover overhead expenses, dealers will need that service to also contribute to the bottom line. Management should conduct a complete audit of the current fixed ops processes to identify areas of opportunity and capture critical revenue opportunities. Refocus the service department by implementing best practices from inspection to delivery, backed up by ongoing training focusing on customer service when conducting every-day tasks like setting up an appointment or providing estimates. A highly functioning fixed ops cylinder will be critical in a down-sales year.
Compliance conundrum continues
Churning in the background of 2022, the Federal Trade Commission’s (FTC) efforts to update the Safeguards Rule generated vocal opposition from the retail automotive industry. Originally slated to go into effect on December 9, 2022, the FTC pushed back the deadline to June 9, 2023, citing a lack of qualified personnel and equipment needed to implement the required information security systems. Regardless of when the amended Rule goes into effect, dealerships will need to implement a robust system to protect consumer data. Additionally, we are still waiting to see how the proposed Motor Vehicle Dealers Trade Regulation Rule will pan out.
Placing profitability bets
The swirl of economic uncertainty, vehicle inventory and floorplan fluctuations, the sales process evolution, rising costs of compliance, and fine-tuning the fixed operations service model, has many dealer principals working overtime. The smart bet for 2023 is to focus on a holistic approach to implementing customer service best practices. Dealers who continue to rely solely on front-end unit prices to make monthly revenue projections will miss out on opportunities to generate solid gains through the combination of F&I product sales and the service revenue those products bring in. Every budget line-item matters in 2023. Work with your strategic partner EFG to ensure those line items are firing on all cylinders.