In my more than 15 years in the auto industry, I’ve seen various ups and downs in the market as well as both wild optimism and doom and gloom. We’ve experienced record-breaking new-car sales the last few years, and as we dive deep into 2018, most dealers are optimistic that we’ll continue to enjoy strong sales, with only a small decline in overall volume.
Here are three trends to keep an eye on in 2018:
Tight used-car inventory
Following what’s now called the Great Recession in 2008, we saw a lot of belt tightening both from consumers and dealers. That was followed by “Cash For Clunkers” and also the trend of consumers hanging on to their vehicles for eight to 10 years before eventually selling or trading them in. Fast forward a decade later, and most of the consumers who decided to hold on to their used car longer than normal have finally given in, disposed of their vehicle, and upgraded. The result? Fewer in-market car shoppers ready to sell, trade and purchase. Which of course means less readily available inventory for dealers to stock their lots with.
Used-car acquisition is at the core of any strong dealership’s business model, and finding the “right” units to stock isn’t easy. Over the last several years, it’s been even tougher to find inventory through traditional channels (physical auctions, trade-ins, etc.)
The recent hurricanes have also had a significant impact, with Black Book estimating that up to 1 million vehicles (including commercial and fleet vehicles) along the Gulf Coast were salvaged. That development sucked the inventory out of many markets, as used vehicles were routed to the flooded areas where demand was high.
What we’ll continue to see in 2018 is increased competition for a limited inventory pool. That means dealers will need to roll up their sleeves and look for alternative sources of used vehicles. That might mean more online and non-traditional auctions, dealer-to-dealer transactions, and street purchases.
Consolidation will continue
Large dealer groups and mega chains will continue to grow and expand in 2018. That can either be a threat to or opportunity for smaller dealers, depending on how they position themselves.
Let’s face it. The mega chains have economies of scale that single-point or small multi-roof operations just don’t have. At the same time, though, large dealer groups are much like a battleship, turning slow and unable to react quickly in some instances.
Single-point and small dealer groups have the ability to pivot and change direction quickly.
They can try new strategies for vehicle acquisition, sales and marketing, and quickly gauge results and implement change. They can also harness the power of selling “local” and leverage relationships within their community.
The good news for smaller dealers is that they can operate just as efficiently as larger dealer groups. The mega chains have the resources to analyze data and optimize local inventory, but so do the small dealers who implement the right inventory-management tools.
The right time to research new tools and vendors isn’t when sales are down; it’s when things are going well. So if a downturn is coming, and it will at some point, be ready. Get your house in order now, and make sure your team is armed with the processes and tools it needs to be as efficient as possible for the lowest monthly cost to your store.
Is your dealership worried about self-driving cars, vehicle-subscription services, and ride sharing? How about Carvana grabbing market share, or Amazon getting into auto sales?
These developments are real, they have legs, and they will take some market share from local dealers. But there’s no need to panic. There is a long runway in front of us before some of these things take off. In some instances, the infrastructure, processes and regulations are potentially decades away.
I predict we will see small incremental changes in pockets around the country, but not to the extent that the auto industry will be completely revolutionized in 2018.
Rather than worry about things you can’t control, you should continue to focus on what you can control: your inventory, merchandising and customer experience. Leveraging good up-to-date data will help you select and sell the rights cars at the right price for your local market.
Also, nearly all dealers can benefit from creating an “Amazon-like” experience for shoppers. This means total transparency across all departments, a quick and simple way for consumers to transact online, a customer-first approach, zero-pressure sales departments, and top-notch customer service. Focus on speed and making it easy for your customers to do business.
Overall, I think 2018 has the potential to be a great year for dealers! Those positioned to see the most success will be the ones that re-evaluate their processes and operations regularly (as every good dealership that wants to evolve and grow should do).
Dealers, don’t be distracted by all the noise of pending disruption. Listen to it, take note, and be cautious. But remember, focus on what you can control, and position yourself accordingly in your local market. I wish all of you a Happy New Year and continued success in 2018.
Josh Dougherty is vice president of sales with DealersLink (www.dealerslink.com), an automotive systems integration and networking technology company based in Broomfield, Colo.