Car dealerships that have embraced technology and online sales during COVID-19 are excelling, with many seeing record sales.
With over 27 years in the auto industry, Larry Hourcle, the academy instructor for National Automobile Dealers Association (NADA), said the way of doing business before COVID-19 is completely changing. He’s seeing the dealers with the best sales using digital tools and digital retailing. He’s also hearing customers are loving the new online, flexible model, instead of spending hours at the dealership.
“The best dealers are getting more sales because people are on their computers all day and looking at cars,” Hourcle said June 12 during a Digital Air Strike-hosted Facebook Live. “Those that are doing it and doing it well are outstanding on what they’re retaining in gross sales. That’s been a really good thing. It’s a changing time. Dealers need to be more on the customer-focused side. That four to six hour time frame at the dealership has got to go away. Now it should be as easy as just collecting keys at the dealer.”
Digital Air Strike launched its new Virtual Retailing in March to allow auto dealers and other businesses a way to interact and transact with customers online through video, AI, social media, SMS messages and automation.
While tech-centric dealers are seeing record sales, they are dealing with tight inventories as manufacturers struggle with factories that are not up to full speed because of coronavirus concerns.
“Now that rates are good, customers want the car they want,” Hourcle said. “I think more people are going to want sub $10,000 cars because people don’t want to use public transportation. Maybe they’ll buy a cheap car instead.”
In April, vehicle sales fell to the lowest rate since the federal government began tracking these sales. One aspect that took a big chunk out of sales was the decreasing rental fleet sales, said Patrick Manzi, NADA’s chief economist, during the recent Facebook Live.
“We saw the first signs of recovery in May,” Manzi said. “We saw Hertz declare bankruptcy. For the rest of the year, we expect to see fleet sales way down. We’re expecting retail demand will recover, but we’ll still have fleet issues.”
With the lower supply, manufacturers are going to play catch-up. Consumers might be able to get the model they want, but not the specific color or trim they want, he said.
The coronavirus recession is different than the Great Recession in 2008 because the dealer lots were full of inventory. The Cash for Clunkers program helped clear inventory. This time around, the plants and the dealerships had to shut down, and now the lots are not full of cars, Manzi said.
“(Dealers) are not overloaded with inventory and they came up early with loans and deals,” he said. “This resonated with a lot of consumers, especially with pickup truck sales, which have outsold the entire car segment. I think the quick action on manufacturers really did help move a lot of metal on the lot. This time it’s a supply issue.”
Once consumer confidence comes back, and people realize they will have a job in six months to pay for a new car, the recovery will take hold and accelerate, Manzi said.
“I think the recovery will not be as long as the Great Recession. I think it will take a couple years versus three to four years,” he said. “It will be quicker this time around.”
Dealers have a lot to think about as they work to engage consumers in new ways. They should get the popular cars people want to buy and have a variety of vehicles in all the price points. That will be the key to moving forward, Manzi said.
Many dealers have to consider staffing as they laid off or furloughed many employees during the pandemic. However, as dealers use more technology, they may not need to hire back as many employees, Hourcle said.
Another issue is making sure customers feel safe at the dealership. Dealers are being creative, which is a “really good thing,” he said.
“We learn from our mistakes. Basically, dealers need to look at their expenses and staffing. Being better equipped to deal with customers is making it an easier experience, from pickup to delivery,” Hourcle said. “We will recover from this. We’re trying to do more for the customer. If we keep that mindset going, things will come out better. Don’t be afraid to try something new. Everything is different now. Things that didn’t work before might just work now.”