NADA Wrap-Up: An Amazing Convention With 5 Key Take-Aways

January 28, 2014

I trust everyone was able to make it home safe and sound from the National Automobile Dealers Association (NADA) convention in New Orleans.

NewONadaExecAs I’m writing, we still have some members of the vAuto team there. The same weather system that welcomed me home yesterday evening to Chicago with sub-zero temperatures is making the Big Easy a challenge for traveling today.

But what a convention! It sure seemed like every one of the 22,000 attendees NADA expected made it to the event. The vAuto booth was a busy beehive with dealers, and I heard from other vendors happy with the attendance and attention they received from dealers.

I thought through all I heard and learned at NADA on the way home. Here are five take-aways that seem most relevant to share:

A focus on the future: A lot of dealers I talked to attended the “2025 Dealership Vision: What Lies Ahead?” workshop. The session offered a look at operational challenges and opportunities in the coming years. Dealers say the session affirmed things they’ve already been doing to proactively face the future—implementing e-commerce technology to facilitate faster transactions; emphasizing technology-enabled processes to lower costs through greater efficiencies; and grooming a new generation of leaders to bring a fresh perspective to tomorrow’s retailing challenges.

All in all, I thought the collective focus on the future was a good sign. As a tagline for the “2025 Dealership Vision” session suggested, “the future of the automobile dealership is not written in the past.”

A sharp take on pricing transparency: I had a good chat with dealer and former NADA chairman William Bradshaw and his son, Wes, about adopting more transparent new vehicle strategies that blend prices and incentives from the get-go. The younger Bradshaw made a sharp observation: “We’ll basically be selling Gen Y buyers the same way we sell A-plan customers for General Motors.” He’s right. The next era of new vehicle pricing means fewer surprises for the customer, and a faster process from start to finish on every deal.

Incentive volatility: I heard a mix of relief and worry as dealers emerged from their franchise meetings. The relief came from dealers whose factory partners are refining stair-step incentive programs, which dealers rightly say “challenge the P&L at some dealerships.” The worries flowed largely from concerns that factories may resort to more consumer-focused incentives to offset a rise in new vehicle inventories on dealer’s lots. The good news is this year’s NADA event brought more technology for dealers to manage changing incentive programs more efficiently and thoroughly to maintain front-end margins.

F&I income fears: NADA says it will continue to go to bat for dealers to resist the regulation of F&I practices and product offerings. Still, there’s a strong sense among dealers that we are quickly transitioning to a new era where flat rates on financing deals, and caps on product margins will become the norm. As one dealer put it, “We’ll be lucky if we can maintain the level of income and profitability we currently achieve in F&I in the years ahead.”

Increasing consolidation: I spoke with dealership buy/sell experts who offered two insights: First, we’ll see a lot more activity in the coming year as positive Blue Sky multiples move some dealers to exit the business and take advantage of a “seller’s market.” Second, buyers aren’t just dealers who want to grow through acquisitions; there’s a greater level of private equity interest in automotive retail. These dynamics square with my belief that a faster pace of consolidation is inevitable, and economies of scale and efficiencies will give larger dealer groups a competitive advantage. In turn, smaller dealers will need to become more agile and boutique-like to compete effectively against larger, more well-heeled competitors.

Those were my top NADA take-aways. What were yours?