NADA Day 1: A Hunger To Build, Improve Business

January 26, 2019

Maybe it’s just me, but it seems like dealers at this year’s National Automobile Dealers Association (NADA) convention in San Francisco are especially hungry for ways to build and, in some cases, preserve and protect their businesses.

I’m told many of the workshops were full, and dealers got turned away for lack of seats. Part of the reason owed to fewer workshop options on the schedule. But I’d submit the packed rooms, and the number of dealers who arrived early to get seats, suggests keen interest in better ways to retail vehicles and make more money.

I had the privilege of being a Distinguished Speaker this year, along with Alan Haig, president of Haig Partners. We addressed how the rise of the future of retail automotive may change as autonomous vehicles and ride-sharing arrive in earnest, and how dealers can prepare today to thrive in what will undoubtedly be a changed car business.

Our presentation touched on topics that came up again and again as I talked with dealers about their goals for attending NADA this year:

Margin compression: Early this morning, I had a conversation with a dealer who asked for an in-store visit to help his team address a big problem: Last year, the dealership set sales volume records in new and used vehicles. But, despite all the effort and cars put over the curb, they lost money. Unfortunately, the dealer’s experience reflects a market in which simply selling more cars won’t make up for ever-smaller margins.

I’ve been telling dealers you have to sell them more efficiently and smarter, which means making hard decisions about a vehicle’s retail fate much faster to mitigate margin compression. I think the strong interest we saw in the vAuto booth for Provision ProfitTime and our new vehicle solution, Conquest, suggest some dealers are taking this opportunity to heart.

Retaining employees: A growing number of dealers recognize that if they can’t consistently field a passionate, productive team in their stores every day, they won’t achieve the level of operational efficiency and excellence that today’s vehicle buyers and service customers expect. It’s also clear that a day of reckoning may be on the horizon for some dealers as they look to take their businesses to the next level, and realize the long-time, loyal employees they currently field may not be fully up to the task. A dealer shared that he attended a hiring/retention workshop with Hireology’s Adam Robinson and came away thinking, “We not only can do a better job finding and keeping people, we have to.”

Inventory efficiency: Dealers are making the connection that, in both new and used vehicles, the share of their inventories that amount to “dead stock” owes in part to the nature of the vehicles they chose to retail in the first place. In used vehicles, this recognition is leading more dealers to examine the inefficiencies in their appraisal and trade-in processes to minimize the number of vehicles they need to purchase from auctions. I liked how one dealer summed up the problem at his store: “We’ll step up more to buy auction vehicles than we will with customers. We’re missing too many good cars.”

Technology efficiency: In his presentation, Alan Haig shared that, for many dealers, “technology is not treated as an ally to help profitability and efficiency.” Put another way, he’s suggesting that dealers often view technology as an expense, rather than a tool that can elevate performance. The mindset has troubling consequences that amount to sometimes significant investments in solutions that aren’t used to their fullest potential and, in some cases, get dumped as dealers look for ways to reduce expenses. Haig suggested that these dealers change their thinking and regard technology as a “frenemy” that can help them achieve their profit and sales objectives.

Merchandising/sales efficiency: For the past couple years, there’s been talk about how dealers can use new technology and tools to market specific vehicles to specific customers who, through data science, are actually interested in purchasing the vehicle, and provide an online experience that minimizes the vehicle purchase pain points that continue to confound customers. This year, it seems like dealers are more keenly interested in transforming how they market, merchandise and sell vehicles to meet customer expectations—a positive sign, I think, that digitally driven retailing has arrived, and it’s ready to make a difference for dealers who embrace.

I am looking forward to what tomorrow’s NADA experience will bring. I’ll share my thoughts here.