Never underestimate the ingenuity of the American car dealership. Suddenly faced with the unprecedented challenge of having to reinvent the way they do business, American auto retailers faced the giant obstacles of a global pandemic and forced business shutdowns in the eyes and managed to keep their heads out. some water. And, as is often the case, they came out the other side with learnings that can only help them thrive as business returns to normal. As the old saying goes, “What doesn’t kill you makes you stronger”, and the first half of 2020 might be the most graphic representation many of us have ever seen.
One of the key takeaways from the last three months is that the ability to sell vehicles online, from request to delivery, is rapidly changing from a “nice to have” to a requirement. Since many dealership showrooms were completely closed by government orders related to mitigating the spread of the virus, the only way for dealerships to sell vehicles was online. As a study commissioned by the National Auto Dealers Association and Roadster discovered, the rapid transition to online sales could have lasting benefits.
While 76% of dealers surveyed said they were able to engage their customers more online, it’s in the effectiveness of the sales floor where the numbers jump out. Of the dealerships surveyed, 61% said digital retailing has improved their efficiency and 24% have been able to increase the number of cars sold per person.
“The biggest takeaway in my mind is that if you can make your sales process more efficient, you can be leaner,” said Michelle Denogean, chief marketing officer at Roadster. “And it goes both ways. I’m not saying they should have fewer people. What I’m saying is that as demand increases, they [dealers] won’t need to add that many people yet. They should raise their expectations and really look at how they can be more productive using digital retail.”
The effects of the coronavirus pandemic have forced dealerships to explore how they can do more with less. Digital retailing has provided a very welcome solution for many, allowing them to continue selling cars that would otherwise have been dead in the water.
While the Roadster/NADA study noted that total sales volume fell sharply in the month of April, online transaction volume increased by 49%. The study says online car sales accounted for 27% of total cars sold in April, compared to just 5-10% in the months before the COVID-19 crisis.
But there’s more to this trend than the fact that more and more dealers have decided that now rather than later is the time to venture into selling vehicles online. The medico-economic crisis has also prompted many dealers to extensively review their operations with the idea of improving efficiency.
“It’s been a forced function for them to really think about their business models in terms of staffing and productivity and the impact from a profitability perspective,” Denogean told forbes.com.
The study strongly suggests that digital retailing can help dealerships be more profitable. The benefits of online sales can improve the efficiency of two key related metrics: vehicle sales per salesperson and vehicle sales per employee. According to NADA, in 2019 dealerships spent an average of $4.09 million in total staffing costs, but with online sales, it’s likely that figure could be reduced.
The COVID-19 crisis has become a living laboratory for this, as dealerships across the country have been forced to downsize. According to the Roadster/NADA study, dealerships that reduced staff and had online retail solutions sold an average of more than 18 cars per person during the month studied, a 38% increase over the previous month. average number of cars sold per person per month in 2019. At the same time, dealerships that reduced their workforce to less than 25% but did not have a digital distribution solution sold an average of 12 cars per person.
One of the main reasons selling online has worked so well is that the time saved per transaction allows dealers to sell more with less. The shorter the transaction time, the more transactions a dealership’s staff can make in the same amount of time. Selling online drastically reduces transaction times because the car buyer does a significant amount of work before closing the deal, often without assistance from dealership staff.
The Roadster/NADA study showed that dealers who closed their showrooms and relied significantly more on the Internet and their business development centers saved a lot of time per transaction. According to the report, 68% of customers said it took them less than two hours to complete their purchase in April, amid the COVID crisis, compared to 43% in February before showrooms closed.
By allowing customers to complete the majority of the transaction themselves, dealerships not only saved time per transaction, but their smaller staff was able to process multiple transactions simultaneously rather than sequentially. These gains won’t be realized immediately after adopting digital retail, Denogean said, because to get the greatest benefits, dealers need to have the right process in place. But better overall efficiency driven by digital retail is certainly possible.