“Nature abhors a vacuum.” There would be no reason for “disrupters” like TrueCar, Carvana, and Vroom to exist if dealers provided customers with what the majority of them want. This includes
- Eliminating negotiations and move to a simple, transparent sales process
- Eliminating wasted time in the sales process
- Money-back guarantees
- Market-based pricing
- The convenience of having a car brought directly to the consumer
In are era of margin compression, how can dealers afford to pay TrueCar? Typically at least seven people get paid for selling a new car:
- Dealer Principal
- GM
- GSM
- Sales manager
- Salesperson
- Porter
- BDC Manager
If you apply your costs correctly, it is almost impossible to make money in your new car department with the high transaction expense and low salesperson productivity (around 9-10 average).
There is a crying need to attract a younger, less expensive sales force – salespeople who can sell a minimum of 16-17 units a month. But you’re not going to attract this type of salesperson to a traditional negotiating dealership. If you don’t make a change to a One Price Selling sales process (like TrueCar), you’ll be inviting more unwanted competition into the new car arena.
The pre-owned market is where outsiders are really setting their sights. CarMax has already proven that if you give customers a simple, fast, transparent sales model you can sell a ton of pre-owned cars. If you don’t change your sales process you’ll be selling less pre-owned cars. Have you noticed your trade-in ratio is dropping? Take a look…Consumers now have so many outlets to choose from they are no longer highly reliant on trading in their cars to dealers. Think AutoTrader, CarMax, Beepie, and CraigsList… Less trade-ins will be the norm unless real change takes place with your pre-owned strategy.
Why is it so hard for dealers to get this? Why don’t they understand the need to become modern auto retailers?
Most dealers recognize that the market and consumers have significantly changed. Yet, they stay married to an archaic process that invites Silicon Valley startups to capture more and more of their traditional market.
Again, why don’t the majority of dealers address consumer demand and change their sales model??
I think the primary “anti-change” culprit is the longevity of the sales management teams found in most stores. In general, the older one gets the more “change resistant” they become. Yes, radical change is scary; but necessary.
Progressive dealers should address the necessity of recruiting a younger management team that they can train in the right skills to manage in today’s environment.
To attract a younger sales force you need sales managers who look more like they are one of their peers. Then train the new management team in the necessary skills to develop a great sales staff – coaching, training, giving recognition and more. The best way to make this transition is to have a store leader, Dealer Principal or GM who is a “change agent” committed to the process.
Frankly, when the new car market takes its inevitable downturn, interest rates rise, and margins continue to compress, it will be too late to make the necessary changes to adapt and cope with new market realities. It is easier to keep market share than steal it back after you’ve lost it. The best time to create change is when you’re on top!
It is time to reinvent the sales process and sales management structure. Those who have already done it are reaping the rewards. Join the 21st Century. If you’d like to schedule a webinar with me to review what changes are necessary to thrive over the next few years please either email me manderson@rikessgroup.com or give me a buzz 404-805-5009