Autobytel Surveys Dealers about Sales Declines, Survival Plans

October 07, 2008

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IRVINE, Calif. — In this weak economic environment, it's no secret that dealers across the board are suffering significant drops in sales, with some reporting double-digit declines.

But what do dealers blame for this softening? And why have some brands been more successful than others? A national survey from Autobytel attempted to shed some light on these issues.

Basically, 56 percent of surveyed dealers reported sales declines over 2007. Almost three-quarters (73 percent) of domestic brand dealerships claimed that sales are down versus 48 percent of import dealers.

Moreover, more than a quarter (26 percent) of domestic dealers said they have experienced year-over-year softening of 25 percent or more compared to 11 percent of import stores that indicated the same.

Survival Methods

So, how are dealers adapting to this downturn? According to the study, an overwhelming number are ramping up their follow-up and lead-conversion processes and paying more attention to Internet marketing.

More specifically, 77 percent of dealers claimed they have put more focus on lead-conversion and follow-up strategy and 69 percent are spending more on Internet marketing.

When asked what will be the most important tactic in overcoming the sluggish economic climate, 50 percent of dealers said improving lead-conversion and follow-up methods. Only 17 percent claimed a re-focus on the used side was most important, and 13 percent favored boosting their service departments.

Moreover, a staggering 91 percent of dealers plan to to either increase or maintain their level of online marketing.

Oddly enough, the study found that the brands with the top sales gains this year (Honda, Hyundai and Nissan) also had the highest percentage of dealerships spending more on Web marketing.

"Overall, import dealers are more likely to increase their focus on both follow-up and Internet marketing than domestics, while domestics are more likely to concentrate on the used department as a strategy to remain profitable in the year ahead," officials suggested.

Inventory Mix

According to the study, Honda, Nissan and Hyundai are the "success stories" of 2008.

Looking at their figures more in-depth, approximately half of Honda and Hyundai stores have reported increased sales this year, while 40 percent of Nissan dealers said the same.

Conversely, 72 percent of General Motors dealers and 65 percent of Toyota stores indicated they experienced softer sales this year.

In a further breakdown, more GM dealers at 15 percent reported sales increases than Toyota dealers at 11 percent.

"Of course, Toyota retailers were left holding a sizable inventory of large trucks and SUVs, and too few hybrids, this year, which may be why more Toyota dealers blamed their current inventory mix for their sales declines than any other group of dealers," officials commented.

Analyzing inventory mix, the study found that 90 percent of dealers experienced an increase in sales of smaller, more fuel-efficient models this year. In fact, 54 percent of dealers claimed to have seen a jump of 20 percent or more.

As such, experts indicated that having a fuel-efficient mix can be a "dealer lifeline."

For example, among dealers who reported sales improvements of 10 percent or more, almost three-fourths also saw a "significant leap" in small-model sales.

What's more, 79 percent of Nissan dealers, 62 percent of Honda stores and 51 percent of Hyundai dealerships claimed to have improved small-unit sales by at least 20 percent.

"With a seismic industry shift toward fuel efficiency underway, those brands prepared with strong gas-sipping lineups have been relatively insulated from the wider industry declines," analysts suggested.

Looking Ahead

Even while some brands tend to rely on more fuel efficient models and inventory mix to drive sales, most dealers are tending to remain cautious about when a turnaround could take place.

More specifically, 52 percent anticipate that a meaningful sales recovery won't happen until at least the second half of 2009.

Hot-Button Issues

What do most dealers feel is the top cause for sales decline? Thirty-eight percent blamed gas prices, 37 percent cited the credit crunch and 10 percent said their inventory mix didn't provide enough fuel-efficient units.

And some dealers indicated that the media should take some of the blame.

"Interestingly, a significant number of dealers wrote in blaming the media itself, arguing the incessant reporting on the down market was tangibly affecting consumer optimism and sales," executives noted.

When asked whether the move toward smaller vehicles was permanent or temporary, 49 percent of dealers responded that they felt the shift is part of a cycle and that fuel costs will eventually dip, spurring a comeback from larger vehicles.

Forty-six percent of respondents, meanwhile, feel the opposite.

"Dealers known for fuel-efficiency are significantly more likely to ascribe to the permanent, fuel-efficient shift theory," analysts highlighted.

For example, officials said, "Nearly 65 percent of Honda dealers fell into that category versus 22 percent of Chevy dealers, while 67 percent of Hummer dealers believe high gas prices and the focus on small cars is just part of a fluctuating cycle."

There was also some division among dealers as to whether fuel economy is the top determining factor for consumers when shopping.

The study discovered that 55 percent said this was the case, while 45 percent said it wasn't. Not completely surprising, import brand dealers were more apt to cite fuel economy as most important at 58 percent, compared with domestic dealers at 42 percent.

The study, conducted by Survey.com, gathered data via phone interviews of 200 nationally represented dealers from Aug. 25 to Sept. 8.