COMMENTARY: 8 tips to be adaptive & thrive in a down market
The world of car dealerships is a dynamic and ever-evolving industry that operates in tandem with economic cycles. In a down market, car dealerships face unique challenges that test their adaptability and resilience. Having insight at CarOffer into thousands of dealerships nationwide, it is interesting to see what some of the best dealers are doing in these more challenging times.
The way they shed light on the different strategies, mindset, and innovations required to not only survive but thrive during these bear times.
The down-market challenge
As we all know, the last few months have been nothing but declines in our macro market. We have seen a decrease in consumer spending, tighter credit markets, and a general reluctance among customers to make major purchases With that we have seen a lot of our dealers experience declining sales, shrinking profit margins, and increased competition. All dealers are facing the same challenges, but the best managers demand a strategic approach that goes beyond simply waiting for the market to rebound.
Diversification of inventory
One key strategy for dealers during a down market is diversifying their inventory. We see too many dealers trying to stick with the same core inventory no matter what the market does. A BMW may be within one mile of a large Nissan store, but they have zero Nissans or lower priced used units on their lot. Our top dealers use all available analytics to see what the fastest turning less expensive cars are in their market and source accordingly. This means offering a wider range of vehicles that cater to varying customer demands and budgets. While high-end cars may see reduced demand, affordable, fuel-efficient vehicles may become more popular. By adapting your inventory to the changing market demands, dealerships can maintain a steady flow of existing and new customers.
Focus on pre-owned vehicles
During economic downturns, consumers often look for cost-effective alternatives. This is where pre-owned vehicles come into play. Car dealerships can capitalize on this trend by emphasizing the quality and reliability of their certified pre-owned vehicles. This not only attracts budget-conscious buyers but also allows dealers to profit from higher margins on used cars.
Dealers need to know their various sources of how to not only find the right cars but also how to find them at the right price. Sourcing units using market disparity/out of market buying allows our dealers to take advantage of getting cars from states that don’t do well with specific trims, drivetrains, etc. therefore getting them cheaper. Other dealers increase their “off the street” marketing and service drive purchases which often turn into two for one deals.
Enhanced customer service
In a down market, competition intensifies, making excellent customer service a critical differentiator. Dealerships must focus on building lasting relationships with customers through exceptional service, transparent communication, and personalized experiences. This not only fosters customer loyalty but can also leads to positive word-of-mouth referrals. The better the relationship, the more they will buy and refer you. When is the last time you sent in a mystery shopper and tracked the process from A-Z?
Innovative financing solutions
Tightened credit markets can make it challenging for customers to secure auto loans. To overcome this obstacle, some of our forward-thinking dealerships can collaborate with financial institutions to offer innovative financing solutions, such as lower interest rates, longer repayment terms, or deferred payments. We all know the old saying of “if you don’t ask…” These options can make purchasing a vehicle more appealing to hesitant buyers and opens more opportunities to close customers that normally would have walked off the lot.
Online presence and digital marketing
The digital landscape has transformed the way people shop for cars. Our top dealer reconfigures their listings in order to show great offers and sometimes cheaper cars first in order to attract buyers at all price points in tougher market conditions. Utilizing social media, search engine optimization (SEO), and online advertising can help dealerships reach potential customers even when foot traffic is low. This includes not only attracting customers to buy but also to sell.
Cost control and efficiency
In a down market, cost control becomes paramount. Dealerships must closely scrutinize their expenses, identify areas for efficiency improvements, and cut unnecessary costs. This might involve renegotiating vendor contracts, optimizing inventory management, and streamlining operations.
Employee training and the mindset of resilience
The success of a car dealership is heavily reliant on its sales and service teams. During challenging times, a lot of our top dealers invest in employee training to enhance product knowledge, customer service skills, and sales techniques. Motivated and well-trained staff can make a significant difference in attracting and retaining customers.
A resilient mindset
Beyond strategic adjustments, a resilient mindset is essential for car dealers operating in a down market. Some key mindset principles that can help dealerships weather the storm include:
—Adaptability: Dealerships must embrace change and be willing to pivot quickly in response to market fluctuations. Flexibility and adaptability are key traits of successful dealers.
—Long-term vision: While focusing on surviving in the short term, dealerships should not lose sight of their long-term vision. Building a strong brand and reputation is an investment that pays off when the market rebounds.
—Risk management: Car dealers should take calculated risks, such as expanding into adjacent markets or investing in new technologies, but also ensure they have risk management strategies in place to mitigate potential losses.
Being a car dealer in a down market is undoubtedly challenging, but it’s not insurmountable. Dealerships that embrace diversification, customer-centric strategies, innovation, and a resilient mindset can not only survive but thrive in difficult economic conditions. By adapting to changing consumer preferences and market dynamics, car dealers can emerge from the downturn stronger and more prepared for the challenges of the future.
Mark Bland is the chief sales officer at CarOffer, an inventory acquisition innovator and part of the CarGurus network. Bland manages the dealer sales representatives and recently built a team to help him oversee the trade floor. He has been with the company since 2011 when it was known as RedBumper. Over the last 12 years, he has worked directly alongside founder Bruce Thompson to help dealers solve inventory problems, thrive, and increase their profitability.