So far so good in 2014, right?
Now that we’ve witnessed how a strong Spring and Summer season can more than atone for a stormy winter that was disastrous for many, are auto dealers expecting the momentum to continue for the remainder of 2014? The answer could be “yes” or “no” depending on how they meet a few of today’s challenges.
Local players will benefit by keeping a close eye on these three “car keys” over the final five months of 2014:
1. Gen Y > Gen XMillennials have spoken … with their wallets.
For the first time ever, automotive purchases among Gen Y consumers surpassed that of Gen X. This is a key trend that Steve Finlay of Wards Auto explores in a recent post. Sure, Boomers still lead the way in total purchasing power, but the trends tell us the rate of change here might be greater than originally projected.
So what, right?
Well, when you consider that Gen Y shoppers have different retail and media consumption patterns than their predecessors, and have different preferences in the automotive transaction — you could say this trend could be a big deal.
The “2.0 dealerships” have made serious strides to cater to specific targets — even beyond their marketing plans. Or maybe you noticed the recent attention that transparent pricing / financing and quicker deliveries are receiving recently?
2. Buying vs ShoppingSales are up; why aren’t lots bustling?
Here’s something your local dealers have seen over the past decade: physical car shopping is in decline, independent of the current up or down sales trending. Years ago, the typical auto purchase involved an average of five or more physical visits by a shopper to auto dealerships in their area. That has changed drastically.
Today, auto shoppers have significantly curtailed their physical shopping — even when they are “in the market” — shifting the majority of this effort online.. Smart dealers are ahead of the curve here.
Bringing portions of the marketing message and the actual transaction to where the shopper is — usually not in the showroom — will continue to be a key practice in 2014. Meeting the dealer’s needs in this arena will go a long way for media partners.
3. The 150-Plus ClubHow do fewer dealers equal higher sales?
It’s no secret that along with the prolonged recession came a sizable contraction of the retail markets. Automotive was no exception, as the total decline of dealerships in the US can be measured in the thousands.
As the automotive market regained momentum and its pacing entered the 16M-unit range, those lost dealerships haven’t come back. Yes, we’ve added a few dealerships here and there, but generally speaking, the market is now supporting a much higher level of auto sales (relative to four years ago) with many fewer stores.
The simple math tells you that the average dealership in the US should be selling 150 or more additional cars per year. But this trend is another support for the growth of mega-dealers and an ever-expanding radius of car shopping. Cars purchased from 50 or even 100 miles away aren’t considered anecdotal outliers like they were a decade ago. And auto dealers, realizing this fact, are taking their “destination store” approaches to a new gear.
Now more than ever, the question isn’t whether an auto dealer is maintaining pace with the brand’s growth, it’s “are dealers surpassing the growth rate of the factory?” If not, they’re losing share more rapidly than they might suspect.
Source: WardsAuto.com, U.S. Light Vehicle Sales. “Gen Y Buyers Greater Than X for First Time”, WardsAuto.com July 31, 2014. Finlay, Steve.
Dave Eckstein is a Partner in the firm ESA & Company. He specializes in highly profitable market share growth for local businesses and gets a kick out of demonstrating a declining cost of customer acquisition. He plays baseball, but isn't that Dave Eckstein.