Here Matthew Hingeley, Partner – Audit & Assurance at Grant Thornton Australia reports on hot topics discussed at this year's convention.
Lower fuel prices, low interest rates, an aging vehicle population and high consumer confidence continue to propel US auto sales and small to mid-sized crossovers representing much of the increase. Like Australia the hot selling products are selling themselves but the success of the good dealers is how they manage slow selling products which are becoming more reliant on incentives to sell.
Here’s a summary of some of the winners and losers in the US market during 2014 and what they are expecting during the remainder of 2015:
Over 125 concurrent Workshop sessions covering over 52 topics are scheduled to run this year in categories which include:
Today I was fortunate enough to attend a local dealership, San Francisco Honda, where I gained an interesting insight into not only the challenges facing US car dealers but in particular dealers in San Francisco where the population is dense and the space at a premium. Traffic congestion, limited parking and population that don’t drive considerable distances results in the small imported cars dominating the San Francisco market with the top five selling vehicles being: Prius, Civic, Camry, Corolla and Mini Cooper. The already leading Prius has recently gone further ahead in sales with it being the car of choice for the rapidly growing “Uber” drivers in the region.
Located in an old concert hall famous for the growth in Rock and Roll during the 70’s, San Francisco Honda is in a Historical building over three levels. With space to only hold one new vehicle of each model and approximately 30 used cars, management of their inventory and service traffic flow was exceptional is exceptional. The challenges facing a US dealer such as San Francisco Honda are:
Manufacturer Pressure
Low margins and net profit as a percentage of sales
Cost pressure
Longer service intervals Market transparency through the internet and websites such as Trucar
These challenges are familiar to Australian dealers, and are largely managed in the same way, though increasing the focus on achieving finance income to offset low new vehicle gross profit, and maximising back end profitability through increasing service capacity at additional facilities.
Despite the similarities, some of the differences I noticed from the Australian market were an increased focus on the Internet and reputation management, a different approach to customer interaction, bringing traditional sublet work such as tyres and auto electrical work in-house and a larger focus on used vehicles.
With one used vehicle sold for every two new vehicles the ratio is not dissimilar to Australia. However, while a large amount of Australian dealers reduced their used vehicle departments due to a lack of quality stock, San Francisco Honda increased its focus on buying used cars from private consumers. With space constraints it is also imperative that inventory turns over quickly which is tightly managed through a focus on buying cars currently in high demand, desirable for the demographics of their location, and lower priced (<,$10,000) vehicles with a high return on investment.
Being the technology capital of the world means you have to stay on top of the way consumers buy vehicles. With the management team including a “Reputation Manager”, the Internet and its online presence is quite clearly a focus for San Francisco Honda. Statistics are reviewed and drilled down on a monthly basis, customer reviews monitored and leads tracked. Australian dealers could also learn from the approach to tracking advertising with the amount spent on the top three lead generators calculated per vehicle sold.
In an attempt to be more transparent with consumers, sales managers and sales staff sit in a sales centre rather than an. Whilst this is a different approach even in the US, the benefits of appearing like the dealerships reception are that customers entering immediately interact with the sales staff and manager.
A perennial favourite of the conference, Butch Hollister’s presentation of the “Best Ideas and Practices from his NADA 20” groups was a full house.
The US car market has seen excellent growth over the past two years and there is a real feeling of optimism amongst dealers that they need to make the most of the current environment. This message was clearly conveyed in the ideas presented with a consistent theme around improving the culture of the dealership, getting the right people, training them, and creating accountability, focus, and urgency.
Whilst there is clearly no silver bullet that will make a dealership successful, it is the consistent application and focus on little ideas such as these which help start the process. Here are some of the best ideas presented:
Expenses - Each month have all managers list the top five expense savings or costs they’ve cut in the previous month and the amount of the saving, with the top saving receiving a bonus equal to the saving.
Technician Tuesday – Hold a monthly Tuesday luncheon with all service staff (from manager to the apprentices). Provide them with a lunch and discuss the yearly goals, and progression toward them, and go through customer and staff suggestions to agree on action plans as a group.
Salesperson mentor program – For every new salesperson you employ assign another salesperson as a mentor for the first three months and reward them for the time it takes to complete it effectively (5% of the gross profit they retain on the deal and $50 for every vehicle they sell over 10 units). The role should include training them on:
New generation Incentives – To the current generation, time off could be more important than cash bonuses. For this reason, one dealer decided to reward additional leave around public holidays rather than the traditional bonus arrangements.
YouTube Employment Ads – Consider placing ads for job vacancies on YouTube. It is low cost, has a larger more varied audience including more technically savvy viewers that are required in the industry, creates a positive impression, is more modern and stylish, and may be more suited to some of the your social positions such as reception, sales, marketing, and CRM.
