There is no doubt that retail margins will continue to experience pressure as more dealers offer online transparency around the transactional elements of a purchase: vehicle sales prices, financing terms, conditional trade-in values, and F&I products and pricing.
That means operational efficiency will play an increasingly important role in helping dealers achieve their desired PRV.
According to a recent Cox Automotive study, “More than half of dealership gross profit margin goes to payroll.”
With an average cost of $10,000 per new hire and an annual turnover rate as high as 67 percent for sales positions, the study said, “a dealership with 100 salespeople can lose $670,000 a year … not to mention the knowledge and customer relationships that walk out the door with that employee.”
These findings come at a time when many manufacturers are fostering a race to the bottom pricing, coupled with growing consumer demand for a more transparent sales process.
Offering more online sales tools can produce operational efficiencies, but only if the in-store sales processes are in sync with the new online process.
Putting customers – who have completed most of the paperwork online – through the traditional sales process when they arrive in the showroom won’t work. It will result in a big disconnect from the perspective of the customer. And not changing the current in-store sales process won’t improve the dealer’s operational efficiency.
What today’s online buyers don’t want?
- Sales reps to make numerous trips back and forth to the sales tower to have their deal penciled
- To complete their loan paperwork while sitting at the store
- Waiting their turn to get ushered into the Business Office to have their payment options revealed
- Getting VSCs and other ancillary products pitched to them in the 11th hour of the sales process when they are worn out and haven’t been given the opportunity to do their own research.
Now naturally, like many of us, I have a reluctance to change too much of the old ways. But there is no virtue at all in clinging as many do to tradition merely for its own sake.
You may be surprised that such obvious details are often overlooked, and agree that this is often the way with matters one has given considerable thought to over a period of time; one is not struck by the reality until prompted accidentally by some external event, or experienced firsthand.
In this day of changing buyer demands fueled by new e-retailing technologies, there is no need at all to employ the sorts of sales processes and staffing plans necessary even five years ago. Don’t get me wrong; staff will always play a crucial role in any sales environment
The retaining of old sales strategies and unnecessary layers of staffing simply for tradition’s sake is no longer ideal. Going forward, more emphasis should be placed on recruiting and training a leaner sales team that has a true “servant” mentality. -Training and incentivizing the sales staff in ways that reflect your desired customer experience are critical when upgrading the retail model.
Today’s consumers may go through more of the car transaction online, but interacting with another person at the dealership will always be essential to success.