“Technology should not aim to replace humans, rather amplify human capabilities.”
–Douglas Engelbart (1925 – 2013), Inventor of the Computer Mouse
There has been a recent backlash against new technologies and companies that have entered the retail automotive space. Although the word “disruptive” still gets thrown around way too much, strides are being made to make things easier and better for dealerships. But, when the question arises, “does it sell more cars?”, the answer should, and always will be, maybe.
I’ve sat at all sides of the table. I’ve been in the dealership’s seat, understanding that desire for a secret weapon that can sell more cars and make more money. I’ve sat at the technical developer’s seat, wanting to create bleeding edge solutions for retail automotive that creates efficient and consistent results. As a Tier I automotive supplier on the technical front, I’ve scooted over to the OEM side to understand the needs of retaining customers, while forecasting what vehicles people will drive in the near future. Most importantly, I’ve sat in the customer’s seat, weighing what I know about the car business against the rapid evolution of purchasing behavior. It’s a balance of all of these aspects, and more, that makes retail automotive a true ecosystem. It’s what I teach every day, and the main reason I feel compelled to share my thoughts on the matter in what will be a multi-part post. First, let’s take it from the start.
Buying vs. Selling
Although the various schools of hard knocks, life, and dealer academies who educate the bulk of automotive retail staff (at least according to social media profiles) do a good job of teaching warm handshakes, those institutions do an abysmal job of teaching economics. The advertising agencies that are leaned so heavily on these days do a lackluster job of interpreting economics. The whiz kid programmer with his certifications from such-and-such certification program isn’t certified in economics. If all of the experts that a dealership turns to had a good grip on economics, they’d stop perpetuating this notion that everybody is buying a car from everybody today, tomorrow, and the day after that. Sometimes you need to hear it from a condescending prick.
Cars don’t grow on trees. They’re really expensive (pick your source if you need a citation). Many decision makers at car dealerships, thanks to demos, haven’t bought a car for themselves in decades. North Koreans are more in touch with how people want to buy vehicles in the 21st century, and have as much money as the average American available to put down on a new truck. Vehicles don’t rot into dust in five years as they did up into the 90s. It’s time for the car business to stop pretending that we’re selling a consumable, like toilet paper. No amount of heads-up displays, massive infotainment touch screens, Internet hotspots, or other stuff that doesn’t help it get efficiently from Point A to Point B is going to fix that. This Car and Driver Magazine editorial does a fantastic job of illustrating how ridiculous things have gotten.
The objective truth is that there is a tiny fraction of the population buying cars in a given market, at a given time. This fixed amount of car buyers, not shoppers, encompasses all social strata and price points, selecting from more than a couple of dozen brands, scores of models, both new and used, from dealer inventories to front yards. To put it in perspective, 17.2 million new vehicles were sold to 225 million license holders, or roughly 7.6% of the total potential market in 2017. That’s less than 0.64% of the potential population per month, spread out over cash purchases, 36-month leases, 72-month financing, and an array of options in between. It’s one gargantuan pie that everyone gets to take a bite out of. The question of “will anything sell more cars” has everything to do with how many people are buying cars, not some new tool, technology, methodology, religion, or anything else. The questions that need to be asked are how big is this month’s pie and how much is that one tiny morsel of leftover, pre-chewed, partially digested, piece of pie actually worth?
The Good News
The good news for car dealerships is that millions of vehicles change hands every day. They still have plenty to work with when it’s all said and done. The new technologies and tools will help move more units, but they need to consider how all sales are taking place, not just car sales. More cars than ever are being bought, but fewer are actually being sold. As the car business continues to hurtle into a world of uncertainty, the one thing we can plan on is the Invisible Hand playing a role in if-and-when a vehicle transaction takes place.
There is more to learning than just studying the same things over and over again. I understand that we want to support our colleagues by reading their blog posts, listening to their podcasts, watching their live streams, and/or attending their conferences. But, you are consuming a lot of time just reconfirming your own beliefs. Instead, try taking just 25% of that time to study the fundamentals of commerce. I share a running list of the books I’m reading on my bio page if you want someplace to start (I’d be ecstatic to hear from you if you’d like some guidance on the matter). There are more important things to know than gossip or the next big vendor.
Based on my experience as a car sales training company, working with hundreds of dealerships across North America, I see three primary strategies to move more vehicles from dealership lots to customer driveways. In the next post, Beg, Borrow, and Steal From the Future, we’ll take a look at today’s most common strategy. When you’re finished, you’ll be hungry for more pie.
Part I: A Story of Pies
Part II: Beg, Borrow, and Steal From the Future
Part III: Defection and Marketshare
Part IV: Whole Pies and Retention
Part V: Conclusion
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