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There Is a Storm on the Horizon, How Can Your Dealership Survive It?

Dec 1, 2020 1:15:38 PM

A new breed of automotive retailers are entering the marketplace, and there’s a very small window of opportunity for today’s conventional automotive dealer to refit their business to be effective in new era of automotive retailing.

It is a commonly held belief amongst dealers that the 300% rule (100% of the Products, 100% of the People, 100% of the Time) is key to maximizing a dealer’s product penetration and profitability, both in and out of the F&I office. Like in all data sets, there’s a high (25%), average (50%) and low (25%) that make up the mean average. And, better than 75% of our industry is underperforming using the high as the standard. The 300% rule is rooted in process. It applies to every aspect of business and our successful execution of this process assures our success. That success lies in dealer’s ability to train and certify their teams to execute consistently and effectively against these processes. Process execution is the ultimate equalizer of people. Overall, it trumps a high degree of sales skill and business acumen. You’ll never hire 20 superstar performers because these superstars in their current form struggle to coexist in the same selling space. That’s why most automotive dealers only have one or two.

But mastering the 300% rule with your teams will guarantee you 20 consistently high performers with virtually no dissention in the ranks or exposure to your business’ growth and stability. After 34 years in the industry, I don’t know any car-people who would disagree with what I just expressed. So why, despite our belief system and best effort, do we fail more often than we succeed?

In my experience, these are the most common contributors to our failure to execute:

  • The Learning Curve for Employees– Since selling cars is not a profession most aspire to growing up, many candidates with a higher learning degree aren’t attracted to this craft. This eliminates many capable candidates and leaves our industry recruiting out of the same employee pool which is littered with candidates with a longer learning curve and a set of bad habits
  • Portal Fatigue – Disparate Technology Systems – Asking salespeople and management to access multiple technology portals, requiring multiple processes, throughout the day invites a level of complexity designed to fail
  • Multiple Processes – Trying to train and develop a group of people to consistently execute against the multitude of processes that reside in the sales and delivery process requires the consistent delivery of a robust training curriculum and regimen to create learned behaviors amongst your team
  • Perpetual Turnover – Unfortunately, for a host of different reasons, the auto industry has averaged a 67% annual turnover of salespeople, making it very challenging at best to consistently execute against an ongoing training regimen
  • Compensation & Reward Models – While many dealers are evolving on how they compensate and reward their people, many are still tethered to their traditional sales cultures. Most of these compensation and reward models are transactional in nature and focus only on the end result (sale and gross profit), and none of the activities that drive it. When we reward and compensate our people with the end in mind, the journey is almost always compromised.

Many dealers have an affinity, bordering on addiction, for new and innovative technology. This drives the decline in process adherence and the increase in the portal fatigue that’s plaguing the industry today.

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Unfortunately, you can’t look at technology solutions in a vacuum. To quote Aristotle, “the whole is greater than the sum of its parts.” These new and emerging technologies have great traits and attributes relative to the opportunity they’re designed to exploit. The concept behind the whole being greater than the sum of its parts is that when combined with other technologies and systems, other properties or synergies are formed that don’t exist with these technologies independently.

The litmus test for whether a new technology can be a positive contributor to the whole is how well it integrates into your supporting technology ecosystem and what it requires from a people and process standpoint to support it.

Technology in and of itself, is worthless. Its use is what gives it value. Herein lies the challenge. Getting our people to use it. Maybe that’s the problem. We’re trying to leverage the value of technology through human engagement. The challenge is that the best solutions on the market are focused on solving one area of your business. They’re the best because all their passion, resources and intellectual effort is focused on developing one thing and one thing only. Unfortunately, this fact is what breeds the disconnect between pooling world class technology solutions and results. To execute successfully within this model, there’s a complete reliance on the synergy of people and process, and therein lies the breakpoint.

Automotive technology giants recognized this early in the adoption of high tech in the auto industry and targeted acquisition to build an omni-solution designed to connect all these world class technologies under one ecosystem, all connected to each other. While theoretically sound, this business model has struggled to produce the significant results its concept set out to accomplish. The challenge lies in bolting these technology solutions onto a foreign mothership. Since none of these solutions are native to the technology architecture of its host, the struggle to integrate these exceptional technologies and their teams into foreign organizational cultures and technology stacks have resulted in the dilution of the effectiveness of these individual solutions, making in this instance, the sum of the parts greater than the whole.

Ugh! So, what now?! Well, when we envisioned an omni-solution connecting all these technologies, we were on the right track. We just needed to figure out how to do it without stripping all the innovation, passion and vision that created the parts that make up the whole.

At ZipDeal we set out to do just that. We built a solution that unifies these great technology solutions into one customer-driven experience stream that doesn’t compromise the value and integrity of the individual solutions. We needed a vehicle that allowed us to pack up all the solutions and processes critical to the dealer’s success, throw it in the back seat and chauffeur them through the customer delivery experience allowing each one to shine on its own.

Oh yea, and we also let the customer drive! Both our industry and the world around us today is fueled by perpetual change. The concept of Kaizen has transcended automotive industry, and now permeates through every facet of industry and society. It is up to us to take the next steps to transform our business model, operational and organizational cultures to anticipate the consumer’s demand of tomorrow.

The first step in this operational and cultural transformation is to look at the challenges in your business driven by the lack of synergy between key technologies, from a different vantage point. We can no longer afford to wear traditional core operating principals and practices like a badge of honor and testament to our loyalty to a business model that’s long overstayed its welcome. The market has held our partner and counterpart, the manufacturer accountable to perpetual evolution to be competitive in the marketplace. The retail franchisee has not been held to the same level of accountability in decades past, but new entrants to the market like Carvana, Vroom and others have created that accountability by responding to consumer demand with a better, faster, more transparent and customer-controlled purchase and delivery experience.

While automotive retailers can no longer dismiss the inevitability of digital retailing on a much larger scale, there are still many elements of the car shopping and purchasing experience that we have to figure out how to virtualize and digitize before the industry sees global transition and change. With that in mind, successful operators of tomorrow will have to figure out how to straddle both the digital and brick and mortar experience effectively in the transition. To do this, today’s operator has to figure out how to reduce its dependency on people and process to leverage the innovative and progressive technologies that drive the transition to a digital customer consideration, purchase and ownership experience.

To achieve the whole being greater than the sum of its parts, operators need to identify technology solutions capable of unifying other solutions and processes into one place without compromising the intended effect of the solutions it houses. A system that through this unification process assures absolute process adherence. How successful would your business be if all the processes that you designed to ensure your success, growth and stability were executed against effectively and consistently? How much more profitable would your business be if you could actually present 100% of your products to 100% of your customers 100% of the time?

Many in the retail automotive business have been able to successfully fail to the tune of millions of dollars a year because there was no competition to hold them to a higher standard. Well the next generation of automotive retailers are here, and the global pandemic has accelerated the timeline for change. The death of the conventional dealership business model, while certain, will be slow and painful. Because of this, many will wait too long before preparing their businesses for change and suffer the ultimate consequence. Make no mistake about it, while warm and sunny days still reside in our immediate future, there is a storm on the horizon and those that take the necessary action today to prepare will survive it, and those that don’t will expire at the hands of consumer demand.  

Tony Gomez

Written by Tony Gomez

Tony Gomez is a 34+-year automotive industry veteran, focusing on developing high performance teams and creating and implementing business improvement models to drive bottom line results. Tony has developed and train teams responsible for growing the business 200% in just two years while service as COO of CallRevu. Tony has served as Platform President for a 10-rooftop dealer group.

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