Navigating Challenges and Opportunities in the Evolving Landscape of Automotive Dealerships

Automotive dealerships in 2023 are grappling with a myriad of challenges driven by changing consumer preferences and the shifting dynamics of the industry. To sustain revenue and margins in the face of reduced traditional profits, dealerships must adapt to new business models. In this article we outline some key challenges faced by dealerships and explore strategies to retain profitability through gains in operational efficiencies, cost savings, and creating innovative revenue streams.

Challenges Facing Automotive Dealerships

Changing Consumer Choices:

• Consumers are now more inclined towards online research and shopping.
• Dealerships must adapt to digital platforms and provide seamless online-to-offline experiences.

 

Reduced Traditional Margins:

• Increased transparency in pricing due to online tools, set pricing models and comparison websites.
• Limited room for negotiation, impacting the dealerships’ ability to maintain high profit margins.

 

New Dealership Model:

• The rise of subscription services, car-sharing, and ride-hailing affects the traditional ownership model.
• Dealerships must explore alternative revenue streams to mitigate the impact of declining vehicle sales

 

Electrification and Technology:

• The shift towards electric and autonomous vehicles demands new skill sets among dealership staff.
• Investments in training, equipment and infrastructure are necessary to cater to emerging technologies.

Opportunities for Cost Savings and Efficiency Gains

Streamline Internal Reconditioning Processes:

• Streamlining internal processes such as pre-sale reconditioning can reduce turnaround time and operational costs.
• Implementing efficient inventory management systems can help dealerships optimise their vehicle stock and minimise holding costs.

 

Outsourcing Reconditioning Services:

• Outsourcing detailing, SMART repairs, and reconditioning can lead to substantial cost savings in labor and equipment expenses.
• Expert third-party service providers can help leverage economies of scale and specialised expertise.

 

Reduced Labor Costs:

• Outsourcing reconditioning eliminates the need for hiring and training in-house staff, thus reducing ongoing labour costs.
• Contracting external experts allows dealerships to focus resources on core business functions.

 

Benefits of Outsourcing vs. In-house Operations

Economies of Scale:

• Outsourcing companies can provide services for multiple dealerships, benefiting from economies of scale and reducing per-unit costs.

 

Specialised Expertise:

• External reconditioning providers possess specialised skills and knowledge, ensuring higher-quality repairs and detailing.

 

Flexibility and Scalability:

• Outsourcing offers flexibility to adjust services based on demand fluctuations, avoiding overstaffing during lean periods.

Driving Revenue Growth through Service Department

Upsell Opportunities:

• Dealerships can capitalise on the service department’s potential for upselling appearance maintenance packages, extended warranties, and accessories.
• Offering value-added services enhances customer loyalty and boosts revenue.

 

SMART Repairs and Customization:

• SMART repair technologies enable cost-effective fixes for minor damages, expanding revenue potential, whilst protecting the original OEM finish and body warranty of the vehicle.
• Customisation services, like cosmetic enhancements (e.g. ceramic coatings and protection film applications), and technology upgrades, cater to individual preferences.

 

Conclusion
In the rapidly evolving automotive landscape of 2023, dealerships face challenges brought about by changing consumer behaviors and reduced traditional margins. By embracing operational efficiencies, outsourcing reconditioning processes, and leveraging upsell opportunities through their service departments, dealerships can not only navigate these challenges but also emerge as agile and profitable players in the industry. Embracing innovative strategies, technological advancements, and customer-centric approaches will be the cornerstone of success for automotive dealerships in the years ahead.

TALK TO US TODAY! Final Touch has 30 years industry experience and a national network of regional operators. We also offer individualised training and SMART repair systems products for dealerships looking at taking services in-house. Why not start by talking to Final Touch today!