Ah, the elusive question. It’s the eternal elephant in the room - the Next. Big. Thing. Analysts, researchers, industry pros and change leaders all try to pinpoint what it is and tell us how to prepare for it.
You probably came to this blog looking for an answer. And I have one for you, but it’s probably not what you expected to find. It’s better.
In every industry, we seek out what the next changemaker will be and try to figure out what it will mean for our business. Higher turnover with a shift in generational work preferences? Reduced foot traffic due to ecommerce and digital retail? Industry disruptors?
For the automobile industry, there is a lot of uncertainty. With new technologies released all the time, it’s hard to effectively predict what the next big thing will be and, more importantly, when it will be big.
How quickly will consumers adapt to new mobility solutions? When should I really invest in getting electric vehicles on my lot? Is ride sharing going to make auto sales plummet next year? In the next five years? Ever?
Before you lose sleep over trying to make predictions and decisions that will ultimately impact your bottom line, hear me out.
There will be a lot more vehicles sold using the traditional methods before the next big thing takes over. But we should always keep an eye on industry trends and stay aware, because the next big thing will be here eventually.
With all the uncertainties at hand, there has to be a way to protect your interests and your sanity.
Here’s a quick guide on how to do just that.
Have a plan. And contingency plans.
As with any business, planning for the future is critical. When looking ahead, a good rule of thumb when you’re facing uncertainty is to establish benchmarks to see how the market is changing and measure the change against your plan.
For example, if you’re keeping your eye on electric vehicles, one benchmark might be the number of EVs sold in the U.S. According to The Edison Electric Institute, EVs averaged 2% of new car sales through Q3 2019. Perhaps at these levels you don’t see the need to take any significant action, but what is your plan if electric vehicle sales increase to 5%? Or 15%?
Your mindset might shift if your brand is one that’s dedicated to EV growth in the next 10 years or is already one of the top sellers of EV models. Or, if you do business in California, the nation’s hotbed of electric vehicle sales.
Of course, an investment in EVs in your showroom isn’t the end of the road. It begs additional questions. For instance, do you have F&I products to offer your EV customers? Has your F&I partner already developed products that can be quickly implemented? What type of maintenance is needed for these types of vehicles, and at what benchmark will you need to make adjustments in your service drive?
It’s easy to fall down the rabbit hole with so much to consider, which is why having a plan with contingencies is so critical to your preparations.
Take calculated risks.
Keeping your eye on what’s to come means you won’t have to take drastic measures quickly because you won’t be blindsided. You have time to consider costs and take calculated risks.
Take digital retail for instance. There is an upfront cost associated with expanding your website to enable your customers to start shopping online. You can also expect there will be a significant investment of time to get digital retailing up and running as well as regular, ongoing upkeep.
However, the associated results - an easier, more transparent buying process, more knowledgeable customers and shorter in-store time - might just be worth the payoff.
The same might be true for offering subscription-based vehicles, which is a huge trend that’s expected to take off.
Know your exit strategies.
As you keep your finger on the pulse of the industry, acknowledge what events or benchmarks will indicate when it’s time to adjust course or back away entirely. Again, it all comes down to your benchmarks and what your comfort level is in taking risks.
Whether you conduct a six-month pilot test or experience an a-ha moment when you realize something is amiss, you can rely on your exit strategy to guide your team in the correct direction. If taking risks is part of your plan, your exit strategies should be too.
Consider a worst case scenario. What if you decided to invest in a car-sharing option for used vehicles on your lot? Worst case: they go unused and you can still sell them onsite or at auction once you turn off the application that supported the ride-share effort. Knowing your exit strategy in advance can limit your financial risk and provide some peace of mind.
Regardless of how long you have been in the car business, you have seen and adjusted to the “next big things” in the past. Remember when Reg Z was implemented and everyone thought it was going to be the end of the retail business. But what happened? Dealers and F&I Managers adjusted and sales went up. When gas went over $5 per gallon, you had no control of the prices, but you adjusted. Whether it happens over time or all of a sudden, you have to be able to adapt when the next big thing happens to prepare for your dealership's growth. So have confidence in your ability, because you’ve done it before.
Work with great partners.
Aligning yourself with other smart, forward-thinking people is always a good idea. More experience, more perspective and increased financial strength are just a few of the many benefits of having partners. Shared goals and values are equally as important.
A great partner will bring new, fresh ideas that support your business model, and you should do the same for them. For any business relationship to succeed, it must be mutually beneficial, so you need to understand - and be able to effectively communicate - what you bring to the table.
With some planning, and help from solid partners, you can successfully navigate the ebbs and flows of the auto industry.
Let's sum it up.
At any given moment, automakers are pursuing technologies, partnerships and advancements to evolve into mobility companies. By keeping an eye on the trends shaping the industry, we can prepare to adapt to the diverse and complex nature of our business and continue to grow together.
The primary value that should guide your operations over the next few years is flexibility, paired with a willingness to read the signals coming your way. Dealers that cling to too rigid a business model may end up unable to cope with the latest challenges and developments facing them. As long as you don't fall into that category, even the most initially concerning projections for the dealership space shouldn't be a cause for worry.
With so many changes coming, one way to differentiate your dealership and find success is by focusing on delivering an outstanding customer experience.
So while we may not know the what and when of the next big thing, you now know what it takes to be ready for it. With planning, adaptability, smart risk taking, great partnerships and fantastic customer service, you can confidently move forward, prepared to tackle what comes next.