The Deloitte Motor Industry Services 2016 Industry Overview Update reinforced a common theme at the Convention, namely that Dealers need to create an ‘experience’ in order to attract customers.
Stephen Timperley told delegates that they can’t avoid new challenges and opportunities, but “if you do what you do well, you will evolve quicker than the market”.
He emphasised preparation: what does it take to become ‘race-fit’? The strongest Dealers are able to create momentum.
Mr Timperley said the last 20 years of data tells a story. The first 10 years from 1996 to 2006 showed a pretty flat line, with some businesses rising, some falling. Then in 2006/07, something changed. The top 30 per cent improved their profitability by a factor of two. Average performers increased their profitability by a factor of 2.5, while losses were multiplied 3.5 times.
In 2010, 11 per cent of Dealers were making profit margins of greater than 3.5 per cent. By 2016, this had risen to 20 per cent of Dealers. However, the percentage of Dealers making a loss rose from 15 per cent in 2010 to 25 per cent in 2016.
Lee Peters spoke regarding F&I changes. He said that in 2015 one in five Dealers was making a loss. In 2016 that figure rose to one in four. If F&I incomes drop by just five per cent, one in three Dealers will make a loss.
Mr Peters said today’s customers expected personalisation and demanded same-day delivery. A recent global study showed that just 20 per cent of customers had a positive attitude towards Dealers.
A US study showed that just 17 out of 4,000 people interviewed preferred the current car-buying process. Between 45 and 90 minutes was given as the optimal time for a sale to take. The old approach of slowing down the sale to increase conversion rates and gross just doesn’t work any more.
“The customer experience is more important than the product or the price. We’re nearly there but still have a long way to go,” Mr Peters said.
Best practice Dealers are realigning their sales processes and asking themselves, “are we getting the right people to do the right job?”
They are freeing up their sales people to do what they do best by surrounding them with complementary staff such as a concierge.
Mr Peters said Dealers could view the dealership as a place to build relationships or a place to do business, but research showed that customers want the first option.
Mr Peters said digitalisation will underpin everything and create new value streams.
“If our customers are living in a digital world, we need to be living there too, side by side, step by step,” he said.
With an average of just 1.1 dealership visits per car purchase, “we know that if a customer is in your dealership, they are a long way down the line to purchase”.
Mr Peters said the dealership of the future will meet consumers’ mobility needs in an age of hyper-urbanisation. It will understand and adapt to reduced car ownership due to greater use of public transport and ride-sharing technology.
Purposeful brands will create community connections, play to customers’ senses and reinvent customer service.
Better people equals greater profits
Mr Peters said the motor industry is not an ’employer of choice’, but it can and should be, given that an 18-year-old has the potential to earn $80,000 in their first year on the job.
‘Success’ is currently defined as a four per cent profit margin. “If we could get the best people, what could that limit be?”
He said the new-age worker is difficult, demanding and wants not just a job, not just a career, but a set of experiences as well. However, increasing the talent pool to which the industry has access and becoming an ’employer of choice’ needs to be the core strategic direction of our industry.
Mr Timperley said Australia is one of the most competitive automotive landscapes, swamped in brands, with 68 brands from 26 countries, and more than 490 models. Combined with the lowest interest rates we’ve ever seen, it leads to the most competitive car market in the world.
Since 2013 the Volume market has dropped two per cent, however the Prestige segment has grown by seven per cent and the Luxury segment by 30 per cent.
Factoring in GDP, interest rates, unemployment rates and household income and equity, the Australian economic environment is still very robust, especially compared with overseas conditions.
Changing rapidly. The shift from family ownership to corporate ownership is set to continue.