As the global microchip shortage continues to significantly impact the automotive industry, the resulting supply chain disruptions have created an ongoing crisis of inventory scarcity.
The numbers are staggering: right now there are 1.4 million fewer new vehicles than in 2020, and more than 2.5 million fewer than in 2019.
For dealers to succeed in the current “fewer fish, same pond” scenario, it will take an adjusted mindset, refreshed focus and creatively tapping into all available resources to reel in maximum inventory and profits. Below are some key recommendations to help dealers successfully navigate the chip shortage looking ahead into 2022 and beyond.
Understand the reality: Inventory challenges are here to stay
According to market forecasts, we know inventory challenges are here to stay…at least for a while.
Experts now believe the chip shortage will extend well into 2022. Car shoppers seem to understand that we’re all in this together, and they’re adapting their perceptions and behaviors accordingly. Recent data from Cox Automotive reveals that most car buyers anticipate negative impacts due to the chip shortage, and the findings shed further light on changes in consumer behavior: car buyers are delaying their vehicle purchase, willing to pay above MSRP, willing to drive outside of their local area for a vehicle and understanding that there may be less favorable deals and incentives available.
Consumer prices are surging due to ongoing supply-chain snags outside of the auto industry, as well. As dealers undertake conversations with customers, it is important to remember consumers are navigating inflation everywhere. Just as consumers have made shifts due to the current situation, dealers also need to adjust accordingly to be successful during this ongoing disruption.
Focus on advertising: Evolve marketing, merchandising and messaging strategies
Even though some consumers are currently delaying their vehicle purchase, dealers should not be dissuaded: there are still plenty of in-market shoppers right now, and those who delay will have to come to market eventually. Now is the time to continue evolving dealership marketing, merchandising and messaging strategies, in efforts to both reach today’s car buyers and in taking the long view working toward increasing market share.
Wisely use available tools to find and reach the right audience, and then focus on meeting them where they are with strong messaging and a targeted merchandising strategy. Take steps to ensure best-in-class digital retailing, including accurate and robust vehicle detail pages (VDPs) to make dealership inventory stand out among the competition.
Strong VDPs can make all the difference when they feature the information and offerings that consumers want, including comprehensive vehicle descriptions and features, detailed videos and photos, personalized payment information, and opportunities for convenient at-home services. Informed consumers who are doing their research understand inventory is low, so dealers can use this to their advantage and consider offering shoppers direct ordering through the OEM. Most dealers are learning people don’t mind waiting a few months for delivery, especially when they can pick out exactly what they want. There is a strong uptick of manufacturer orders waiting for delivery.
Find untapped opportunities: Grow virtual reach and get creative with inventory acquisition
Use an educated approach to understand a dealership’s virtual reach, leveraging data to make informed choices and to widen the dealership’s footprint accordingly. With so many consumers willing to shop outside their local market, dealerships should look out past their backyard and beyond their DMAs to uncover both potential new customers and more vehicles to beef up inventory. However, there are important points to consider.
Given current market conditions, it may not necessarily be the best time to sell cars to out-of-market customers, especially if the dealer’s lot is already low. Think past the front-end sale, making sure the consumer has a good trade and plans to do service with this store. Look for the right shopper that can bring in more lifetime value.
Replacing a sold vehicle may be difficult, and dealers need to have a proactive plan in place with each unique consumer situation. Also, get creative in finding untapped sales opportunities and inventory acquisition strategies, including utilizing tools to buy vehicles directly from consumers or to reach potential customers who want to do more of the car-buying process online. Private vehicle acquisition is not only more cost efficient compared to auctions, but dealers have the control.
Building a process that works, a dealer will find they are more self-sufficient and saving money on fees. As dealers creatively uncover new opportunities, don’t neglect the steady gem that is fixed ops. Service and repair can help provide a stable long-term revenue opportunity even during the most volatile market conditions. Even though some consumers are delaying service, the average service ticket is up substantially — so when they do come in, they want to spend more to get the car in better shape.
The chip shortage is the auto industry’s reality for the foreseeable future. Knowing which levers to pull can be make-or-break between businesses that successfully ride this wave and those that continue to struggle amidst the strong current. Dealers who adjust their mindset and wisely use data and tools to focus their approach will be best equipped to weather this storm into 2022 and beyond.
Kevin LaSage is the director of digital marketing for Autotrader
Source : AutoFinanceNews
