It's easy to make a compelling argument that franchise auto dealers are at significant risk of going through a serious downturn, very similar to big box retailers like Macy's, J.C. Penny, Sears and even Nordstrom. Nordstrom is known for its exemplary customer service, liberal return policy and in-store amenities. The company also prides itself on selling apparel that buyers see as unique, fashionable and worth a premium price. Nordstrom's floor traffic is down, causing serious concern.
“If we’re going to improve our business, we have to improve the customer experience and we have to improve the product,” he said in a telephone interview. “Our results are not where we want them. We need to get better.”-Erik Nordstrom-co-president.
Every retailer, regardless of business, needs to improve upon the customer experience. Consumer centric businesses will lead retailers going forward, those retailers that don't improve the customer experience will continue to trend downward.
Franchise dealer's customer traffic is down significantly as well. Currently, the only safe haven for franchise dealers is the new car sale. Unfortunately, the new car sale has become a commodity. Every department within the franchise dealer model is under siege, and vulnerable to threats from disruptors. Consider the following.
Approximately 17 Million new units will be sold, versus an approximate 210 Million legal US drivers...a relatively low percentage, and this is the one area in which the dealer is still protected
Approximately 40 Million used units will be sold, yet franchise dealers will account for less than 30%...independent used car dealers are winning
Approximately $100 Billion will be generated annually through franchise dealers' service and part operations, yet the overall repair industry will generate well over $1 Trillion dollars...independent repair facilities are winning big
The auto industry has been doing well for years, yet when you drill down on the aforementioned data...there's a lot of opportunity going elsewhere. How much more revenue could the franchise dealer be generating if they were able to find a solution to attract more customers and retain those customers?
Consider all the various tools and services the average dealer utilizes within their fixed operations, are any of those tools or services going to prompt a consumer to conduct business with you? No. What tools or services are you currently utilizing that's going to get the customer off the sideline and into your dealer's service drive? If those tools and services were truly resonating with the consumer, and improving the customer's experience, then you would see much higher service retention indexes...and that's just not the case.
When it comes time for a consumer to have their vehicle serviced, do you think the customer says to himself, "I'm going to ABC Dealer because they conduct an MPI" or "I'm going to ABC Dealer because they have online scheduling" or "I'm going to ABC Dealer because they have two way communication" or "I'm going to ABC Dealer because they have a great BDC or CRM" or "I'm going to ABC Dealer because they have discounted pricing"or "I'm going to ABC Dealer because they have great people and processes", the answer is no. 70% plus of consumers opt for the after-market despite all these tools and services...why? It's simply more convenient and less time consuming than the dealer, and that will continue to be the case until the franchise dealer makes auto repair more convenient, less time consuming and not such a time zap for consumers.
Service Customer Pick-up & Delivery when offered to consumers has an adoption rate of 80% plus. What are some of the metrics that franchise dealers are experiencing with Pick-up & Delivery?
95% approval rating
Increase in customer pay service spend up to 48%
Increase in warranty service spend up to 65%
Loaner out time reduced by up to 55%
Reduction in the number of customer waiters
Improves the customer and dealer experience
Consumers now view auto repair as convenient
Consumers no longer view auto repair as time consuming
Consumers won't put off auto repair
Improve upon the customer experience, make the customer experience convenient and not time consuming, and the franchise dealer will recapture their lost UIO and gain conquest customers.
Nordstrom has great facilities, great employees, great processes, great product, etc., yet consumers aren't coming in...does this sound like your dealership?
Look forward to visiting with MBUSA, and Dealers at MBUSA' National Conference!
Ken Hite is Senior Vice President at RedCap. RedCap's technology and drivers are utilized by OEMs and dealers for Service Customer Pick-up and Delivery, as well as Consumer Test Drives. Ken has 25 years experience within the automotive industry, inclusive of retail, OEM, after-market and start-ups. The auto industry must learn to exceed customer expectations and implement business processes based upon customer convenience.