Bank on bricks and mortar

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WHILE THE ECONOMY HAS HAD bumps in the road, Canadian auto sales continue to grow. If we were to add up where all of the OEMs’ projected sales would be in two years, Canada would already be well above 2 million vehicle sales per year.

This math may not make sense right now, but the discussion of online sales and network capacity is very real with every OEM.

A few months back, the Canadian auto dealer team and I were comparing our current state of affairs to the retail banking industry in the late 1990s and early 2000s.

The banks bet that online banking would forever change banking. In fact, Bank of Montreal created a unique division called “mbanx,” which was exclusively an online banking institution without any branches. Although mbanx was a great idea in theory, it lasted only a few years.

This period of time also saw the banks sell a lot of their branches and consolidate operations.  But as our banking needs increased, this model did not allow the banks to take advantage of the smaller opportunities. It was also inconvenient for customers.

Fast forward to the last five years, and we see an evolution in retail banking trends.   

Banking is becoming more about convenience.  TD has extended hours, and BMO and RBC are focusing on neighbourhood banking by opening more small branches — especially in urban centres.

In many cases, the most cost effective route is to expand at an existing location. In general, this eliminates the need to invest in more land and customers are familiar with your location.

The primary goal of automotive retail networks is to expand facility capacity for sales, service and pre-owned vehicles. Most OEMs are requiring investments and adding locations to accommodate the growth of the Canadian market.

In order to get ahead of the curve for the next OEM open point, here are some initiatives that could help you add the capacity needed so OEMs can fulfill their expansion plans.

In many cases, the most cost effective route is to expand at an existing location. In general, this eliminates the need to invest in more land, and customers are familiar with your location.   

Most dealerships were built with an expansion plan in place so that when the day came, it would be possible to grow.

The downside of renovating an existing facility is disrupting your operations. Renovations cause logistical nightmares and staff turnover. They tend to drag on and often have a negative effect on morale.

Building at a new location eliminates much of the operational headaches. As well, a new building constructed with modern materials and construction methods is likely to be far more energy efficient, which leads to lower operating costs over time.

In many cases, we see that dealers are still able to utilize or sell their old facilities after they relocate.

In the majority of cases, we recommend relocation, though adequate land in a good location at a good price is hard to find. This is the primary driver of buy-sells and the proliferation of dealer groups.

When neither of these are viable satellite facilities can become options.

In larger markets, most satellites are built for service by decreasing a customer’s travel time.

Although it can take some time for customers to realize that they have another option for service, we see that satellites assist greatly with tire season, PDIs, reconditioning and inventory storage.

In most cases, a service satellite would be located in an area where real estate values are not as high as the main retail store. Service satellite facilities also present cost savings for potential renovations with less high-end retail finishes and a smaller customer reception area.

In smaller or single point markets, there may be opportunities to open a retail store in a mall, or even pop up showrooms in the high seasons.

While this undeniably adds to overhead, the convenience to local customers may be enough to differentiate yourselves from competitors — not to mention expand the coverage of your market.

Online sales will continue to have an impact on automotive retail sales but the banks have taught us that bricks and mortar will remain a key part of the customer experience.

Dealers that can provide convenience and quality of service will put themselves in a good position for growth.

Even with an uncertain economy, there appears to be upside on new vehicle sales in this country.  Low interest rates, safer and more tech savvy cars, and an average age per vehicle over 10 years, will likely cause you and your OEM to find ways to grow your capacity.

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Canadian auto dealer