No matter where you lived in Canada or around the world in the first half of March 2020, your head was likely spinning — both as a business owner and as a consumer.
Dealerships had enough to contend with in the face of changing technology, the evolving retail environment and a softening of the sales growth we have become accustomed to.
Now, you also have to deal with a consumer who has likely moved from being irritated, demanding and impatient to one who is also less confident than before.
The last weeks of February and the first week of March brought us whipsaw movements in financial markets, discord in Canadian politics and business as well as the emergence of the COVID-19 virus that has wrought havoc on businesses across the world in the past few weeks.
No matter how you try to spin it, the outlook for new vehicle sales is soft for 2020. We keep saying to ourselves that “a 1.95 million sales scenario still represents a good business.”
But given the rising population (especially in urban areas) and strong employment, where is the growth in sales? Millennials are right in the window of what should be the prime vehicle acquisition years and they’re a large part of the population. Why aren’t they stepping in to fill the hopper?
According to Stats Canada, “Millennials, now the largest generation of Canadians, at 27% of the total population, may be facing different challenges in building wealth than previous generations of young Canadians. Despite being the most educated generation, concerns have been raised that millennials have been “slower to launch” (Stats Canada, Apr 18, 2019).
There is a clear indication that younger consumers are delaying certain purchases that might have been made earlier in previous generations. This likely includes the purchase of a new vehicle.
Perhaps more are moving towards used vehicles, but the bottom line is that there is a clear shift in balance in terms of the psychology of consumers. It’s now less of “I want a car” to more of “when do I need a car.” At the same time, younger consumers have other needs and wants that they are finding more difficult to meet in a tougher economic environment — a place to live, the desire to travel and the need to meet ever-increasing education costs.
The outlook for consumer confidence across all demographics and in all regions of Canada has likely taken a nosedive since the beginning of March. Don’t distance yourself – get closer! Focus on the basics.
Even before all this hit, there were already signs that consumer confidence was beginning to wane.
Bloomberg and Nanos Research Corporation publish a weekly index of Canada’s “Economic Mood” — the Bloomberg Nanos Canadian Confidence Index (BNCCI). The BNCCI is a composite of two sub indices — one based on consumers’ feelings about their personal finances and job security (Bloomberg Nanos Pocketbook Index), and the other based on consumer expectations for the economy and real estate prices (Bloomberg Nanos Expectations Index).
Their February 28, 2020 report contained some interesting numbers.
The BNCCI shows an increasing level of confidence in the first part of 2019, with a peak in July and August. Apart from a few blips, the trend has been downwards since then and in the last week of February 2020, the Index stood at 55.81. This compares with an Index of 49.21 in 2008 (the first year of the index and the year of the recession) and a record high of 62.92 at the end of 2009.
Interesting to note that millennials appear to have higher levels of confidence and that confidence declines with age. Even more reason to wonder why these consumers (many of whom are in the traditionally peak automotive market years) did not step into the market more strongly.
The outlook for consumer confidence across all demographics and in all regions of Canada has likely taken a nosedive since the beginning of March.
Don’t distance yourself – get closer! Focus on the basics.
There is strong evidence — both academic and real-life — that consumer confidence impacts how consumers behave in a purchasing environment. Consumers become more cautious, more rational and more likely to question their own priorities.
Right now, we’re not just dealing with a crisis in confidence, but with real hard issues that impact our business. You likely won’t see your customers very often — if at all.
If you’re a tennis player, you’ll know that your worst enemies (outdoors) are wind and sun. At those times, the two basics of the game are critical — move your feet, watch the ball.
If you don’t do that you’re sunk! In this kind of environment, I believe retailers (including car dealerships) need to focus on some of the basics in much the same way.
I found a very interesting blog used by a community of small businesses and entrepreneurs (https://www.carolroth.com/blog/tips-for-building-consumer-confidence-in-your-company).
The owner is Carol Roth, an experienced financial practitioner. The blog is based on responses to what Roth describes as the “KLT factor” (Know, Like and Trust).
More than ever in a highly volatile environment, this is an excellent credo — to make sure your prospects and customers know you well, like you and trust you. How do you do that? The bloggers on this site came up with 82 recommendations. I’ve selected the top five (in my view): walk the talk; what’s your word worth?; be transparent; be real, be personal in all your communication; and make complaints easy (and make sure you address them immediately).
These are comments from people on the front lines of businesses, not answers to questions in a survey. They are common sense, but often get lost in the fog of traditional training, endless process manuals and the use of complex new technologies in the dealership.
Not a peep from my dealerships!
Since the last week of February, I have heard from almost every entity that I deal with (even my accountant!), laying out what their plans are for handling the situation and how I can interact with them.
What do I do if I need service? What’s the protocol? Who’s at the dealership to look after my needs? What precautions are you taking to safeguard my health and wellbeing and that of your staff? These are the things that consumers want and need to know right now.
Over the next few weeks and months, you will be facing customers and prospects who are feeling less confident than ever.
I believe that focusing on what makes these consumers know, like and (especially) trust you, is essential to getting through this.
