Now is the time to make your plans for next year, especially with so much uncertainty.
In many ways I find that the beginning of fall is the perfect time to start planning for next year.
By the time January rolls around, plans for 2024 should be in execution mode, where you realize your planned strategies and tactics. If you only start planning in January, that puts you in a position to play catch-up with your competition.
It’s true that January and February are traditionally the slowest sales months of the year, however, many of us use this time to attend industry events and various brand meetings that take us away from our stores. As a result, in many aspects, quality planning takes a back seat.
Cautious optimism is surrounding 2024. We hope there will be a recovery, but we are not sure.
Depending on who you listen to, either the Canadian economy is headed for recession, or it might not be.
Also, some very interesting historical norms might not happen this time. For instance, the relationship between employment and recession.
Normally in a recession the unemployment rate increases as businesses adjust their labour costs to cope with the uncertainty. At this point however, it appears that employment might increase.
The pandemic effect on workers is likely at play here as many pre-pandemic workers have altered their behaviour and have sought other options.
An example for auto dealers is technicians. It seems like every dealership in Canada is looking for technicians. Various provincial strategies have been put into place to address this shortage.
Another example has to do with the decisions auto dealers made as the pandemic surfaced. Many auto dealers permanently changed or eliminated internal roles. The pandemic provided the time to reflect and gain visibility into all processes. As a result many auto dealers have already redeployed their human resources to eliminate spend creep that had slowly developed. As business slowly returns, many dealerships have created additional capacity through new and improved processes. More individuals working differently will be required — not less.
The pandemic provided the time to reflect and gain visibility into all processes. As a result many auto dealers have already redeployed their human resources to eliminate spend creep that had slowly developed. As business slowly returns, many dealerships have created additional capacity through new and improved processes.
Planning is still very complicated and is not easy. Certain brands have had little change while others are amid significant change. Those auto dealers that own and operate more than one store may very well find themselves with several different strategies needed to comply with brand demands. Managing your individual retail brand across all vehicle brands will need to have a consistent external go-to-market message however the operating back end might be very different. This could complicate the movement of your team members between stores as you attempt to deploy the right skills into the right place.
At the moment brands are looking to have a closer relationship with customers and some are adopting strategies to insert themselves between the customer and dealer. For some brands this upsets the traditional apple cart and injects confusion.
I have learned over the years that where there is confusion there is opportunity. Your 2024 plan should have strategies to mitigate the confusion and turn this into an opportunity for your dealership. To successfully affect the opportunity might require you to become more aligned with your brand(s) than you have been in the past. It will likely also require you to be extremely flexible and nimble as OEM plans evolve and customer reaction varies.
According to DesRosiers Automotive Consultants, the pandemic has created a backlog of more than 1.1 million new vehicle sales. Although this bodes well for future new vehicle sales, it has the opposite effect on used vehicles and fixed operations. The backlog means that there will be a lag with fewer used vehicles available and a similar lag in customers in your service bays. Depending on how long it takes to fill the backlog, there could be a few years of continued used vehicle shortages and slower traffic through your service bays.
We are all going to have to exhibit discipline regarding new vehicle inventory levels. Although we often do not have control over this in our current push vehicle production systems, we must be diligent in ordering.
Supply shortages have been good in that it allowed reasonable gross margins to be earned with little to no inventory carrying costs. We grew up as dealers, however, always wanting large inventories. I wonder if the pandemic has created a permanent shift in consumer purchasing patterns in that ordering is now more acceptable than it has been traditionally.
Not too long ago, customers bought what we sold them, however, I wonder if we might have turned a corner where the customer now buys what they want and are willing to wait for it. If this is true, inventory levels will not need to be large.
One historical fact has been that many vehicles were produced that customers did not intrinsically want. Today, to some extent this is happening with certain brands, in that brands are producing the models and options that maximize the brand’s profitability at the expense of customer and dealer wants. Also, some brands are attaching the purchase of extra options or branded items as a prerequisite to order and secure a vehicle.
As the industry moves forward with more clearly defined channels there will be many brand experiments, much like throwing spaghetti against the wall to see what sticks. There will be a broad spectrum of approaches. We are far from certainty and far from being able to plan our longer-term futures accurately and completely.
We are in the early innings of industry transformation. Our customers are influenced by the way they purchase all items. What they experience with other goods and services is what they will likely want to experience with auto retail. Our brands on the other hand are influenced by financial projections predicting what adopting technology can produce.
As dealers we are the most important part of the continuum. We are the glue that connects all the dots. Our success will be influenced by both customers and brands over the long-term.
In the meantime, 2024 is right around the corner and we will need to manufacture short-term wins to remain in the race towards longer-term success.