Uncontrollable Factors Affecting Dealerships | Dealers Compressed Episode NINE
Admittedly, the content of this episode isn't the most exciting thing to talk about. However, in a world of transparency, it's more imperative than ever to keep yourself educated to ensure you are able to best serve your customers working within these limits.
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Transcription
What do Presidential elections, building your dream home, and increasing OEM production efficiency have in common?
Well, in chapters 7, 8, and 9, Dale uses them to address some of the less talked about issues in day-to-day dealership management. Make no mistake, these issues have huge implications on the future of this industry.
First, industry regulation. There's now a Republican in the White House and many in the auto industry are hoping that it's less likely that widespread regulation take significant steps forward. Four daunting words: Consumer Finance Protection Bureau. The CFPB. Dale quantifies dealers' reliance on F&I profits to keep their operations afloat, accounting for upwards of 40% of both new and used department gross. With penetration rates with 85-90%, F&I income can top $2,000 a unit for some dealers. The CFPB is taking an ever closer look at dealers' practices here and Dale wonders what they might find.
Dale also addresses the ongoing recall issues, as well as the FTC's issues in franchise laws. Direct-to-consumer companies like Tesla are complicating matters even further for dealers. And although he tends to agree that the current administration may be less likely to advance a regulatory agenda, he warns that once the federal government demonstrates a keen interest in an issue, it never really goes away.
In chapter 8, Dale uses a great illustration about building a dream home to highlight the self-serving nature of many current data-solution providers. He paints the picture of a couple choosing the perfect plot, architecture, and systems of the new home. They to use a larger, more expensive well drilling company only to find out that their decision limited their ability to choose the fixtures to their liking and when they did, they had to pay extra for those that the well drilling company did not provide. In the end, they didn't even own the water.
Although it seems preposterous in a real estate example, Dale points out that this is actually what's happening to dealer data and it's stifling growth and innovation. He even recounts a situation in which a friend of his passed on investing in a promising digital solution which would have allowed dealers to deliver a better service experience. Why? Because the data integration fees were such a steep barrier to entry.
Dale goes into much more detail outlining his reasoning for addressing this issue and concludes by stating "The cat's out of the bag! Let's see how long it takes before someone catches it."
In chapter 9, Dale speaks specifically to the dissatisfaction of dealers regarding the way OEMs handle the production and allocation of new vehicles. He cites the frequent presence of dead stock as production currently misses the mark on consumer demand leaving many cars unsellable. Now, Dale does indeed empathize with the challenges of OEMs, such as changing standards and long-production cycles which force them to make decisions far in advance.
Also, occurrences like $2/gallon gas prove to be unforeseen, but significant influencers. But with all the requirements put on dealers, Dale deems it fair to suggest that OEMs could become better at aligning production and allocation with consumer demand. Dale admits that he isn't qualified to speak to "how" to do this, but to him, it seems like a very necessary step to the future success of dealers. He reminds everyone that when dealers have the right inventory, they know what to do. That's a win for everyone.
