Digital Dealer - December 2017 - 10

By Dale Pollak
Founder,
vAuto

// Ownership

3 Must-Dos to
Combat Dealer
Margin Declines
How many dealers
figured they'd make
up for ever-smaller
margins in new and used
vehicles by selling more
cars in 2017?
If you asked the
question in a room full of
dealers, I suspect most, if
not all, hands would be in
the air.
"You make up your
gross in volume" is the
age-old rule of thumb in
the car business.
But what if the thumb
is broken, and the rule
doesn't fit anymore?

10

DECEMBER 2017

That's the situation in
today's retail automotive
market.
Through June of this
year, the National Automobile Dealers Association (NADA) reports
that dealers are seeing
declines in two important
places-on the gross and
net profits they realize
when they retail new and
used vehicles, and in the
overall number of vehicles
they actually retail.
Gross/net profits:
NADA reports that gross
profit as a percentage

D I G I TA L D E A L E R . C O M

of new-vehicle selling
prices dropped below six
percent, to 5.9 percent, in
the first half of 2017 compared to the same period
in 2016. In used vehicles,
the gross as a percentage
of the sales price dropped
to 12 percent.
Meanwhile, the net profit per new vehicle retailed
fell 74 percent to -$396,
and the net profit for each
used vehicle retailed fell
nearly 50 percent to $112.
Retail sales: In the
first half of 2017, dealers averaged 449 new

vehicle retail sales, up
just two vehicles from the
same period a year ago.
In used vehicles, dealers
saw a slight drop, as they
averaged 358 retail sales,
down from 362 a year ago.
These dealership data
points suggest that dealers
who believe they can retail
their way to improved
profits are probably kidding
themselves in the current
market. If the strategy
worked, shouldn't we see
decidedly different numbers from NADA?
To me, the data amounts
to a call to action. Dealers
need a better way forward
that doesn't rely simply on
selling more cars to make
more money. Similarly, I
don't think cutting expenses will provide dealers
sufficient relief from the
combined pressures of
margin compression and a
softer sales environment.
I believe the best
way forward rests with
increased operational
efficiencies. Dealers simply
have to find a way to sell
and service customers
with greater efficiency and
lower costs.
The good news here
is that most dealers have
three areas of long-standing inefficiency that, if
addressed, can help them
achieve the higher levels
of operational efficiency,
productivity and profitability
they need to thrive in the
years ahead:
Human capital: Dealers
continue to suffer from an
average annual turn-over



http://www.DIGITALDEALER.COM

Table of Contents for the Digital Edition of Digital Dealer - December 2017

Digital Dealer - December 2017
Contents
A Letter from the Show Director
What Real Commitment Looks Like
Could Your Culture Use a Little MAGIC?
3 Must-Dos to Combat Dealer Margin Declines
The Internet & Phones Are the NEW “Showroom” … Your Cheese Has Been Moved
Your Limitation Is Not What You Don't Have, It's What You're Not Using
Year-End Spend Management Assessment – Setting Up for a Successful 2018
Vehicle Merchandising: Use Features Not Price
One Size Fits All No Longer Applies
Your People Are Your Brand!
KATIE BOWMAN COLEMAN Bowman Chevrolet
6 Reasons to Do an Annual Social Media
Are You Future Ready?
Rethink How to Market with Facebook and Instagram
What Your Dealership Can Learn from Carvana
Disrupting the Buying Cycle: Turning Service Leads into Sales Dollars
How Online Payments Can Be the Catalyst for a Superior Customer Experience
We Don’t Need No Stinkin’ Tech Training – We Have Good Teeth
Dealers Say Fixed Ops is the Most Important Department
Digital Dealer - December 2017 - Digital Dealer - December 2017
Digital Dealer - December 2017 - Cover2
Digital Dealer - December 2017 - 1
Digital Dealer - December 2017 - Contents
Digital Dealer - December 2017 - 3
Digital Dealer - December 2017 - A Letter from the Show Director
Digital Dealer - December 2017 - 5
Digital Dealer - December 2017 - What Real Commitment Looks Like
Digital Dealer - December 2017 - 7
Digital Dealer - December 2017 - Could Your Culture Use a Little MAGIC?
Digital Dealer - December 2017 - 9
Digital Dealer - December 2017 - 3 Must-Dos to Combat Dealer Margin Declines
Digital Dealer - December 2017 - 11
Digital Dealer - December 2017 - The Internet & Phones Are the NEW “Showroom” … Your Cheese Has Been Moved
Digital Dealer - December 2017 - 13
Digital Dealer - December 2017 - 14
Digital Dealer - December 2017 - Your Limitation Is Not What You Don't Have, It's What You're Not Using
Digital Dealer - December 2017 - 16
Digital Dealer - December 2017 - 17
Digital Dealer - December 2017 - Year-End Spend Management Assessment – Setting Up for a Successful 2018
Digital Dealer - December 2017 - 19
Digital Dealer - December 2017 - Vehicle Merchandising: Use Features Not Price
Digital Dealer - December 2017 - 21
Digital Dealer - December 2017 - One Size Fits All No Longer Applies
Digital Dealer - December 2017 - 23
Digital Dealer - December 2017 - Your People Are Your Brand!
Digital Dealer - December 2017 - 25
Digital Dealer - December 2017 - KATIE BOWMAN COLEMAN Bowman Chevrolet
Digital Dealer - December 2017 - 27
Digital Dealer - December 2017 - 28
Digital Dealer - December 2017 - 29
Digital Dealer - December 2017 - 6 Reasons to Do an Annual Social Media
Digital Dealer - December 2017 - 31
Digital Dealer - December 2017 - Are You Future Ready?
Digital Dealer - December 2017 - 33
Digital Dealer - December 2017 - Rethink How to Market with Facebook and Instagram
Digital Dealer - December 2017 - 35
Digital Dealer - December 2017 - What Your Dealership Can Learn from Carvana
Digital Dealer - December 2017 - 37
Digital Dealer - December 2017 - Disrupting the Buying Cycle: Turning Service Leads into Sales Dollars
Digital Dealer - December 2017 - 39
Digital Dealer - December 2017 - How Online Payments Can Be the Catalyst for a Superior Customer Experience
Digital Dealer - December 2017 - 41
Digital Dealer - December 2017 - We Don’t Need No Stinkin’ Tech Training – We Have Good Teeth
Digital Dealer - December 2017 - 43
Digital Dealer - December 2017 - 44
Digital Dealer - December 2017 - Dealers Say Fixed Ops is the Most Important Department
Digital Dealer - December 2017 - 46
Digital Dealer - December 2017 - 47
Digital Dealer - December 2017 - 48
Digital Dealer - December 2017 - Cover3
Digital Dealer - December 2017 - Cover4
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