Consider the following research findings about the up-and-coming generation of car buyers, known as Milennials or Generation Y:

  • Theirs is a “kinship economy,” according to J. Walker Smith, chairman of The Futures Company, a marketing research firm. As Millennials engage retailers, a positive experience is paramount. “It’s all about how we resonate with people,” Smith says. “They don’t want a relationship with your brand, they want relationships with other people.
  • They expect to “co-create” retail experiences, says Sheralyn Hartwell, executive director of Frank N. Magid Associates, which specializes in business strategy research and development. “They expect to have their own custom experience, and they expect to be co-creaters,” Hartwell says.
  • They believe they are a generation of “creators” who are part of a group that will “change outdated systems,” says Danielle Paponetti, director of ad sales research for Viacom Media Networks, which owns MTV and VH1.
  • They view cars as “appliances” that offer the ability to “explore and control” their destiny. They are less likely to get driver’s licenses when they reach driving age, and vehicle purchases often coincide with life events, such as a new job or relocation.
  • They use technology (smart phones, in particular) to research shopping decisions, and they “expect you to know more than they do” about the products/purchases under consideration, Hartwell says.
  • They are less than satisfied with the in-store experiences dealers offer, says Isabelle Helms, vice president, research and market intelligence for Cox Automotive. In particular, negotiation and paperwork are among the chief complaints they cite about buying vehicles, she says.

I gleaned these insights from a recent Cox Automotive-sponsored research summit in Atlanta. To me, the individual findings were not all that surprising—they ran consistent with what I’ve read and seen in the past. However, taken as a group, the insights got me thinking about three specific things dealers will need to do to remain relevant and satisfying retailers as they increasingly serve a new generation of smart, technology-astute buyers.

1. Align your sales process and strategy to emerging expectations: It shouldn’t surprise any dealer that tomorrow’s generation of vehicle buyers doesn’t like a purchase process that requires negotiation and up to four hours in the showroom to complete a deal. In fact, these are key drivers behind the growing number of dealers who have re-engineered their sales strategy toward a model that moves cars with little or no negotiation. Some are pressing the in-showroom sales timeline to 90 minutes and less.

This model requires two steps many dealers are still reluctant to undertake—putting “first pencil”-like prices on new/used vehicles online, and standing firmly behind their market-validated asking prices in the showroom.

To be sure, this sales strategy re-alignment isn’t easy. It’s really a cultural shift that requires payplan and process changes to advance a business model where transparency leads to trust and, in turn, trust leads to more cost- and time-efficient sales and improved profitability. Currently, dealers who have adopted the limited/no-negotiation models report positive early pay-offs, and greater satisfaction from Millennial/other buyers who are delighted to share their experiences with friends.

2. Embrace Technology: If anything, the findings listed above suggest that the speed of technological change for dealers will only increase. Millennial buyers like photos, but they love videos. They get frustrated when they can’t easily find prices or vehicles using mobile devices. More and more, they’ll also want to complete a greater share of their vehicle purchases online.

In her research findings, Hartwell shared that Millennials want to engage retailers who “get them.” This means dealers will need to know more about each customer before the first phone call or showroom visit—a level of understanding that is only possible with new technologies. In the end, dealers will need to make sure every customer engagement picks up where the last one left off.

3. Let go of the Gen Y stereotypes: Paponetti’s research reminds Baby Boomers like me that we can be dismissive of the positive traits Millennials can bring to a business. They consider themselves creative innovators who thrive in collaborative environments and question the “whys” behind processes that strike them as inefficient or outmoded. They’re technology “natives” for whom adapting to new technologies is relatively easy. They have a willingness to take risks and learn from mistakes. They are loyal and hard workers when they receive the near-constant level of feedback they need to shine and feel happy.

As dealers prepare for future buyers, they will be challenged yet again to let go of some of the traditional ways of retailing new/used vehicles. The good news: Based on the size of the Millennial demographic, there will be a lot of up-and-coming professionals entering the work force to help take their businesses where they’ll need to be.

 

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There’s a lot of talk in our industry about the difficulties dealers face finding—and keeping—good employees.

Much of the discussion often focuses on ways dealers and the broader industry can change the less-than-favorable reputation of automotive retail careers as a “last resort”-type option for people who, for one reason or another, can’t find work in other industries.

Of course, the onus for changing this reputation largely falls to dealers. They are the ones who, on a day-to-day, employee-by-employee basis must prove that automotive retailing can be a meaningful, rewarding and satisfying career choice for aspiring young professionals.

Last week, I received a link to a video (see below) the Germain Motor Company, run by dealer Steve Germain, is using to attract new employees. It features one of Germain’s sons, Austin, in a variety of dealership roles explaining why the dealer group seeks employees who are “consistent, take ownership and build strong relationships” and how the group invests in their success through autonomy, ongoing investment, technology and training. The younger Germain urges viewers to “stop looking for your next job and start your career today.”

COO John Malishenko says the video is part of broader effort at Germain to take its recruitment and retention efforts to the next level. “As businesses, we’re as people- and process-focused as any other industry, if not more so,” Malishenko says. “We hope the video will connect Germain to a younger generation of employees. We want them to know that if they share our values, they’ll share in our success.”

The video strikes me as a good example of the proactive efforts dealers will need to undertake to both change the perception of automotive retailing careers in general, and to attract and retain the next generation of employees who can help ensure the long-term prosperity and viability of our business.

 

 

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You might say the month-in-month-out focus of automotive retailing is both a blessing and a curse.

It’s a blessing when you’ve had a bad month. As the next month starts, the pain of a poor prior month tends to fade quickly.

Conversely, the month-to-month mindset is a curse when a really good month cascades into complacency when the calendar turns a page.

The challenge for dealers, of course, is to rise above the ups and downs of the business and stay focused on the long game of continuous performance improvement, irrespective of past failures or successes.

rick ricart A Velocity Dealer Turns Up The Heat—And Keeps It HotI was reminded of this higher order of operational excellence when I received a note this week from dealer Rick Ricart of the Ohio-based Ricart Automotive Group.

You may remember Ricart mentioned here recently for earning distinction as the No. 2 used vehicle retailer in the country. At the time, he pledged to make No. 1 for next year’s rankings.

Ricart and his team appear to be well on their way. They had a record-setting August with more than 770 used vehicle sales (more than double their monthly average a year ago), and he’s pushing his team to keep their collective feet on the accelerator.

In the note Ricart shared with his team, he gave them props for a record-setting month, and then focused their attention on next steps to finish the year, and start 2015 with an even higher degree of profitability and success. Here are some excerpts from the note, which I thought were worthy to share with the broader community of Velocity dealers:

“Welcome to September. A strong finish to August helped us deliver a record 771 retail used units. We took a hit on gross to get the units, but it helped move quite a few aged units, which is always good.

Switching gears and thinking about the 4th quarter, the key to the success of this department is all about Inventory and Velocity. We are past those summer months that huge volume of customers help hide some of the “dice rolls”, if you will. Time to tighten up the buying. Unless you are 100% sure we can make 6%-8% profit on day 21: Do not buy the car. Critical. I see too much repricing to target at day 14-21 that we are only asking a few hundred in markup. That has to stop now. We should be able to steal cars. The market is dropping. Don’t get tricked into over-paying….

Ricart’s note goes on to discuss game plans for specific, problematic vehicles, and ways to lower the group’s used vehicle inventory investment (e.g., “buy selective and smart”).

The note struck me as a great example of the kind of dealer-level involvement in used vehicle operations that is critical for success in today’s market. In addition, it’s another reminder that tomorrow’s used vehicle profitability and sales is rooted in the astute exercise of Velocity fundamentals today.

Congrats, Rick and team. Keep up the outstanding work!

 

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A Consumer Perspective On Vehicle Financing, F&I Practices

08.22.2014

  There’s been a fair amount of hand-wringing in the industry following the recent New York Times editorial that addresses the rise of vehicle financing for credit-challenged buyers and how some deals make their financial situations worse. The piece calls for greater regulation of the market and rules that would prohibit dealers from “gaining additional [...]

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A Parallel Between Electronic Dance Music and Retailing New/Used Vehicles

08.18.2014

On Sunday, The New York Times published an article about efforts by organizers of the Electric Zoo Festival, a three-day electronic dance music (EDM) event in New York, to curtail drug use among attendees. A year ago, the event shuttered a day early after two people died from apparent drug overdoses. In more recent weeks, [...]

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One-Price Dealers’ Time Has Come

08.15.2014

Below is a comment and my response to a recent blog posting, questioning the success of one-price dealerships. (if you’ve read the initial conversation, there’s more below.  Scroll down to “Additional Thoughts”) Good afternoon Dale I had the pleasure of reading one of your articles today. I found it interesting. However, it would be also [...]

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Two Bright Stars Shine In East Tennessee

08.08.2014

My travels this week took me to East Tennessee to visit two dealers, Daniel Johnson, GM of Johnson City Toyota and Dustin Walters, GM of Friendship Hyundai. The visits were part of a larger Cox Automotive program that aims to help dealers earn financial rewards from their investments in AutoTrader.com, Manheim and software companies like [...]

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Dealers As Hunter-Gatherers Or Farmers—Where Do You Stand?

08.06.2014

Here’s a question that’s had me thinking: Has the evolution of the automotive retail business reached a point where dealers need to stop hunting and start farming? The question came to mind during a conversation with an industry analyst. He offered an anthropologist-type view of the industry—some dealers are hunter-gatherers, while others appear to have [...]

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A Closer Look At The Evolution Of Used Vehicle Inventory Age Benchmarks

08.04.2014

It wasn’t too long ago that dealers routinely kept used vehicles for 90 days as retail units. More recently, dealers have adjusted this retail timeline to account for rising price competition and transparency spurred by the Internet, as well as the always-increasing costs of keeping cars in retail-ready condition on your lot. It’s now common [...]

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Dealer Discovery: Why “Total Gross” Matters Most In Used Vehicles

08.01.2014

I had an e-mail exchange with a Chicago-area Honda dealer the other day that I think is relevant for all dealers, especially those who have adopted the Velocity Method of Management. The dealer asked two important questions—What’s the optimal percentage of used vehicle inventory that should be maintained under 30 days of age?, and, What’s [...]

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