Suddenly faced with the unprecedented challenge of having to reinvent the way they do business, America’s auto retailers in March faced the giant obstacles of a global pandemic and enforced business closure square in the eye and managed to keep their heads above water. And, as is often the case, they have come out the other side with some learnings that can only help them prosper as business returns to normal.
 
The first half of 2020 might be the most graphic representation of new learnings that many have ever seen. As the old saying goes, "Whatever doesn’t kill you makes you stronger."
 
One key takeaway from the past three months is that the ability to sell vehicles online, from inquiry to delivery, quickly transitioned from a "nice-to-have" to a requirement. Because many dealership showrooms were completely closed down by governmental orders related to mitigating the spread of the virus, the only way for dealers to sell vehicles was online. As a study commissioned by the National Auto Dealers Association and Roadster discovered, the quick transition to online sales could have long-lasting benefits.
 
While 76% percent of dealers surveyed said they were able to engage their customers more online, it was in salesroom efficiency that the numbers jump out. Of the dealers surveyed, 61% said that digital retailing improved their efficiency and 24% were able to increase the number of cars sold per person.
 
"The biggest takeaway in my mind is that if you can make your sales process more efficient, you can be leaner," said Michelle Denogean, chief marketing officer at Roadster. "And that goes both ways. I’m not saying that they should have less people. What I’m saying is as demand goes up, they [dealers] aren’t going to need to add as many people. They should elevate their expectations and really look at how they can be more productive using digital retailing."
 
The effects of the coronavirus pandemic forced dealers to explore how to do more with less. Digital retailing has provided a very welcome solution for many, enabling them to continue to sell cars when they otherwise might have been dead in the water.
 
While the Roadster/NADA study noted total sales volume was down markedly in the month of April, the volume of online deals grew by 49%. The study said online car sales accounted for 27% of total cars sold in April, compared to just 5%-10% in the months preceding the COVID-19 crisis.
 
But there is more to the trend than the fact that more and more dealers decided that the time had come to venture into online vehicle sales. The medical/economic crisis also triggered many dealers to take a long, hard look at their operations with the idea of gaining efficiency.
 
"It’s been a forcing function for them to really think about their business models as they relate to staffing and productivity and the impact from a profitability standpoint," Denogean said.
 
The study strongly suggests that digital retailing can help dealers be more cost-efficient. The benefits of online sales can improve efficiency in two key related metrics — vehicle sales per salesperson and vehicle sales per employee. According to the NADA, dealers in 2019 spent an average of $4.09 million in total personnel costs. With online selling, that figure likely could be trimmed.

 

The COVID-19 crisis became a living laboratory for that because dealers across the country were forced to reduce staff. According to the Roadster/NADA study, dealerships that cut personnel and had online retailing solutions sold an average of 18-plus cars per person in the surveyed month, a 38% increase over the average number of cars sold per person per month in 2019. At the same time, dealerships that reduced their staff to less than 25% but lacked a digital retailing solution sold an average of 12 cars per person.
 
One key reason that online selling worked so well is that saving time per transaction enables dealerships to sell more with less. With shorter transaction times, dealership staff can complete more transactions in the same amount of time. Online selling cuts transaction duration drastically because the car buyer does a significant amount of work prior to the completion of the deal, often unaided by dealer personnel.
 
The Roadster/NADA study showed that dealers who closed their showrooms and put much greater reliance on their Internet and business development centers saved a significant amount of time per transaction. According to the report, 68% of customers said that it took less than two hours for them to complete their purchase in April, in the midst of the COVID crisis, compared to 43% in February before showrooms shut down.

 

By empowering customers to complete the majority of the deal themselves, dealers not only saved time per transaction, but their smaller staffs were able to work multiple deals simultaneously instead of sequentially. These gains won’t be realized immediately after adopting digital retailing, Denogean said, because to gain the greatest advantages dealers must put the right process in place. But better overall efficiency driven by digital retailing certainly is possible.