CATA News

Automakers and their dealers are faced with a new dilemma as the U.S. enters its second holiday season amid the COVID-19 pandemic: how best to advertise their vehicles when the supply of those vehicles is limited. 

 

Given the challenges of the global supply chain — and the well-documented auto manufacturing plant shutdowns that have taken place this year — there just aren’t as many vehicles for sale as usual. And that leads to questions about how much to encourage demand.

 

The answer, it seems, is to dial things back. A recent report by Reuters found that both manufacturers and local dealerships have decided to reduce the amount of advertising expenditures they’ll make this year.

 

Ad dollars already have been in decline during the pandemic. Analytics firm Pathmatics found that automakers reduced their digital advertising spending by $24 million, about 10%, between late July and the end of October, compared to the same time frame in pre-pandemic 2019. 

 

Another analytics firm, EDO, found that spending on broadcast television commercials during those same months was down $57 million, or 5% compared to 2019.

 

"Winter sales events are such an institutionalized event that it’s hard not to do them," said Kevin Krim, EDO’s chief executive. "But if they do their jobs really well, they could make people unhappy if the cars aren’t there."

 

Simply cutting back on advertising because the showrooms are a bit barren is not the straightforward solution it might seem to be. Data from PureCars shows that dealers that cut back on advertising spending between March and August this year had more of an overall sales drop-off than dealers that changed their advertising messages alongside spending more. PureCars found dealers who decreased the amount spent on advertising 50-89% had an average sales volume drop of 28%. But dealers who increased their ad spending by 9% had a sales drop of just 9%.

 

Marco Schnabl started in the automotive business 20 years ago selling vehicles at a car dealership in his native Germany.

He loves auto retailing, but one thing he didn’t like much there: the European business model of dealerships stocking low inventory levels and consequently taking vehicle orders from customers who would wait weeks and months for the automaker to make and deliver the vehicle.

That’s a marked contrast to the traditional U.S. way of selling cars: In-market consumers select a vehicle of choice from dealer lots (or web pages) teeming with inventory, and drive it away forthwith.

Schnabl, who went on to sell cars in the U.S., said: "I’m not a fan of the European system. It’s too much of a wait for customers. And as a salesman, you had to wait a long time for your commission check."

 

That said, he thinks the current nationwide circumstances of scant dealership inventory because a microchip shortage forced automakers to cut production necessitate implementing at least a stopgap build-to-order system in the U.S. 

"Consumers have heard the inventory shortage is a real problem, so mindsets have shifted enough to do preorders," said Schnabl, co-founder and CEO of automotiveMastermind, a provider of predictive analytics and marketing automation software for dealerships.

His company has expanded its data-driven product offerings to help dealers handle inventory challenges, engage with shoppers and retain customers.

"Dealers should figure out what is possible, and work with customers to set expectations," he said in explaining how an order-and-wait system could catch on in the U.S., if only temporarily. "This is the best time to do it."

He recommends inventory-strapped dealers tell customers, "‘I want you to have a great experience, so let’s order a car now." The promise of, say, a $500 loyalty discount, would reward customers for their patience."

If a purchase order requires months-long waits, dealers should communicate regularly with customers to let them know the store hasn’t forgotten them, Schnabl said. 

Could an ordering system like that permanently take root in the U.S., switching away from dealers stocking acres of inventory? Schnabl doubts it. "It’s unrealistic to think that two or three years from now, the U.S. would have a European-like system."

For one thing, automakers want inventories that are higher than they are now. Most manufacturers are publicly owned companies facing stockholder pressure to sell lots of cars and carve out a healthy market share, he said. "There’s also the capacity issue" of keeping auto factories humming, not idle or even operating below full capacity. Some major auto plants have shut down completely for lack of enough semiconductor microchips.

But operating at full or near-full capacity doesn’t mean pushing excess numbers of vehicles on the market. That push-rather-than-pull strategy has been tried before, usually in desperation, with costly consequences, especially to residual values. But in any enterprise supply should come close to meeting demand. Right now, that’s not happening in the auto industry.

 

Some dealers are fine with the current inventory situation. They say it allows them to sell cars at higher profits. And it takes less selling time if customers are lined up waiting to buy.  

 

"The (inventory) shift has been so rapid, a lot of people wonder what happened," Schnabl said. "It’s a wild time. Dealers are resilient, especially in this country. The best dealers are thinking about keeping their customers. Dealers need to make money; I’m a firm believer in that. But not at the risk of maximizing profits to the point of losing loyalty, and we’ve seen loyalty dropping lately."

 

Because of the new-vehicle inventory shortage, many consumers are finding their way to the dealership used-car lot. That’s led to an inventory shortage there, too.

 

Schnabl said automotiveMastermind’s predictive analysis capabilities allow dealers to find creative ways to replenish their pre-owned vehicle inventories.

 

One way is to use customer-based data to reach out to people who statistically are likely prospects to sell their current vehicles.

 

"Look at customers who will be in the market soon according to our predictive analysis," Schnabl said. "Some households change vehicles like clockwork. Some consumers have multiple vehicles in their garage. It is quick inventory acquisition to reach out to them."

 

 The Federal Trade Commission is blanketing industries with a clear message that, if they use endorsements to deceive consumers, the FTC will hold them responsible with every tool at its disposal.

The rise of social media has blurred the line between authentic content and advertising, leading to an explosion in deceptive endorsements across the marketplace. Fake online reviews and other deceptive endorsements often tout products throughout the online world. Consequently, the FTC now is using its Penalty Offense Authority to remind advertisers of the law and deter them from breaking it. By sending a Notice of Penalty Offenses to more than 700 companies, the agency is placing them on notice they could incur significant civil penalties — up to $43,792 per violation — if they use endorsements in ways that run counter to prior FTC administrative cases.

"Fake reviews and other forms of deceptive endorsements cheat consumers and undercut honest businesses," said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. "Advertisers will pay a price if they engage in these deceptive practices."

 

The Notice of Penalty Offenses allows the agency to seek civil penalties against a company that engages in conduct that it knows has been found unlawful in a previous FTC administrative order, other than a consent order.

The Notice sent to the companies outlines a number of practices that the FTC determined to be unfair or deceptive in prior administrative cases. These include, but are not limited to: falsely claiming an endorsement by a third party; misrepresenting whether an endorser is an actual, current, or  recent user; using an endorsement to make deceptive performance claims; failing to disclose an unexpected material connection with an endorser; and misrepresenting that the experience of endorsers represents consumers’ typical or ordinary experience.

Companies receiving the notice represent an array of large companies, top advertisers, leading retailers, top consumer product companies, and major advertising agencies. A full list of the businesses receiving the Notice from the FTC is available on the FTC’s website. A recipient’s presence on this list does not in any way suggest that it has engaged in deceptive or unfair conduct.

In addition to the Notice, the FTC has created multiple resources for business to ensure that they are following the law when using endorsements to advertise their products and services, which can be found on the FTC’s website.

The Commission voted 5-0 to authorize the Notice and its distribution.

 

As supply chain disruptions and effects of the pandemic continue, new vehicles are hard to find on dealership lots coast to coast. Nevertheless, customer satisfaction with the vehicle purchase experience has held since last year, according to an annual J.D. Power study released this month.

The 2021 U.S. Sales Satisfaction Index Study found overall sales satisfaction remains at 789 points (on a 1,000-point scale). Satisfaction with dealerships where buyers purchased their vehicle increased two points to 841, while satisfaction with rejected dealers declined six points to 632. 

The buyer satisfaction increase is buoyed by buyers receiving more money for their trade-ins than they expected at the time of new-vehicle purchase. Year over year, the percentage of buyers who got more than they expected for their trade-in increased nine percentage points in the mass market segment and eight percentage points in the premium segment. However, satisfaction among vehicle buyers significantly decreased year over year in the inventory-related factors for website (-14 points) and at the dealership facility (-16 points). 

"Despite the lack of inventory, dealerships have overcome what might be thought of as a challenging sales environment for shoppers," said J.D. Power’s Chris Sutton. "Right now, it’s hard to see the light at the end of the supply chain tunnel, so dealerships need to continue to sell vehicles through their inbound pipeline and help customers with special orders. However, the silver lining for customers is that trade-in values remain high and that has had a positive effect on customer sales satisfaction." 

The study also found that satisfaction with the variety of dealership inventory significantly decreased 0.55 points (on a 10-point scale) among mass market shoppers and 0.42 points among premium shoppers during a three-month period from March through May 2021. 

Among key findings of the 2021 study:

 

• If you build new vehicles, buyers will come: Manufacturers struggling most with inventory shortages are losing shoppers to competitors. The percentage of shoppers rejecting a brand due to inventory shortages is most prevalent among domestic truck brands. One in four shoppers, on average, rejected one vehicle brand or another because dealerships didn’t have the exact vehicle they wanted. 

"The good news for dealers is that 78% of rejecters who reject a dealership due to inventory shortages indicate they will consider the dealership for future vehicle purchases. In other words, they’re not blaming the retailer for an inability to find their new vehicle," Sutton said. 

 

• Buyers of new battery-electric vehicles less satisfied with sales experience: There is a large disparity in satisfaction among buyers of battery-electric vehicles and of internal combustion engine vehicles. The overall buyer satisfaction index is 54 points lower for BEVs (790) than for traditional gasoline-powered vehicles (844). A cause for this is dealership personnel vehicle knowledge/expertise, with more than a full point difference in sales satisfaction between BEV buyers (7.59 on a 10-point scale) and gasoline buyers (8.72). 

"BEV buyers are a unique challenge for dealers," Sutton said. "As manufacturers ready new model launches, now is the time to ramp up training and knowledge of BEVs and related services—such as charging and aftersales requirements—as buyers will undoubtedly have more questions about them." 

 

• Remote buyers more satisfied with digital retailing: Among those buyers who are willing and able to purchase their vehicle without having to physically visit their selling dealer, the study found that satisfaction is much higher in both the premium and mass market segments than among those buyers who go to the dealership. "The ‘Amazon effect’ of seeing, buying and having a product delivered to your doorstep has made its way into vehicle-buying and it is here to stay," Sutton said. 

Now in its 36th year, J.D. Power’s sales satisfaction study measures satisfaction with the sales experience among new-vehicle buyers and rejecters (those who shop one dealership and purchase elsewhere). Buyer satisfaction is based on six factors (in order of importance): delivery process (28%); dealer personnel (21%); working out the deal (19%); paperwork completion (19%); dealership facility (10%); and dealership website (4%). Rejecter satisfaction is based on five factors: salesperson (40%); price (23%); facility (15%); variety of inventory (12%); and negotiation (10%). 

 

The study is based on responses from 35,387 buyers who purchased or leased their new vehicle from March through May 2021. 

 

Cary C. Bosak, 61, CEO of the 12-franchise Bosak Auto Group in northwest Indiana, died Nov. 5 after a heart attack.

 

Part of the third generation of the Bosak family business, Mr. Bosak attended the University of Notre Dame and he returned to the school for all of the football team’s home games.

 

He served on the boards of the Andrean High School Foundation and St. Mary Medical Center, and he was a benefactor of the American Heart Association; the Juvenile Diabetes Research Foundation; and the new Dean and Barbara White Community Center, to name a few. His dealerships sponsor youth athletics and raise money for schools, community centers and more.

 

Mr. Bosak’s attitude and work ethic inspired the best from all who worked alongside him. He noted that his professional wins were rarely, if ever, an individual accomplishment, and he made sure celebrating them wasn’t, either.

 

Survivors include his wife, Jennifer; their children Cameron, Carson, Logan and Caden; his mother, Barbara; brothers Skip (John) and Greg; a sister, Theresa; and many nieces and nephews. 

 

Memorials appreciated to the American Heart Association.

 

Accurate Office Supply is a 4th generation family-owned business serving the greater Chicago area since 1946 and is excited to be an approved CATA Member Partner. We believe that this strategic alliance with the CATA is a great way to align the interests of the CATA, Accurate Office Supply and all the CATA dealer members together. 

Our company was founded by our great-grandfather, Randall Krelle, who opened a pen store on West Washington Street near Chicago’s near-West Loop. Over the years we have grown and changed with the times. The company today is proudly owned and operated by brothers Joe and Louis Krelle.

 

At Accurate Office Supply our promise is value through products, service and support. 

 

Value in the products we sell. Our main product offerings are office products, janitorial/sanitation, break room/kitchen and warehouse supplies purchased directly from some of the best names in their industries such as 3M, BIC, Rubbermaid, Sharpie, Swingline, Hewlett Packard and Georgia Pacific. We are dedicated to helping in many areas of your office management and productivity. We sell paper, toner, pens and notepads. We also sell chemical cleaning solutions, bath tissue and coffee. We help with custom stamps (notary) and specialize in custom marketing materials such as branded pens, notepads, USB sticks and drinkware. Accurate also is a partner with manufacturers that offer specialized print services. There are so many areas where Accurate can help source supplies that move your dealership forward. If you have a need in the workspace, we have products to help. 

 

Value in service. Service to the customer is in our DNA. We have next-day delivery on over 120,000 products with our own drivers and fleet. Our website is designed for the buyer with multiple aids such as search, history and quick lists. If you have an immediate need, stop spinning your wheels, call us directly and talk to a real person who is ready to help. Lastly, if you are an existing customer, you will have your own dedicated salesperson keeping your pricing competitive and helping with any special needs that may surface. 

 

Value through support. There are many vendors to meet your office product needs, but Accurate Office Supply has taken the extra step to align our interests with your interests through the CATA. That is why 2% of all purchases with Accurate Office Supply will go back to support CATA and aid in their efforts to support you, the automotive dealer members. 

 

Accurate Office Supply is the premier choice for your office product needs. Together we keep your spend right here in the Chicago market, our very own employees walk in your doors to get service, maintenance and purchase new cars. This local spend also supports CATA with every dollar spent. We look forward to reaching out to all the dealer members to establish business relationships and talk about what we can do to earn your business and, in time, your trust. Thank you for allowing us to be a part of your community. 

 

Legislation supported by the CATA and the IADA to remove the $10,000 cap on first-division motor vehicle trade-ins takes effect on Jan. 1. If a customer makes an advance trade-in of a first-division vehicle that is valued at more than $10,000 and waits until then to use the credit, the customer will be entitled to a full trade-in credit.  

 

Put another way, the value of the trade-in credit is based on the date the credit is used, not the date the vehicle is traded in. 

 

One hundred fifty-one CATA dealer members reported a combined 884 unemployment claims during the third quarter of 2021 to Sedgwick Claims Management Services, Inc., which has been serving CATA dealers under various names since 1979. The company’s efforts saved those dealers a total of $4.8 million in benefit charges by contesting the claims.

 

Sedgwick monitors any unemployment claims against its clients and contests all unwarranted claims and charges. The company counts about 241 CATA dealers among its clients.

 

Claims that can be protested and subsequently denied help minimize an employer’s unemployment tax rate. The rate can vary between 0.675 percent and 6.875 percent of each employee’s first $12,960 in earnings.

 

The 2021 average unemployment tax rate & new employer rate for Illinois employers is 3.175 percent, or about $411.50 annually per employee ($398 in 2020). Rates have been improving since 2012, with a slight increase in 2021. However, rates are expected to increase in 2022 due to depleting state trust fund balances.

 

"The unemployment tax really is the only controllable tax in business, in that it’s experience-driven," said Bruce Kijewski of Sedgwick. An ex-employee’s claim affects the employer’s tax rate for three years.

 

For new enrollees, Sedgwick client fees amount to $2.85 per employee, per fiscal quarter. For the fee, Sedgwick monitors all unemployment claims; files any appeals; prepares employer witnesses for hearings, as necessary; represents the client at any hearings; verifies the benefit charge statements; and confirms the client’s unemployment tax rate.

 

For more information, including how to retain Sedgwick’s unemployment services, contact Kijewski at (773) 824-4322 or Bruce.Kijewski@Sedgwick.com.

 

The next CVR Illinois Quarterly Webinar is 10- a.m.-12 p.m. Nov. 18. Registration is $49 for customers, $59 for non-customers.

 

Topics to be reviewed include:

 

• How to Process a Lease Buy Out

• Inventory

• Processing a Conversion Title in CVR

• Secure POA VS Sec of State POA

• Changes coming Jan. 1

- Conversion Title Fee

- Trade Tax Cap Going Away

- Electric Plates

- Title Fee going to $155

• 90-Day Drive Away Ordering Process and Fee

• Forms Explanation

• Processing an ATV Application on CVR

 

The presentation will be led by CVR Account Executive Joey White, who has 21 years’ experience in state regulation processing.

 

Reminder: $10,000 cap on vehicle trade-in credits expires Dec. 31

Legislation supported by the CATA and the IADA to remove the $10,000 cap on first-division motor vehicle trade-ins takes effect on Jan. 1. If a customer makes an advance trade-in of a first-division vehicle that is valued at over $10,000 and waits until then to use the credit, the customer will be entitled to a full trade-in credit.  

 

Put another way, the value of the trade-in credit is based on the date the credit is used, not the date the vehicle is traded in. 

 

Pete Sander, who has been president of the Illinois Automobile Dealers Association since 1985 and an employee there since 1975, will retire at year’s end, the IADA announced Nov. 5. He will be succeeded by Joe McMahon, the IADA’s current director of government affairs.

 

After graduating from Northwood University in Michigan, Sander began at the IADA as a field representative networking with members. He counts as one of his proudest professional achievements acquiring the land to build a four-story office for the association a few blocks from the Illinois State Capitol.

 

Sander was elected in 1994 as president of the Automotive Trade Association Executives, the national group of his counterparts in other states. In 2004, he was recognized by Northwood University, for his contribution and dedication to the auto industry. He also has been recognized for his work with the Secretary of State’s office in representing dealers’ interests on the SOS Dealer Advisory Committee. And under his tutelage, the IADA-CVR program came to fruition and has been a valuable member service and partnership for the association.

 

"It has been my pleasure and honor to lead the IADA and be involved with such a dedicated staff to work with and for the many volunteer dealer members who have participated with the IADA over the past 46 years," Sander said. "I thank you for the opportunity."

 

"With his leadership," said Rick Yemm, the association’s 2021 chairman, "the IADA is recognized as one of the stronger state dealer associations in the country as well as in the Springfield association community."