At the recent AICPA National Automotive Conference in Orlando, three speakers discussed our changing retail market. MaryAnn Keller of Furman Selz, Inc. provided the audience with a forecast of gains by Toyota and Honda in the coming years, and an overview of what has happened in the past year to our marketplace. One of the key points that she made was how the capital from public ownership will change how we operate dealerships. Investors want growth and the key players will provide this by acquiring more and more dealership groups. When this trend ends, the management of these corporations will have to maintain growth by reducing costs.
The three key areas on which these corporations will focus are:
· Reducing floorplan costs by obtaining credit lines at rates less than normal
· Reducing advertising costs by creating their own association
· Reducing back office costs by consolidation of functions
This was confirmed by another speaker, Mark Thimmig of Republic Industries. They plan to use their strength of 196 franchises and over 50,000 employees to leverage resources. One key area where they plan to save costs is through systems technology. From their experience with Blockbuster Video, they found that tracking rentals provided them with the stocking information that not only drove purchasing but also influenced Hollywood production. Republic plans to have fewer dealer systems providers and will be shopping for a provider that won't force them into the normal "box." They are capable of performing their own support with an MIS department of over 100 employees and an established help desk that supports their auto rental system. This system can tell producers which leading lady is the most popular with which leading man. Providing this type of economic pull information will change how vehicles are built.
The final speaker, Pete Ellis of Auto By Tel, discussed the Internet selling process. As an odd coincidence, I had purchased a vehicle from Pete Ellis' dealership in San Diego over 20 years ago and recently used his Auto by Tel Internet page to assist in purchasing a new truck over the Internet last month. Mr. Ellis provided cost comparisons between an average personnel and marketing cost of selling 100 vehicles ($101,500) and the cost of using an Auto by Tel department to sell the same amount ($18,500). Obviously this type of structure will mean that dealers can either sell their vehicles with lower margins or will just make a lot more money.
How can you use these trends to change the way you run your dealership? One factor that runs through all three discussions is technology. Technology will help you cut back office costs by enabling consolidation of accounting functions. Technology will enable you to track which vehicles to order and which ones to quickly get rid of. Technology can replace a sales force that is difficult to acquire, train and manage. These changes won't come easy, but if you start now with a business plan for migrating to the system that you need, you'll save a lot of money and time in avoiding costly mistakes.
By the way, I'll be a speaker at the upcoming NADA convention. The topic will be "Forty Things To Do With Your Computer System." I hope to see you there!