After years of robust car sales, auto retail is now experiencing a softening market. It’s difficult to predict what’s coming next and while no one has a crystal ball, it’s clear that many showrooms are not as active as they were last year. Tightening up dealership processes could actually help dealers survive these choppy waters ahead but are they prepared to tighten their belts?
When times are good, everybody’s flush.
It’s human nature to hold off on belt tightening while things are going well. After all, most people, when they’ve got a wad of cash in their pocket, tend to throw caution to the wind. Refining critical processes takes a back seat to enjoying the ride because all we want is for it to never end.
Now that we’re in our 7th straight month of falling sales, it’s time to take a look at processes which help bring more value to our customers.
The “value chain” approach to dealership processes.
It will be those dealers who take a “value chain” approach to operational processes that will find themselves weathering the storm. I will be those who turn to their numbers and relentlessly reinvent themselves who will remain profitable.
I’ve spent most of my adult life running dealerships and frankly, I never let the numbers get away from me. Maybe that’s because I came into the business with very few resources and had to make things work on a shoestring. When I arrived at one store, there were ZERO processes in place…and I was tasked with literally doing everything. I worked every job in the dealership, except technician (I had to draw the line somewhere), and without my creation of useful dealership processes I never would’ve survived.
We had opened a Nissan dealership in Rosemead, CA that had been shuttered for 13 months. It was the owner and I, and about 6 other people that started that store. Within 6 months, we were selling 175 cars per month.
My whole freakin’ world was dealership processes.
Old habits die hard and in this case, that’s a good thing. Dealership processes may not be a sexy subject but when the storm comes your way, processes are a lifeline to survival.
In today’s auto retail environment, dealers must create and build value at every step.
Dealers must separate the useful activities (which allow the store as a whole to gain competitive advantage) from the wasteful activities (which hinder the store from being a leader in the market) in order to survive the challenges ahead.
There are many advantages to focusing on value-creating activities:
- Higher profits
- Better brand image
- Improved digital reputation
- Ability to charge premium prices
- Higher employee morale and lower turnover
- No more sleepless nights worrying that you’ve missed something important
What are the components of value chain dealership processes?
Dealerships engage in hundreds, even thousands, of activities in the process of converting brand awareness to net profit.
The idea of the value chain is based on the process view of dealership operations – the viewing of operations as a system, made up of subsystems each with its own factors in the conversion process.
The main systems where processes can be designed and improved are:
- Technological development and transformation
- Human resource management
- Marketing and sales
- Asset management
- Expense control
- Customer service and experience
Dealership processes streamline operations in such a way that dealers are able to deliver a greater value over and above the competitor. The more value a dealership creates, the more profitable it is likely to be.
“Value chain” Processes + Shrewd, Thoughtful Leadership = Superior Dealership Performance & Profitability
With this approach, a downturn in sales becomes an inspiration for improved processes. What needs to happen for you to enable value chain processes that create the greatest possible value for your customers?
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