by Clare Hetherington
•
1 March 2021
The past few months have been hard on dealerships. Battered by the COVID pandemic, downgraded overall market growth projections for 2019-2020 and predicted growth rates (McKinsey) expected to dip anywhere between 4.9% in an optimistic scenario to 11.6% in a conservative scenario. New vehicle sales have slowed down considerably, which has translated to a slower expansion of vehicles in operation (VIO). According to IHS Markit, 2020 is the fourth straight year the average vehicle age in the U.S. increased, extending a trend over the last two decades during which Americans hang on to their cars and trucks longer. So how is this different from previous recessions? COVID-19 has created an economic situation that is fundamentally different from any previous crisis. According to McKinsey, GDP will decrease, as it typically does during downturns, but the coronavirus crisis will also introduce additional aftermarket-relevant factors that were absent in the 2007 to 2009 financial crisis: fewer collisions, lower retail traffic, a significant increase in digital channels and e-commerce volumes, as well as lower public transportation use. As featured heavily at the recent NADA expo, new factors, such as increased digitization, could have a positive effect on aftermarket sales and potentially deliver a positive and stabilizing influence. Arguably, the most visible change will be the digitalization of parts and services retail across the customer purchase journey. Such trends will accelerate, catalyzing the recovery of the aftermarket. Frost & Sullivan estimate the adoption of digital channels in parts and accessories retail to pick up the pace, expanding by 17% in 2020. It is likely that apprehensions over contamination at workshops will boost the uptake of digitally enabled, on-demand service models, giving rise to contactless options. Accordingly, mobile and contactless delivery of parts and services are predicted to surge. Frost & Sullivan also predict that this will be accompanied by the development of online marketplaces for booking parts and services. If digitalization spurs changes, so does an aging vehicle parc. The average vehicle parc age in the US is already about 11.8 years with such trends echoed in other parts of the world. With these implications and the forecast impact of lower new vehicle sales it is likely that these ages will only increase in the upcoming years; impacting heavily on the warranty revenue usually generated. So how can dealerships compensate for lost vehicle and warranty servicing sales? The answer is simple and one that has been documented for some time. Dealerships need to optimise revenue from all sources and most importantly, increase high-margin, low-risk aftersales opportunities such as tire sales. Dealerships don’t always want to sell tires, but… Auto dealers need tire sales and service to keep customers coming back to their service departments Some of the fastest growing dealership networks have been able to maintain and increase revenue through 2020 with the supply of tire sales. Most importantly these businesses have also recognized that by offering these aftersales services they are able to close their customer retention cycle, maintaining footfall into their dealerships by making sure that the vehicle sale does not conclude their business. Recent restriction have led to an acceleration in digital retailing, with the coronavirus credited with speeding up dealerships' adoption of digital retailing tools and processes. Auto retailers had previously been slower to implement e-commerce than some other industries, but that shift accelerated as dealers worked to sell cars remotely when they couldn't in person. That led to more online buying and e-signing options. Best performing dealerships have service departments that have rolled out more contactless options, from mobile check-in capabilities to mobile service vans and online tire sales. Auto repair was generally considered an essential service during the spring shutdowns and dealerships expanded their use of pickup and delivery of customers' vehicles, bringing greater convenience at a time when customers were concerned about health and safety. Dealerships must be first to offer replacement tires, or it could be the last time you ever see your customer. According to NADA, most customers buy replacement tires from the FIRST person that identifies the need. Since dealerships are likely carry out warranty work on the vehicle up to the time that the first set of replacement tires are needed, it’s likely they will see the customer first. With all of this going for dealerships, one would naturally assume that OEM Car Dealerships could and should dominate the replacement tire business, so why don’t they? The main reason dealers don’t sell more tires is that they don’t prompt the sale. Tires are not checked on all vehicles entering the dealerships, so customers are not aware of their need and are not asked for their order. Dealerships don’t identify the customers need for tires so don’t offer the replacement tires right there on the service drive. This a huge loss of revenue but also can leave the consumer driving a dangerous vehicle. Another major concern, (and a way that independents outperform dealerships) is their lack of investment in technology. If it is hard for the customer or technician to identify the correct tires for the vehicle, the customer will look elsewhere. How can we help? We provide qualified Vehicle, Tire and Wheel Fitment and Product Data, enabling you to visualize and optimize your products online and within ERP-systems. Our Information is matched to ACES/AAIA and seamlessly integrates with DMS, e-commerce platforms and internal inventory systems. Easily access manufacturer vehicle descriptions and specifications, OE tire and wheel fitments and OE upstep specifications. You can link tire and wheel images and product data with EAN product numbers, and EU compliant labelling, TPMS specifications and TUV documents where applicable. Available globally with 100% fitment accuracy against vehicles in operation. With data that covers passenger cars, motorcycles and commercial vehicles; all from the same API’s, you can also offer search by License Plate, or Year, Make and Model. It’s simple and easy to integrate with consumer-facing websites, point of sale systems, e-commerce platforms and internal back-office systems. We can offer both REST JSON and SOAP XML so you can decide which approach is best for your needs. DriveRightData’s products and services increase dealership influence and maximize the touch points with a consumer post vehicle sale, thus increasing customer retention. It also creates the support for increased sales and revenue opportunities through enabling the dealer to facilitate a cradle to grave proposition and offer a connected and touchless environment for the consumer. Often for dealerships, post-sale opportunities for the sale of tires and potentially wheels are lost to traditional tire retailers. Use of the DriveRightData API’s supplement aftersales revenue opportunities for networks, improving the consumer user experience through the provision of data supporting the sale of tires and potentially wheels. The use of data to target the sale of tire and wheel products, can help the market offset any lost revenues from a potential slowdown in new and used car sales in the months ahead, as the market and wider economy adapt to the impact of lockdown. In addition, it can also help to close the loop on a full, ‘in-life’ vehicle offering to the consumer. With the information gained from the API’s used as a hook proposition. By enabling the dealer / OEM to facilitate a discussion around the purchase of a new or used vehicle, i.e., persuading the consumer to use the money they intend to spend on tires, as the basis of a deposit on a vehicle. Contact us now to discuss exact requirements or to activate your free trial.