The recent auto downturn had not only slowed down auto volumes, but it had also bought the auto dealerships' growth to a standstill. We had close to 300 dealerships shutting down, which is not only a business loss but also an employment loss for many. For those who survived the onslaught, now it is a patch of green pasture. The market has caught back and the market is very encouraging. Stocks are low and demand is high.
For those who are surviving today, we need to move ahead, but with caution. One needs to remember that we are in this industry for the long run, so knee-jerk reactions don’t help. We need to work on the various expenses and take control of them and at the same time work on various revenue options and maximize them.
The lion’s share of expenses comes under Manpower, rent, and Interest costs.
Here is a quick 5 step guide, which can help you work better during a recovery :
1.) Productivity is more important than manpower count.
We often measure productivity in terms of cars sold or cars serviced. But the approach needs to change:
a.) we need to look at the productivity of each revenue department. Per manpower productivity of Insurance team, Accessories team, Finance team. Set benchmarks for each department's manpower and chase productivity.
b.) Divide the Team into 3 categories : top 30% - avg. 30% - bottom 30%
In most dealerships, it’s the top 30% manpower which does 75%+ of the productive output. This means we need to work towards the retention and motivation of this staff.
The rest average 30% need to be personally worked in such a way that they aspire to move to the top 30%.
The bottom 30% is the excess fat you are carrying, it's time to burn the fat into healthy abs or trim it.
2.) Don’t blindly cut cost; Cut only Nonproductive cost:
People often start cutting marketing expenses or customer retention initiatives. This often doesn’t help, rather works on the contrary.
Rather, Look at non-revenue expenses and start trimming the bush. For example: Reducing the nonrevenue team size, multi-tasking, inter-departmental transfers, reduction in consumables cost, better payment terms and prices with vendors.
3.) Optimize Digital Tech (+) Customer Data Mining:
Acquiring, Retention, Engaging, Loyalty, Referral: All can be driven by simpler online tools which reduce the stress on excess manhours. Customer data mining often gives us the opportunity to upsell products/ or upgrade the customers. This comes at no or low acquisition cost.
4.) Give an Omni Channel Experience:
Customers today would reach out to you through Call / Web/ Walkin / Event, make sure you are able to give them an omnichannel standard experience. This would ensure the customer doesn’t feel the need to hunt for physical infrastructure, this also helps you to reach out to customers beyond your small geographies.
5.) VAS gives Money :
Often we are trying to push out car sales or push service count. But we often don’t lay emphasis on the VAS services. The sale of accessories, spares, upgrade programs, Cross-selling, finance often bring in margins up to 15% upwards.
This may seem small in value terms, but has a significant contribution to the overall financials. The above may seem easy to read, but the success of the same would be possible only if the same is tracked and monitored. As what is not measured never grows.