“The supreme art of war is to subdue the enemy without fighting.” – Sun Tzu, The Art of War
As I look ahead to the coming year, I see a trifecta of potential trouble for dealers:
First, dealers will want to continue the pace of renewed new and used sales volumes and profitability they enjoyed in 2013.
Second, consumers will get even hungrier for the best deal, heeding calls from TrueCar and others to not “overpay” to buy a vehicle while getting a guaranteed, no-haggle price and experience.
Third, we may well see a softening of consumer demand in new and used vehicles — even as factories want to maintain higher levels of production, and lease returns help normalize supplies of used vehicles.
Taken together, I believe these factors will put more pressure on dealer margins and accelerate the shift in our business from highly to hyper-competitive. My fear is that many dealers will run headlong into this challenging environment without re-assessing their game plan or strategy. Like they’ve always done, the dealers will go toe to toe with other dealers and their customers to win more deals, even though such battles ultimately mean less for the bottom line.
This thinking has led me to Sun Tzu’s concept of “winning without fighting” and a key question: How can dealers win without fighting in their quest to sell more new and used vehicles and make more money?
For sure, part of the answer lies in knowledge. The dealers who are most astute about supply and demand data for new and used vehicles in their markets will have an advantage. As Sun Tzu once said, “If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.”
The good news here is that technology and tools are available to help dealers mine the market data and spot their strengths and weaknesses in the context of the competition. In new and used vehicles, it’s easier now than it’s ever been to see all the competing cars and their prices — and execute your retailing strategy accordingly.
I don’t believe there will be a single strategy that will help dealers win without fighting. Dealers are too different and distinct for that to happen. However, I do believe the most successful strategies will share four common elements:
1. Proper pricing.
Most dealers understand the necessity of market-transparent pricing in used vehicles, and many are essentially “transaction transparent” when they put asking prices on cars. In new vehicles, however, it’s still mostly a crapshoot for dealers. I’m convinced transaction-like new vehicle pricing will be the next new frontier for dealers — an evolution that occurs as dealers “know the enemy” and themselves.
2. Proper promotion.
With new technology and tools, dealers can now tell the exact equipment and features that appeal most to new and used vehicle buyers. Moving forward, the challenge will be showcasing each car’s specific value factors in the most compelling way (via descriptions, photos, videos, etc.) to catch a buyer’s interest. On top of that, buyers will increasingly want to validate you as a dealer who truly offers a less time-consuming, superior experience.
3. Proper purchasing.
Dealers are well aware of the battle to acquire the right used vehicles for their inventories and markets. There’s far less analysis and implementation of the right inventory profile in new vehicles. It should be readily understood by dealers that those who purchase and stock a higher number of in-demand vehicles will get more deals.
4. Proper processes.
The rising tide of transparency will only climb higher in the coming months. While they don’t like to admit it, I suspect most dealers recognize that traditional sales processes are running out of relevance with buyers. The key here is recognizing that buyers reward dealers who make the transition to transparency in their showrooms.
I would encourage dealers to reflect on the year ahead and ask their teams, “What can we do in 2014 to win without fighting and sell more new and used vehicles?”