When we total up the collateral damage to business wreaked by the coronavirus pandemic, chances are we’ll think about movie theaters, department stores, gyms, and cruise ships. Obviously, restaurants suffered the effects as well, even if they were able to pivot to carryout/delivery options.
But it may be traditional car dealerships that have felt the most pain, ending up on the “endangered business list.” Think about it – even before the pandemic, dealerships were feeling the threats of online research, helping consumers better negotiate for a new or used car.
And online upstarts like Carvana, Car Gurus, Vrooom, and others have sprouted up, actively repositioning car dealerships as draconian and unpleasant.
Add to that supply chain hiccups, and you’re looking at once popular local businesses now under siege in the wake of the pandemic.
A new opinion piece in MarketWatch’s “Outside the Box” feature by Tom Holgate puts it less diplomatically:
“Death to the car dealership – the Tesla sales model is poised to take over America”
No words minced there.
Holgate says the trend to electric vehicles has accelerated the direct-to-consumer frenzy. And after all, who will miss hearing, “Let me talk to my manager” or “If I can hit that number, do we have a deal?”
When you consider the investment in huge plots of real estate, scores of employees, maintenance departments and service bays, and other related expenses, a tectonic shift in the bloated world of car dealerships is underway, and local economies will soon be affected by these changes. And so will radio.
Over the decades, radio has counted on advertising revenue from hometown dealerships, including trade agreements for vans and station cars. Radio remotes have been with us for decades, many of which originate from those local car dealerships. Whether you’re licensed to New York City or Nome, these automobile vendors have always represented sizable chunks of radio revenue.
Holgate believes car dealerships have fallen tragically out of step with the way consumers enjoy doing business in the 21st century. Rather than deal with hassles at every step of the sales journey, most car buyers have learned there’s a better way to buy or lease a new vehicle.
Repositioning traditional auto showrooms is child’s play. Junior copywriters can ace this advertising quest as you can see below in this Vroom campaign, promising “You never have to go to a car dealership again.”
https://www.youtube.com/watch?v=aXTi7mnzdGc
Holgate predicts the car dealership model we’ve known our entire lives will shift, changing the way these business will market themselves. He notes “the dealership of the future” will take up less space, so say goodbye to the 900-car lot. The new model will be about making an (online) appointment for taking a test drive and placing an order.
Of course, cars – electric or otherwise – will still need maintenance but their 10-acre footprint will most definitely shrink. Holgate suggests micro dealerships may sprout up in well-traveled shopping areas because they will require less space.
In short, everything is changing in their world, businesses that radio people know very well. At our three DASH Conferences in 2013-15, we featured a car dealership panel every year. First of all, they’re an entertaining, outgoing group. And their enterprises aren’t a whole lot different than local radio stations. In their relationships with OEMs, it’s akin to the network/affiliate relationship in broadcasting.
You can learn about your community and the local business climate by spending time with dealership owners and managers. And to a person, they’ll tell you their worlds are being rocked.
To that point, the days when dealerships poured umpteen advertising dollars into holiday sales – President’s Day, Memorial Day, July 4th, Labor Day, and all the others – may be numbered.
And that means radio sales teams will be wise to start planning now for a car dealership future that is tenuous at best. To get a handle on how radio might adjust, I checked in with our sales and marketing guru, brother Paul Jacobs.
He’s used to innovating on the fly, he knows radio sales, and the automotive space. And he offered up the following tips, many of which revolve around improving networking and key local contacts:
1. Get to know the local auto dealer association really well. They might be the last (wo)man standing in this Darwinian scenario.
2. Introduce yourself to the regional offices of each OEM if they’re in your town. They might wind up being VP/Sales for the region, and if you’re lucky, they wake up every day with your morning show.
3. Take the used car manager out to lunch. Even though the Carvanas sell “pre-owned” vehicles, used cars might become their core business. And right now, used cars are incredibly profitable – more than selling new cars.
4. Connect with the person in charge of marketing the service center. One thing that likely won’t change – it will remain their top profit center
5. If a dealership’s function will ultimately come down to test drives, delivery, and service, radio can shift to promotions and tie-ins that fit those three functions. Motivating consumers to show up at a car store or go to a landing page will remain jobs local radio will continue to do well.
6. Smart dealerships will see the writing on the wall and “own” the positions mentioned in #5. Work with them now to begin including them in their messages. This is where your production director can be an asset.
7. Traditionally, OEM’s know precious little about how to market to consumers – that’s what radio knows how to do. Remember, car manufacturers sell their vehicles to the dealers, not directly to customers. So educate them on consumer behavior, even hosting focus groups, sharing quantitative research, and perhaps even conducting surveys of your audience that focus on need and intent to buy. Don’t go small. Go big.
The local retail landscape is changing right along with everything else in post-pandemic America. For radio, continuing to cultivate those deep pockets of sales revenue will play a role in radio’s ultimate success as hometown businesses.
You can drive that to the bank.
Jacobs Media has consistently walked the walk in the digital space, providing insights and guidance through its well-read national Techsurveys.
In 2008, jacapps was launched - a mobile apps company that has designed and built more than 1,300 apps for both the Apple and Android platforms. In 2013, the DASH Conference was created - a mashup of radio and automotive, designed to foster better understanding of the "connected car" and its impact.
Along with providing the creative and intellectual direction for the company, Fred consults many of Jacobs Media's commercial and public radio clients, in addition to media brands looking to thrive in the rapidly changing tech environment.
Fred was inducted into the Radio Hall of Fame in 2018.
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Fred…the ultimate car dealer sales model is NO dealerships, but direct-to-consumer sales by the factories (Tesla model again.) I know. There are all kinds of franchisee laws preventing that in most states, but there also are laws still on the books prohibiting drinking beer in downtown St. Louis on Sundays!
Ford has already started to separate their legacy and EV lines, much to the displeasure of the dealers. The radio business needs to respond with ALL of Paul’s suggestions…but frankly, good reps have been doing much of that already. A reminder that the fundimental disciplines still are very important in a time of dramatic culture shifts.
Thanks for the excellent post again…
Thanks, Jackson. I always enjoy your perspective and wisdom.
Well there you go again, Fred. Tesla has created more of what drives business in the 21st Century – Competition. The laws of marketing apply here as they should in broadcasting. Find out what people want, give it to them and tell them it exists. I’d love to tell you more but I have to ask my manager first. Very enlightening post here.
Appreciate you reading the post, as always, Dave, and taking the time to comment.
Late to the party here, but good riddance! Hated calling on them to sell media, hate them as a consumer.
Bob…I loved calling on dealers. they were often abrasive, arrogant and egotistical. They were also very interesting and had substantial budgets. Of course that was before the mega dealers and we were the big dogs in town with radio & TV. I”m sure today would be different…
I agree with everything you say except the interesting part.
Fred, great article! You point out serious issues car dealerships should pay attention to right now. The problem is…according to friends I have in the industry, they are making more profit right now than they ever have. They have no floor plan to speak of, cars are sold before they arrive, which means, lower marketing costs! Why spend money attracting people to dealerships that have no inventory, just send that expense to the bottom line.
The scary thing is, most think this is the way it is going to be from now on. It’s like “morphine” before the real pain hits.
Dan, many thanks for this. I’ve heard the same thing – the supply chain shortages are translating to major profits. Good for them, but it won’t last. And as you point out, the bleeding will start before they know it.