So much has changed over the past three months in the automotive retail world. Depending on the state or municipality you examine, things have looked and will continue to look very different, but overall, it’s been tough sledding to say the least. Sales in most markets are depressed and large numbers of staff have been furloughed or laid off. With all that said, I wanted to shed some light on the amazing resiliency we are seeing from retailers that are adjusting to the new normal and pivoting on a dime like a Silicon Valley startup. We are seeing change like we have never seen before, and much of this change will make the industry stronger in the end.
For several weeks in March, New York dealerships were entirely shut down in order to “flatten the curve.” As New York became ground zero for the coronavirus outbreak, extreme measures were certainly required. Fortunately, in April, dealerships throughout the state of New York were permitted to open for retail sales, but only if they sold online and performed remote vehicle deliveries. Showrooms were to remain shuddered. So let’s take a look at how two New York dealers, one urban and one rural, reacted to the hands they were dealt.
Paragon Honda is located on a tiny lot in the heart of Queens, NY, one of the most densely populated areas in the US and the hardest hit by the coronavirus epidemic. In a normal month, Paragon would sell around 1,000 cars, making it consistently a top 3 volume Honda store in the country. With their digital focus, Paragon acts more like an online retailer, with the ability to deliver cars to people outside of their primary market.
While Paragon has always been extremely effective at digital marketing and sales, prior to the pandemic they were still finalizing most deals in the showroom. So, when showroom closures were mandated due to the extreme number of coronavirus cases, Paragon knew they were going to have to pivot quickly. No longer could a BDC rep say “when can I make an appointment for you to come into the showroom?” Those words were to be entirely stripped from everyone’s vocabulary, overnight. By April, when the announcement hit that automotive retail sales were deemed “essential,” Paragon had already adjusted their entire sales operation to focus on remote selling and delivery.
The result: 255 vehicle sales in April with May on target to double that at 600+ sold and delivered 100% remotely.
This is an amazing number considering it was not only the first month of selling exclusively this new way, but the market had just opened back up to allow this. So, how did they do it?
Working with limited resources, Paragon experimented with a new 3-person pod approach — coupling a sales manager with two digital sales consultants to collectively guide customers through every step of the process, from initial lead response to delivery of the vehicle at the customer’s home. Paving the way was the hard-working and adaptable team of Julian Windfield, John Santiago, and Victor Rosario who together sold and delivered 70 vehicles in the month of April. As customer inquiries were assigned, Julian was making contact with customers at all times of the day and night, building trust during a time of crisis by identifying with them and letting them know he was also working from home and would do his best to help them with their transportation needs. Once contact was made, he would hand the baton to either John or Victor. They then walked the customer through the buying process, 100% online using Roadster’s digital retailing platform, which allowed them to be as efficient and flexible with their time as possible. Julian remarked, “When working with customers we can get a deal penciled and a folder ready for finance in as fast as 10 minutes.” With some additional process improvements, Julian and team are convinced they could easily sell and deliver over 100 cars a month.
One might say, “yeah, but were these deals profitable?” The answer is, absolutely — front and back end gross were both as strong as ever with this new approach. Not only has the team been winning with increased transparency of the deal terms themselves, but they have effectively been previewing service & protection plan options with customers prior to handing them over to the virtual finance office, resulting in higher attach rates and revenue per transaction.
Brian Benstock, the GM and Vice President of Paragon Honda, is convinced that the toothpaste is out of the tube and there’s no putting it back in — referring to the new normal of online car buying. He had always envisioned this outcome, but the COVID-19 epidemic has accelerated his vision by many years.
The Sun Auto Group
The Sun Auto Group is located in Upstate New York, with 4 stores scattered throughout the rural area outside of Syracuse, including a Chevy franchise and 3 used car locations. Dealer Principal Todd Caputo has never been afraid of change. Prior to the COVID-19 pandemic, he had already made significant adjustments to modernize his sales process, including moving to a one-price model. His team utilized Roadster as a tool to structure digital deals for customers throughout the entire process, but the transactions were ultimately finalized at the store using touch screen televisions and iPads.. Similar to the Paragon story above, Sun Auto had to figure out how to finalize transactions remotely, without having customers visit them in-store, not even as a fall back plan.
In a typical April, the Sun Auto Group would sell 550-600 vehicles with about 60-65 people on the variable operations team. For the last two weeks of March, with the statewide shutdown imposed, sales had dropped to zero.
Todd and team sprung back with 268 sales in April, and are now tracking toward 400 for May 100% delivered outside of the showroom, in a makeshift, contact-free delivery center.
What’s most amazing is how many sales they achieved with what could most accurately be described as a skeleton crew. Only 3 people per store were selling cars: one sales manager handling lead intake, one automotive advisor selling digitally, and one person hanging paper. That’s it for each of the four locations, for a total of 12 people focused on variable operations . They did have a few additional support staff to help with deliveries and document processing, but for the most part this pod of 3 rocked the show. The average sales output per person more than doubled, and in some cases, actually tripled. To make things even more efficient, they limited dealership deliveries at the stores to 3 days a week, something that customers didn’t even blink an eye at.
The team has been working from home most of the time, which is not only safer for the employee from a health perspective, but it affords them a lot more flexibility to manage their lives, while still being responsive to customers at all hours of the day and night. Automotive advisors can guide customers through the online transaction in a matter of minutes, which ultimately allows them to work deals with multiple customers at once. Todd sees this type of employee flexibility as the new normal going forward. With digitally managed transactions, managers have full visibility into what is happening, and when it is happening, for all deals in flight.
When it comes to trade valuations, Todd has personally appraised 300+ vehicles over the past 6 weeks, all submitted online through Roadster’s Express Trade tool. What amazed Todd was how honest all the sellers have been, providing detailed photographs of damage spots and excessive wear. This allows him to provide firm offers without fear of having to appraise again during the vehicle drop-off process.
Todd is not sure how sales will look going forward, or how many employees he’ll be able to bring back, but he does know that the way he wants to sell cars going forward will be much more digital and eCommerce driven. He’ll make sure the employees on staff are proficient with technology, can multi-task effectively, and have strong finance skills.
Both of these dealerships are great examples of what can be accomplished with a strong commitment to a digital sales process, especially in the middle of an extremely challenging circumstance. By leveraging technology, following process, and communicating effectively with customers, Paragon Honda and the Sun Auto Group have shown that the possibilities are nearly limitless — but they aren’t alone. According to Roadster’s recent Dealer Impact Study, done in partnership with NADA, many dealerships are experiencing similar results. Units sold per salesperson is trending up by 5 incremental transactions on average. So, while it has been a challenging time to say the least, dealerships are in the process of reinventing themselves, and as a result, the car business will never be the same again.