5 Steps to Recalibrate Your Dealership’s Business Model in 2021

April 13, 2021 | Article

In 2020, dealerships had to make dramatic shifts in their operations as the coronavirus was declared a pandemic and social distancing efforts limited their usual processes. Many did so in a hurry, quickly adopting solutions and strategies to better serve their customers.

They escalated their digital and remote capabilities so customers could have more access from home. Dealerships changed their on-site operations to accommodate social distancing. Some were able to conduct the buying and financing processes entirely online through phone, email and chat conversations. Still others could provide virtual test drives and delivery services.

For most, these changes and advancements were a significant disruption in the buying process. In the past, buyers of auto, truck, implement or heavy equipment have traditionally engaged with their dealer in face-to-face interactions. They have appreciated the tangible and tactile experience—to test vehicles and equipment and evaluate all their options in person with the guidance of a dealership professional. In addition, negotiations and financing discussions typically warranted the gravitas of a face-to-face conversation. However, as COVID pandemic restrictions came about dealers were forced to consider these buying habits and expectations and pivot accordingly. The traditional dealership model was perhaps no longer the sole option.

The start-to-finish online buying option in these industries was previously only a future consideration for most dealers. Then, the pandemic put the demand for online options into overdrive. Dealerships needed to shift if they wanted to sustain their businesses and stay profitable.

Adapting to the New Normal
Now, if you’re a dealer owner, stakeholder or manager, you might find that your old business model was disassembled, amended and red-lined to accommodate social distancing. After an entire year of accommodating, it’s clear that dealerships can’t return to their original business models—regardless of how successful they were pre-pandemic.

The changes made have introduced shopping conveniences and efficiencies that buyers appreciate, and they’re likely to remain popular and in demand. Your current and future competition knows this, and they’re strategizing to capture that business.

So, the question is: do you need a new business model in 2021? The answer is probably yes. But the design and outcome of that business model might look different for each dealership.

Here are a few steps you can take to start rethinking your business model:

1. Reflect on Changes You Made in 2020
Don’t walk away from insights gained from your experience in your dealership in 2020. There’s value in analyzing what worked, what didn’t and what had more potential if better executed. Take the experience month by month, action by action, and gauge each decision and approach’s effectiveness. Crowdsource insights from customers and employees to ensure you’re getting a realistic perspective and identify where you already have buy-in. Your new business model will capitalize on your successes and opportunities for improvement.

2. Assess the Performance and Viability of the Solutions You’ve Used
Review the solutions, including technologies and new service methods, you implemented to serve customers amid social distancing protocols. For many dealerships, there wasn’t enough time to carefully select the right fit for the company. Instead, you might have:

  • Enhanced your website and implemented e-commerce in a hurry with a messy patchwork of platforms and plug-ins.
  • Added chatbot capabilities but found it didn’t quite perform.
  • Offered delivery and were unable to fulfill your promises.
  • Dealt with increased cybersecurity risk.
  • Gathered various data to help make sense of the situation.

Do a thorough assessment of the solutions you’ve kept in place. Later, once you’ve determined the right focus for your business model, you can choose which of these is worth fixing, updating, swapping or dropping. You want to have your goals in mind before making technology and operations decisions to ensure they align with your value proposition.

Q&A with Eide Bailly’s Dealership Industry CPA, Bob Holder

3. Analyze Your Competition’s Strategy and Performance
The entire dealership industry battled these same challenges in tandem. The range of experiences is vast, and there is much to be learned from how your competition performed. Some businesses’ initiatives fell entirely flat and forced them to close their doors. Others’ strategies sent them soaring ahead. There’s a lot of trial and error within this range. Understanding the outcomes can help you make more effective decisions at your dealership.

As part of your competitive analysis, consider what might be on the horizon and how your business model might better meet the customer of the near future, rather than simply meeting today’s industry standard. What alternatives to traditional dealerships are posing immediate threats? What might be around the corner?

Boost your dealership’s performance with a Dealership Diagnostic Check. Understanding your dealership operations as a whole is critical for maximum profitability. When all parts of your dealership are operating at peak performance, you can feel confident that your dealership will have the competitive edge and ultimate success.
Request Your Free Dealership Diagnostic Check

4. Prepare to Adopt the New Standards
Considering what your customers asked for in 2020 and what your competition offered, you can make some assumptions about new industry standards. They might include offers such as:

  • Contact-free, strictly online negotiations and purchasing
  • Online financing processes and approvals
  • Chatbots
  • Enhanced website experiences
  • Contact-free test drives
  • Delivery
  • Special requests tailored for each customer

These might now be fundamental expectations for dealerships. They are essential to your operations and must be integrated into your business model, though they aren’t your differentiators. Technologies and strategies that support these services should be on your list to adopt. You might not be able to sustain your dealership without them.

5. Identify Your Differentiators
With this lay of the land, you can determine how you’ll set yourself apart from your competition and establish yourself moving forward. As you know, the dealership industry can be difficult to differentiate in, and a lot of those fundamental and expected services take enough effort on their own. However, merely following the trends won’t ensure a sustainable, profitable business in the future.

Here are a few questions you can ask yourself to help identify your differentiators.

  • What are some initiatives that have been successful in the past?
  • What has proven effective in your dealership as well as with competitors?
  • How can you go above and beyond with the new standard services? For instance, you could offer a robust live chat program instead of just chatbots.
  • Which areas should you focus on? If you try to excel in all categories, you might not excel in any.
  • How can you capitalize on your most successful initiatives? For example, if your website is garnering a lot of business, you could enhance your on-site SEO efforts and your website’s search capabilities.
  • Is there a niche you can create for your dealership? You might:
    • Carry all of a particular line or type of vehicle/equipment
    • Strategize ways to become a more valued business citizen
    • Establish yourself as a thought leader in industry publications
    • Pursue charitable initiatives, perhaps monthly
    • Offer high-value service programs to customers
  • Could you expand into a different market, be that physically, online or in terms of demographic?
  • Can you offer value-add items, like a virtual class?

Request Assistance When Necessary
Dealerships will continue to need to pivot with any new challenges that may emerge. Maintaining operational efficiency and profitability requires being well-informed and nimble. For any challenges that you’re struggling to manage on your own, it’s beneficial to hire expertise when necessary.

Boost your dealership’s performance with a Dealership Diagnostic Check. Understanding your dealership operations as a whole is critical for maximum profitability. When all parts of your dealership are operating at peak performance, you can feel confident that your dealership will have the competitive edge and ultimate success.
Request Your Free Dealership Diagnostic Check

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