March 27, 2023

This paid piece is sponsored by Eide Bailly LLP.

A version of this article first appeared on EideBailly.com.

By Justin Reilly, tax partner

It could be a car, boat, ATV or tractor dealership. The dealership industry as a whole has seen accelerated change in the past few years.

Dealers are seeing major shifts in how they work with customers. The “kick the tires” test no longer drives sales. Now, in an increasingly digital environment, many dealerships are adopting new technologies and strategies to give customers more options for interacting and transacting with them. For example, some dealerships now can conduct the processes of buying and finances entirely through phone, email and chatbot conversations. Some even provide virtual test drives and delivery services.

For an industry that once proudly relied on engaging with customers face-to-face, this is a dramatic and complex shift. And an overhaul of this caliber may equate to a full-on business model transformation for your dealership. To understand the best new direction for your business – what should stay, what should go and what can be enhanced – take the following measures to start rethinking your business model.

Reflect on the changes you’ve made

As the industry has changed and customers have come to expect a more digital, remote experience, you’ve likely already made many significant changes at your dealership. There is value in analyzing what worked, what didn’t and what has more potential if better executed.

Review the past couple of years closely, action by action, and gauge each decision’s effectiveness. Crowdsource insights from customers and employees to ensure you’re getting a realistic perspective. Your new business model should capitalize on your successes and opportunities for improvement.

Assess the performance and viability of the solutions you’ve used

Review the solutions, including technologies and new service methods, you’ve implemented to serve customers as their needs have shifted. These solutions may not be optimal for long-term success and may need to be adjusted or replaced, or they might be the leading solution for your new business model.

Common issues dealerships have battled with through industry shifts include:

• Enhanced websites and e-commerce with a messy patchwork of platforms and plug-ins.
• Chatbot capabilities that don’t quite perform.
• Delivery services that are difficult to fulfill efficiently and effectively.
• Increased cybersecurity risks that must be dealt with and managed.

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

Analyze your competition’s strategy and performance

There is much to learn from how your competition performed during the challenges over the past several years. Some businesses’ initiatives fell entirely flat and forced them to close their doors. Other businesses implemented strategies that helped them be tremendously successful. 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 future rather than simply meeting today’s industry standard. What alternatives to traditional dealerships are posing immediate threats? What might be around the corner?

Prepare to adopt new standards

Considering what customers have begun to prefer and need, you can make some assumptions about new industry standards. This might include offers such as:

• Online financing processes and approvals.
• Chatbots.
• Enhanced website experiences.
• Contact-free test drives.
• Delivery.

These soon might become fundamental expectations for dealerships. 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.

Identify your differentiators

After you’ve taken the time to think through the above, 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 to help identify your differentiators:

• What are some initiatives that have been successful in the past? How can you capitalize on these 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.
• 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.
• 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.
  • Offer high-value service programs to customers.
• Could you expand into a different market, be that physically, online or in terms of demographic?

Recalibrate your business model to overtake the competition

Dealerships are pivoting constantly to overcome new challenges within the industry, the economy and customer-buying behaviors. Maintaining operational efficiency and profitability requires being well-informed and nimble.

To better understand how a digital transformation can help recalibrate your dealership’s business model and set you up for long-term success, download our Digital Transformation Guide.