Strategies and Opportunities for Dealerships On the Path to COVID-19 Recovery
- Keywords:
- covid-19
As businesses are starting to reopen across the country, it’s encouraging to focus our attention through the windshield rather than the rearview mirror. But it’s clear that the COVID-19 pandemic has had significant implications for auto dealerships, and operations will have to adjust accordingly as the industry slowly gets back on its feet.
We recently spoke with two experts to discuss what dealerships can expect moving forward. BMO Capital Markets Economist Erik Johnson provided an overview of the key trends and changes we expect at the retail level. Also, Greg Wells,1 a renowned physiologist and performance expert, discussed the key health and wellness tactics dealerships should consider as part of a practical transition plan to moving back into the workplace.
Listen to the full conversation here, or read the content below that describes what is in the podcast.
Macroeconomic Trends and Opportunities
As Johnson explained, “We’re experiencing a massive global economic contraction at a speed we’ve never seen before.” While the timing and the strength of the recovery is still uncertain, Johnson said we should be seeing a rebound from the depths of this contraction by early 2021 and returning to pre-pandemic economic performance by the end of 2021.
For now, however, elevated levels of unemployment and lower economic activity will put pressure on auto sales in the near term. April vehicle sales were down 75% year over year. But the good news, Johnson said, is that April may have represented the bottom of the market.
Nonetheless, there are some pockets of strength, making it clear that product segment matters. Johnson noted that light truck sales crept up to almost 80% of market share in the first quarter, and large pickup trucks in particular performed well—down only 2% compared to a 20% decline in overall vehicle sales in the quarter.
Along with product segment, online sales is emerging as a competitive advantage in the new normal of social distancing. Looking at the U.K. market, Johnson noted that while overall vehicle sales were down 97% in April from the previous year, Tesla’s Model 3 emerged as the country’s best-selling car during the month. Electric vehicle sales overall were up 161% year to date compared to 2019.2
“That points to two trends,” Johnson said. “The EV segment has been more resilient through this. And if you think of Tesla as a platform that largely engages in online sales and its customers are used to buying online, it’s providing some cushion in the downturn. Where there’s a bit more comfort level on both the customer and dealer sides, that can help through a crisis like this where it’s harder for people to test drive a car or buy something in person.”
A Healthy Reopening
While dealerships move toward reopening their businesses, customers are likely to continue to be wary of fully participating in the retail economy. That’s why Wells said that health, safety and wellness are the top priorities for just about all business types.
“If you are not thinking about health and safety, and the well-being of your employees and customers, that is a huge risk,” he said. “It’s also a huge opportunity.”
To that end, Wells said dealerships need to answer a crucial question: What will the health and safety of your employees and customers look like as you reopen? “If you can nail that, I believe it could put you in a position where you are radically ahead of your competition and could gain some significant advantages in the coming years,” he said.
Managing stress will play a crucial role. When employees first start returning to work, or when a customer drops their car off for service, they will likely respond with fear—and that’s a perfectly normal response, Wells said.
“We are scared of COVID-19 and fearful of the future because the future is uncertain,” Wells said. “That causes a significant flight-or-fight response inside the body. Understanding that response can help you make the right decisions for your company, your staff and your customers.”
Wells offered the analogy of business leaders thinking of themselves as a lighthouse, and their customers and employees as boats out in the ocean during a storm. “Our job is to help them navigate through to safe harbor,” he said. “To do this, we need to counteract the stress response for ourselves.”
Wells outlined a few tactics for accomplishing this:
Breathe. Before you get on a call, enter a meeting, answer a challenging question, taking a couple of deep breaths changes the brain’s physiology and calms your stress centers. “As leaders, your people will mirror your intensities: you can calm people down by being calm yourself,” Wells said.
Focus on what you can control. As pressure increases, it’s helpful to narrow your focus. “Anything outside of your control gets shoved aside,” Wells said. “That allows you to control your own stress response and positively influence others.”
The power of microbreaks. “Stress is only problematic if it’s constant and long-term,” Wells said. That’s why breaking up moments of stress with anything that makes you feel more relaxed—whether it’s taking a walk, meditating or listening to music—is beneficial. “When opening up dealerships, I strongly encourage you to help people take breaks during the day and to take vacations over the course of the year.”
Psychological safety. High performing teams are those with high levels of psychological safety—that is, individuals are not afraid to come forward with new ideas. And Wells said new ideas will be essential to adapting to the new normal. “As we restart our businesses, we have a unique opportunity to reimagine the future,” he said. “To do that, you have to be highly innovative. You need people challenging and asking questions, people offering new ideas of how to improve health and safety within the dealership. You need support to exceed risk. When we are psychologically safe, it helps us to mitigate the sense of fear and anxiety we have in this environment.”
That last point is crucial. Dealerships, like so many other businesses, will have to navigate a changed environment. Issues such as making sure cars brought in for service are properly disinfected and creating social distancing measures on the showroom floor will require creative thinking.
“Returning to normal is not a viable path forward if we want to be more successful in the future than we were in the past,” Wells said. “All of us need to reimagine a future that’s better than the past. The way to reimagine a future for your businesses, at least for the next 18 months, is to consider that health, safety, and wellness are now priority number one. And if you do those things well, you will have a tremendous business advantage over your competition, not to mention that you’re going to take wonderful care of your employees, your customers and your community.”
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Robert Sadokierski
Former Senior Vice President & Head, Automotive Finance, BMO
As businesses are starting to reopen across the country, it’s encouraging to focus our attention through the windshield rather than the rearview mirror. But it’s clear that the COVID-19 pandemic has had significant implications for auto dealerships, and operations will have to adjust accordingly as the industry slowly gets back on its feet.
We recently spoke with two experts to discuss what dealerships can expect moving forward. BMO Capital Markets Economist Erik Johnson provided an overview of the key trends and changes we expect at the retail level. Also, Greg Wells,1 a renowned physiologist and performance expert, discussed the key health and wellness tactics dealerships should consider as part of a practical transition plan to moving back into the workplace.
Listen to the full conversation here, or read the content below that describes what is in the podcast.
Macroeconomic Trends and Opportunities
As Johnson explained, “We’re experiencing a massive global economic contraction at a speed we’ve never seen before.” While the timing and the strength of the recovery is still uncertain, Johnson said we should be seeing a rebound from the depths of this contraction by early 2021 and returning to pre-pandemic economic performance by the end of 2021.
For now, however, elevated levels of unemployment and lower economic activity will put pressure on auto sales in the near term. April vehicle sales were down 75% year over year. But the good news, Johnson said, is that April may have represented the bottom of the market.
Nonetheless, there are some pockets of strength, making it clear that product segment matters. Johnson noted that light truck sales crept up to almost 80% of market share in the first quarter, and large pickup trucks in particular performed well—down only 2% compared to a 20% decline in overall vehicle sales in the quarter.
Along with product segment, online sales is emerging as a competitive advantage in the new normal of social distancing. Looking at the U.K. market, Johnson noted that while overall vehicle sales were down 97% in April from the previous year, Tesla’s Model 3 emerged as the country’s best-selling car during the month. Electric vehicle sales overall were up 161% year to date compared to 2019.2
“That points to two trends,” Johnson said. “The EV segment has been more resilient through this. And if you think of Tesla as a platform that largely engages in online sales and its customers are used to buying online, it’s providing some cushion in the downturn. Where there’s a bit more comfort level on both the customer and dealer sides, that can help through a crisis like this where it’s harder for people to test drive a car or buy something in person.”
A Healthy Reopening
While dealerships move toward reopening their businesses, customers are likely to continue to be wary of fully participating in the retail economy. That’s why Wells said that health, safety and wellness are the top priorities for just about all business types.
“If you are not thinking about health and safety, and the well-being of your employees and customers, that is a huge risk,” he said. “It’s also a huge opportunity.”
To that end, Wells said dealerships need to answer a crucial question: What will the health and safety of your employees and customers look like as you reopen? “If you can nail that, I believe it could put you in a position where you are radically ahead of your competition and could gain some significant advantages in the coming years,” he said.
Managing stress will play a crucial role. When employees first start returning to work, or when a customer drops their car off for service, they will likely respond with fear—and that’s a perfectly normal response, Wells said.
“We are scared of COVID-19 and fearful of the future because the future is uncertain,” Wells said. “That causes a significant flight-or-fight response inside the body. Understanding that response can help you make the right decisions for your company, your staff and your customers.”
Wells offered the analogy of business leaders thinking of themselves as a lighthouse, and their customers and employees as boats out in the ocean during a storm. “Our job is to help them navigate through to safe harbor,” he said. “To do this, we need to counteract the stress response for ourselves.”
Wells outlined a few tactics for accomplishing this:
Breathe. Before you get on a call, enter a meeting, answer a challenging question, taking a couple of deep breaths changes the brain’s physiology and calms your stress centers. “As leaders, your people will mirror your intensities: you can calm people down by being calm yourself,” Wells said.
Focus on what you can control. As pressure increases, it’s helpful to narrow your focus. “Anything outside of your control gets shoved aside,” Wells said. “That allows you to control your own stress response and positively influence others.”
The power of microbreaks. “Stress is only problematic if it’s constant and long-term,” Wells said. That’s why breaking up moments of stress with anything that makes you feel more relaxed—whether it’s taking a walk, meditating or listening to music—is beneficial. “When opening up dealerships, I strongly encourage you to help people take breaks during the day and to take vacations over the course of the year.”
Psychological safety. High performing teams are those with high levels of psychological safety—that is, individuals are not afraid to come forward with new ideas. And Wells said new ideas will be essential to adapting to the new normal. “As we restart our businesses, we have a unique opportunity to reimagine the future,” he said. “To do that, you have to be highly innovative. You need people challenging and asking questions, people offering new ideas of how to improve health and safety within the dealership. You need support to exceed risk. When we are psychologically safe, it helps us to mitigate the sense of fear and anxiety we have in this environment.”
That last point is crucial. Dealerships, like so many other businesses, will have to navigate a changed environment. Issues such as making sure cars brought in for service are properly disinfected and creating social distancing measures on the showroom floor will require creative thinking.
“Returning to normal is not a viable path forward if we want to be more successful in the future than we were in the past,” Wells said. “All of us need to reimagine a future that’s better than the past. The way to reimagine a future for your businesses, at least for the next 18 months, is to consider that health, safety, and wellness are now priority number one. And if you do those things well, you will have a tremendous business advantage over your competition, not to mention that you’re going to take wonderful care of your employees, your customers and your community.”
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