With ongoing inventory shortages, it’s tough to see the light at the end of the tunnel. Shoppers aren’t always patient once they’re ready to buy. And a limited inventory selection puts dealers in a tough spot. So how can dealers tackle inventory challenges while ensuring excellent customer experiences? Below we dive into current obstacles and ways dealers can turn problems into opportunities.
Low inventory woes have plagued the industry for the last three quarters. Cox Automotive revealed that there were 17% fewer new vehicles on dealership lots in mid-February compared to February2020. By April 2021, IHS Markit suggested semiconductor shortages, the Texas cold wave, and the Renesas plant fire in Japan will keep inventory levels lower “throughout the4th quarter of 2021 in the automotive sector.”
Moreover, 43% of respondents to the Q1 2021 Cox Automotive "Dealer Sentiment Index" listed “limited inventory” as a factor holding back their business. Then, “record April sales significantly depleted the inventory of new vehicles” right before a typically busy May.
The ongoing shortage of computer chips means it may take longer to resolve inventory issues. Dealers can’t afford to wait around for manufacturers to catch up. Instead, many take an innovative approach to source inventory, make the best use of stock on hand, and improve customer experiences.
How can your dealership reduce strain from short inventory? Although there isn’t one clear answer, dealers can find relief by adjusting buying strategies, focusing on digital experiences, and using technology to gain a competitive advantage. Below are five suggestions to cope with challenges.
1. Leverage Pre-Owned Inventory
With new vehicles in tight supply, make the most of your pre-owned vehicles. Research from Cox Automotive shows “23% of new-vehicle intenders are considering a shift from new to used.” By keeping a fresh supply of in-demand models, trim packages, and makes, you can deliver on the customer experience promise. Turn your pre-owned inventory into an advantage by using:
• Sensor data to track days on lot
• Tools to forecast reconditioning costs
• LotVision to identify vehicles getting the most test-drives
• A data-driven approach to find and engage prospective buyers
2. Get More Trade-Ins
Develop a healthy used car inventory by using predictive marketing tools. These can help you find vehicle owners wanting to trade or sell their used model. Furthermore, data enables you to prioritize in-demand trade-ins and proactively connect with potential sellers to secure highly profitable trade-ins.
Use your customer relationship management (CRM) program, dealer management system (DMS), and inventory data to connect with the right car owners. Let prospective sellers know that their vehicle may be worth more than they think. Take a multi-channel approach using:
• Landing pages
• Search ads
• Social media
3. Optimize Digital Experiences
The majority of car shoppers understand there’s an inventory shortage. And they’re willing to pay a bit more for the car they want. But they’re shopping around online and need a reason to choose your dealership. Earn loyalty at the start of the buyer journey by:
• Using online tools to capture customer information
• Providing virtual experiences, like 360 walkarounds and video chats
• Offering pre-approval financing tools
• Digitalizing the trade-in or sales experience
Additionally, use your digital channels to identify people considering models you have in stock and reach out with a relevant message. According to Cox Automotive, “19% are willing to consider another vehicle category.” However, “37% of shoppers are planning to postpone their purchase.” Focus your efforts on selling to those open to exploring what’s on your lots.
4. Invest In Logistics Technology
Maximizing operational efficiency and creating frictionless shopping experiences are critical to dealerships. With lot management technologies, such as LotVision, dealers can immediately find the right model for a test drive and answer customer requests anywhere and anytime using LotVision’s mobile application.Plus, online maintenance and reconciliation let your teams concentrate on selling cars, not managing stock.
5. Prioritize Your Best Performing Inventory
If you’re having trouble stocking the most in-demand vehicles, focus on securing your most profitable inventory. The gross margin and sales age will highlight vehicles that move fast and earn a higher profit. Combine this information with sensor data from LotVision to uncover potential trends. This combination helps dealers make better decisions when securing new inventory.
Inventory issues will be a thorn in dealers’ sides for quite a bit, if not all, of 2021. Dealers can lessen the effects by taking a proactive, data-based approach to procurement. The right mix of new models and pre-owned inventory can help you increase dealership revenue. Tools like LotVision can reduce costs and empower your team to dedicate themselves to exceptional customer experiences.
Cox2M is the commercial Internet of Things (IoT) business line within Cox Communications. Our mission is to unleash the true potential of a connected world by enabling complete asset tracking and monitoring solutions; giving businesses and communities the data and tools they need to improve processes, realize operational efficiencies, and deliver better experiences to customers and residents.