Pub. 1 2012-2013 Issue 1

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S S P R I N G 2 0 1 2 14 15 new jersey auto retailer W W W . N J C A R . O R G new jersey auto retailer Strategic Vision of Dealerships in 2025 A Study into the evolution of the retail automotive industry BY GEORGE E. BERRY JR., CPA O ver the two-year period, ATA assembled a steering com- mittee of experts, created a focus group for the project, held numerous conference calls, surveyed dealers and pre- sented the final paper at ATA’s 18th Annual CEO/CFO Forum in February 2012. Following are highlights of the predictions that were developed through our research. To download a complimentary copy of the full report, go to www.mironovgroup.com ./ata-white-paper- download/. Based on what we know today, what is the retail automotive landscape going to look like for dealerships in the year 2025? Overall, we believe that operating profits for dealerships in the year 2025 will be driven by three main factors: • The ability of a dealership group to expand its brand portfolio by leveraging greater economies of scale within geographic regions. • Technological advances that will expand vehicle throughput and reduce personnel costs. • Changing real estate requirements as a result of faster inventory turnover and relocation of some departments to lower cost locations. ATA decided that the best way to see how these factors will im- pact the dealerships’ operations is to follow them through each department and consider the overall atmosphere that dealerships will face in the future. While outside influences will impact op- erations, they are beyond the scope of the organization’s paper. Instead, ATA concentrated on dealership operations as they continue to evolve and focused on addressing the opportunities and challenges that lie ahead within the industry. Dealership Sales ATA’s study found that the use of Internet research, lead genera- tion communications, and the ability to shop inventory and price vehicles electronically will accelerate into the year 2025 – with most of the shopping experience and vehicle research being pri- Over the last two years, Auto Team America (ATA), a network of 11 CPA firms that serve over 2,000 auto dealerships nationwide, has worked on creating a vision of the retail automotive industry a decade or more into the future. strategic vision of dealerships  continued on page 16 marily driven by technology. Through the increasing availability of various research tools, consumers will continue to be closer to a purchase decision before they walk into the dealership showroom. This increased use of technology will likely accelerate the pace of closing transactions with salespeople possibly doubling their current rate of 12–18 vehicles sold per month in the future. ATA predicts that there will be smaller staffing requirements from the use of technology and efficiency improvements. The increased sales activity per salesperson will allow the average dealership to triple throughput and sell 175 new units a month. When the consumer reaches the point of purchase, ATA believes the actual sales transaction, at its core, will be the same in 2025 as it is today. The purchase of a vehicle is a major decision, and it will take a skillful salesperson to guide the customer into a situation that is comfortable to them. Additionally, due to regulatory andmanufacturer requirements, the actual closing process will still take place in the dealership, with all the required forms being completed electroni- cally and vehicle delivery occurring at the showroom location. The only efficient way to address compliance on every transaction will be to leverage technology. ATA predicts that the Finance & Insur- ance department will once again be absorbed into the salesperson position. Since much of the custom- ization of after-sale products and finance qualifications will happen prior to the close of the sale, the function of F&I will be reduced to compliance. New technology inno- vations will make compliance easier, so the final F&I compliance items will be performed with a delivery specialist or salesperson at lower cost to the dealership. ATA predicts that there will be larger payments from the manufac- turers in the future, giving them greater influence and control on how dealers conduct their business, including the areas of facility requirements, business practices, advertising decisions, stocking guides and much more. With regard to the pre-owned vehicle department, ATA sees changes in the sales process and inventory. Technology has resulted in the commoditization of used vehicles and technol- ogy will continue to make the department much more efficient. Program/remarketed vehicles will be sold via online bidding and wholesale buyers will bid on vehicles in an online market- place, allowing the dealership to maximize wholesale profits. The market will continue to push manufacturers to maintain high residual/pre-owned wholesale values – forcing more vehicles into their branded certification process. Manufacturers will begin to recondition vehicles to certifi- cation status before remarketing them. And some manufacturers will take the next step in “cer- tif ication” and begin to offer “refurbished” vehicles that will have more components inspected to a greater degree and replaced as necessary. The factory will expand its influence over the used department in order to maintain control over marketing pre-owned vehicles. To counter this, the deal- ership can go outside the factory channel to acquire used vehicle inventory. These options for the pre-owned department will allow it to be one of the areas where dealers will continue to chart their own path and be responsive to their individual market needs and business goals. Dealership Fixed Operations Better logistics, improved demand analysis, careful selection of strategic warehouse locations and more common vehicle systems in 2025 will allow for more efficient control of parts inventory. Overall, ATA predicts that manufacturers will control 90% of dealership inventory with guaranteed buybacks, eliminating much of the past obsolescence issues. With timely delivery of parts improving, the average turn of dealership inventory will Better logistics, improved demand analysis, careful selection of strategic warehouse locations and more common vehicle systems in 2025 will allow for more efficient control of parts inventory.