Use inventory scarcity to your advantage

Written by Alexander Hoff

Published: February 19th, 2022

Where are we now?

In the past 24 months, we have experienced and seen changes in the Automotive industry that I did not believe I’d ever see; 2022 will be the third volume in the series. Over the next couple of weeks, I’ll dig into how the role of the dealership has changed, how to use scarcity to your advantage, and how to best cater to the new breed of car buyer. Today, let’s start with how to adapt to inventory scarcity during tax season and how the new role of the dealer can be leveraged to set your business apart.

Compared to a year ago, we find ourselves in a better position to welcome buyers back to the lot; if only we have the inventory to showcase. Now this inventory shortage that started with new vehicle sales has spilled over to pre-owned and has led to a massive pent-up demand for vehicles this tax season. Thankfully, these buyers will be equipped with tax returns as large as last year of an estimated $2,800 each, the highest on record. The metaphorically sarcastic cherry on top of all this, a reported 72% of franchise dealers are having trouble sourcing and hiring staff at their dealerships, and independent roofs are no better off. So how do we take this cocktail of unprecedented challenges and turn it into an advantage?

New buyer expectations are here to stay

The past two years have radically changed how buyers approach their car buying journey, and there is no putting the genie back in the bottle. Buyers have grown accustomed to a new level of information as a result of being forced into virtual retailing at scale in our industry. Long gone are the days that Carvana and Vroom are the only dealers to adopt eCommerce for vehicles sales. Add to that the vehicle shortage and buyers are spending over 9-hours researching vehicles, the majority of which happens before they ever contact a dealer. The shortage has forced consumers to search high and low, overturn every proverbial rock, and by the time they speak with your dealership, the buyer is more knowledgeable than your sales team about the vehicle of interest. When they finally do reach out they leverage text-based messaging, either live chat options through your website or a third-party listing site or mobile text messaging.

If 80% of car buyers know the car they want before they ever speak to a dealership, and then contact the said dealership via live chat, is the role of the dealership the same as 2019?

Dealer’s new role in the car-buying journey

Short answer, no. Dealerships must adapt to the modern car buyer, long gone are the days when the online form fill is king. Text-based messaging is now king. Dealers find themselves in the position where they need to earn the right to ask a prospective buyer for PII information or set up an appointment for a test drive. The modern car buyer doesn’t want to be ‘sold,’ they want to be wooed.

The time has come for dealers to move on from a sales-first mentality and transition to a focus on customer service and experience. Enough dealers and OEMs have already taken this step, those dealers that cling on to the past ways of winning business risk being obsolete in the very near future.

Now that we’ve established that live chat and customer experience are kings, how are dealers adapt? The answer is quite simple and will require less time and resources on behalf of the dealer. The next blog article in this series will focus on these two cost savings to the dealer.

Today, we will conclude with the beautiful simplicity of live chat and how to provide a customer experience better than your competition; unless your competition also reads this article, you better act fast to gain a first-mover advantage. The simple way to provide the best customer experience is to build rapport, but how do you know if and when you have built rapport? The common definition dealers provide when asked, what rapport is revolved around friendly conversation, talking about sports, or the customer asking questions. Not to my surprise, when you ask a sales rep at a dealership to define the exact point in time they know they have rapport they have trouble answering. Rapport is a formula, not a feeling. Like any formula with constants and variables, you have the opportunity to drive repeatability through a strategy.

“Once you have gathered information about the motivations of the [prospect] and show, on a deep level, that you understand their current state, you have built rapport. Rapport leads you to trust-based influence and then you get to your objective, your case-in-chief, your ask.” Derek Gaunt, Ego Authority Failure

Do you see? Straight forward strategy. Discover the motivations of the buyer and demonstrate you understand, you build rapport; from this, you gain trust-based influence in the relationship.

The new playbook

For some time, OEMs have been constrained by supply chain issues. Did profits plummet last year? Not at all, “Dealerships selling domestic cars saw their pre-tax net profit rise 112.6%, NADA says. Those selling imported cars saw an even greater increase, 140.6%.” They achieved this by two means. First, the modern car buyer is willing to accept the price of the vehicle and not haggle; a day I never thought I’d see. Second, they shifted their focus to customer experience and taking orders. With very few new vehicles on the lot, franchise dealers now take orders from buyers for 2022’s newest and best models.

It is time for independents and pre-owned departments to follow this lead. Customers are spending far more time researching and sourcing their preferred vehicle, and over the past year have grown accustomed to settling for a different vehicle. Dealers face the same challenge with sourcing vehicles that meet their quality standards and customer demographics. So why not merge these two endeavors into a single opportunity?

Above, we defined what true rapport is and when you know you have it. This formula is the perfect blueprint for pre-owned dealers to adopt to win customers. Even easier now that buyers prefer live chat or texting. Simply answer these two questions for each buyer you speak to:

  1. What is motivating them to buy a vehicle now?

  2. What did they like about the vehicle of interest?

Once you answer these two simple questions, repeat them back to the customer. Now that you know exactly what the customer is looking for and why, become their problem solver. Offer to go to work for them if you don’t have the perfect vehicle in stock. Take orders and have a set list of vehicles you know will have immediate buyers once acquired. Now that you have trust-based influence with the customer, you have earned the right to ask for PII information and now have a reason to follow up with them. Ask the customer to save your number and the next time you call with good news they’ll be filled with excitement rather than dread.

This newfound focus on customer service will be a welcome change to the 56% of millennials that feel pressured by their sales rep to "buy now." I have talked to dealers that have adopted this strategy and after a few months swear by it. They report having more referral traffic to their dealership and little to no resistance when discussing the price of vehicles. 

The current landscape of our industry is presenting a unique opportunity for dealers to reinvent how they connect with customers and win business over their competition.