Controlled Change

Among the tech crowd, disruption is a magic word. It creates an opportunity.  The techies favor disruption because they are the ones that hope to profit from it.  If they can damage an existing industry, they can provide the virtual solution.

For established businesses, disruption is generally not a good thing. For those that must do business day to day, disruption upsets the work force and forces management to lose focus on the primary goal – serving customers.  Not that change is the enemy of established business.  Businesses must change to survive, but slow and steady is the answer.  Change is good. Disruption is not.

For dealers, controlling change is hard work. Dealers are no strangers to change. They have been doing that for years. They evolved from hand written buyers orders and retail installment sale contracts, to machine printed versions, and now to integrated systems which turn out all the paperwork for a deal. Some are even venturing into digital documentation. It has been the same with marketing. For years, newspapers carried the bulk of dealer advertising. Then dealers moved into broadcast media.  When the internet became hot, dealers moved into that space. Now dealers are working with apps.

Disruptors want to quickly break down what has worked. Disruption is not in the best interest of dealers, their families, or their employees. While dealers have historically coped with substantial changes in the way they do business, they now face challenges unlike they have ever seen. The breadth and pace of change can be staggering.  There are numerous challenges that dealers face.

  • What to sell? For years, what a car dealer sells was not an issue — four wheeled, light duty vehicles with internal combustion engines. Today many contend that the internal combustion engine must give way to electric propulsion, while others contend that electric propulsion on a wide scale is impossible. So far, consumers are skeptical of the electrical revolution, with only a small segment preferring electrical propulsion and often only because of expensive government subsidies. The next revolution to disrupt dealers, we are told, is how vehicles are driven. This was never an issue since vehicles were sold to drivers. However, we are told that drivers will soon be passé. Computer controlled autobots will be safer and more efficient. Once again, there may be difficulty convincing most American consumers that riding around in a four wheeled appliance is consistent with their concept of freedom of mobility.
  • Who sells the vehicles? For years, there was no issue on who sells vehicles. Dealers do. The efficiencies and business sense of that for the manufacturers was not challenged. Today it is challenged most prominently by a manufacturer of electric vehicles. Soon, it may be joined by traditional manufacturers increasingly buying into the future of self-driving appliances on wheels. Under that dream, consumers won’t own cars. Companies will (and preferably they will be subsidiaries of existing manufacturers), and those companies will contract with multiple passengers to pick them up in the appliances and take them to their destinations throughout the day. Since consumers will no longer see it necessary to own a car, it is argued, there will be no reason for dealers to sell them.
  • How do you sell? For years there was no question about how a dealer sold vehicles. A customer may have called, written, or emailed to set up an appointment. But the sale invariably took place at the dealership. There is some questions on whether that must take place today. Can everything be done virtually, with the vehicle being dropped off at the customer’s home? Most consumers who, contrary to what “everyone knows”, actually like the process of buying a new car would disagree.
  • Do dealers sell? For years, there was no issue that transactions took place at dealerships. Today, internet brokers want to change the prevailing model to virtual sales. They would like to make the sale on the internet or through an app.  Brick and mortar dealerships would become delivery points or delivery agents. 

So what do you do?

  • Support your trade association. Your national and state trade associations are now more important than ever. There are reasons for the franchise and licensing laws passed during the last sixty years. The franchise laws incentivize dealers to invest their own capital, and risk their livelihoods, to own and operate an independent business franchised by an OEM. Their life’s work should not be at the whim of that franchisor, and state legislators have appreciated the need to protect entrepreneurs from those whims through franchise legislation. Just as important are licensing statutes. We have all heard that car issues are the number one source of consumer complaints by consumers. That is questionable, but legislators do not want to hear from their constituents that they have been ripped off in what is often their largest purchase. Laws have been passed to be sure that those who sell vehicles have a brick and mortar presence so customers who buy cars who need relief can find them and have licenses so regulators who wish to discipline dealers for not adequately protecting consumers can do that. Those carefully determined laws should not be cast aside because techies think it is time to disrupt an industry that has worked for a century. Your ability to work with other dealers to maintain and strengthen legislation to control change depends on national and state trade associations.
  • Embrace controlled change. Given the pace of developments, change is inevitable. Embrace it. Understand it. Implement it in your store. We emphasize, however, that you must understand the changes you implement. Do not get caught up in the latest fad. Investigate before you buy a new product or service. Find out how it works. Make sure the contract you use for the product or service will ensure that it will meet certain standards. Nothing lasts forever, but make sure your investment is one that will provide a reasonable return.
  • Train your personnel. Nothing is more important in coping with the change dealers face than training personnel. Like everyone else, dealership personnel develop ingrained habits. Those may or may not work to keep up with the change you embrace. The only way for people to understand the change and to adjust to it is to train them, oversee them, and retrain them.

Adapting to the changes sure to come will require hard work.  However, the franchised car dealer system has lasted for over a century for a reason – it works.  It permits local business people to provide sales, maintenance and repair services to consumers that OEMs cannot afford and cannot do effectively.  The system will survive disruption if dealers are dedicated to it and do the hard work to protect it.