AutoSuccess – May 2018 – by Dennis McGinn 

Jaws dropped, mine included, as Don Flow, chairman and CEO of Flow Automotive Companies, addressed several hundred dealers and industry affiliates at Automotive News’ recent Retail Forum.

“A brutal reality is in front of us,” said Flow, whose company operates 36 franchises in Virginia and North Carolina. He called for the industry to create “value equation models” that deliver the guest experience and shopping enjoyment consumers find through Amazon and Apple. “The goal is that all dollars spent on that VIN in your marketplace need to be spent with you,” he said.

 He called for dealers to apply lean process management practices to their operations to eliminate waste, bottlenecks and processes that add no value to customers or to the bottom line.

Dale Pollak also addressed the gathering, calling for dealers to embrace transparency and increase efficiencies throughout their operations to push back at margin compression and other “profit evaporating” factors.

“The clarion call is efficiency. We can see no other way to survive and thrive in this business,” Pollak said, noting dealers’ inefficiency in human capital utilization, with a turnover of 64 percent in sales and 40 percent overall.

He also cited process inefficiency that leads to aging inventory and capital depreciation, promotional inefficiencies and technology inefficiencies that can be difficult to use and are frequently incompatible, so they don’t share data with one another.

“We’re not able to pull out of the industry what we used to, so we must be more efficient,” Pollak said. “We cannot expect to meet the challenge of the future if we cannot get these challenges resolved.” 

Consolidation will continue as stand-alone family dealerships find it increasingly difficult to stay in business.

Dealers rightly are concerned about how new trends and technologies — such as subscription car services, ride-share, electric and self-driving cars — will trouble their business model. The product in showrooms in the next 10 to 15 years will be radically different from what we’ve known before.

Yes, the disruptors and disruptive transportation models are upon us. But while we will see these new models flow into the business and onto our streets, traditional car-ownership will continue.

Consider this information, taken from the McKinsey & Company report “Automotive Revolution — Perspective Towards 2030: