Focus on Car Count, Sales Agility in 2023
This MTD exclusive was provided by Dennis McCarron, author of MTD's monthly Business Insights column and a partner at Cardinal Brokers, one of the leading brokers in the tire and automotive industry (www.cardinalbrokers.com).
So 2022 actually happened! (Hard to believe!) My brain tells me it’s still late-spring, but the calendar tells me it’s time to bring on 2023 and all of its craziness.
But first, look at what we lived through during the past few years.
First, there was 2020, which brought us the pandemic, riots in cities across America and a host of other calamities. That year was difficult with lockdowns, home schooling, illnesses, deaths and enough mental health issues to last a lifetime. Many couldn’t wait for the year to end. People even posted online “Goodbye, 2020 – hello, 2021!”
And 2021 didn’t disappoint. It started with a political punch in the face. Lockdowns continued for most states, masks were everywhere and can anyone say the word “inflation?”
Last year had its moments, as well, with continued inflation, supply chain problems as far as the eye could see and of course, the invasion of Ukraine and serious talks about what happens if a tactical nuke detonates somewhere.
It’s with the optimism of a pessimist – or is it the pessimism of an optimist - that we dive into reflecting on 2022 in the tire industry, while predicting what we can reasonably rely on for 2023.
Last year should have been a financial banner year for tire dealerships. People were spending money fixing their cars as money was still flowing through the country and sky-high new and used car prices were making plenty of people think about keeping their current car longer.
Add-on sales were relatively easy to negotiate with customers and increased labor rates kept up with wage earnings.
Hopefully, you gave generous raises to those employees who deserved it, as the pipeline of fresh talent has all but dried up – making retention a major factor.
And while unit sales were down or flat, unit dollars also were high thanks to multiple – and I mean multiple – manufacturer price increases. I can’t remember in my now-long career a period of 24 months during which prices increased that often and by that much.
Bottom-line profits for most of the aftermarket remained strong from 2021 and likely set records or came close.
From the data I could source, the bigger box stores didn’t fare as well - with the biggest difference seeming to be that independents didn’t do any mass lay-offs. They powered through it, whereas big box stores had sizable layoffs and haven’t quite seemed to recover headcount, which hurts their ongoing ability to service customers. But they will recover.
Going into 2023, I see three major areas to focus on - car count, sales agility and corporate discipline.
Car count is the lifeblood of a store when faced with near certain ARO declines. While a recession isn’t baked in just yet, consumer sentiment is pulling back. At least for the first quarter - when more than 30% more Americans are expected to pay for holiday gifts with credit cards - there won’t be much left in the wallet for that traditionally unbudgeted car repair.
Workflow and processes will take on an even more important role next year as dealerships push to be even more efficient, while adding one to two new cars per store, per day.
Sales agility is the ability of a service advisor to adjust to new conditions. That easy customer “yes” from 2020 and 2021 will go by the wayside. What worked for salespeople in those times likely won’t be effective in the first quarter or first half of next year.
Advisors need to dust off their presentation skills and fine-tune their empathy radar - all while holding strong on margins. Strong advisors will adapt with a new approach. Poor advisors will lament that “nobody is buying anything.”
Corporate discipline means sticking to logic, not your gut. We already see benchmark interest rates at 2008 highs. That means if you borrow money to purchase inventory or pay other bills, you likely have forgotten how painful it is to pay down that debt.
Last year at this same time, I advised you to get out of debt. I hope you did and I hope you continue to stay out. There are going to be plenty of “deals” out there to end this year and start the next. If you have the money on hand and the hole in your inventory, by all means, snatch that deal up!
But if you don’t have the cash and your inventory is quite full due to a flat year in unit sales, stick to your guns and pass on the deal. There will be others.
I wish every reader a happy and rewarding holiday season. Congratulations on a tough and well-fought out year – again – and I wish you all the best in the new year.