12 March 2020

The conventional dealership is “here to stay”, according to respected analyst Glenn Mercer, as he presented an update to his ‘Dealership of Tomorrow’ study at NADA Show 2020. The number of franchised auto retail rooftops in the US remains around 18,000, despite predictions that the franchised system was doomed.

“A local, physical presence is still very important to auto makers,” said Mr Mercer. “Only if the US moved to a build-to-order situation would that change; that would allow the physical store to disappear. But that’s not going to happen; the US is a buy-from-stock world and we’re in an era of instant gratification.”

Looking to the future, dealership managers should be more concerned about internal threats to the business, such as maintaining margins or upping customer retention, than external threats such as autonomous cars or ride sharing. “Stores have become more and more digital, rather than being replaced by digital,” he said. “Convenience has become a real driver for the customer and we must continue to make business easier to do.

“Dealerships are becoming somewhat less profitable, as are all retail operations, but used and service work are the upside. This will be the decade of cost reduction and good operational management.”

Other threats are receding. Electric car sales (in the US) are growing at a slower rate than some had predicted; Mr Mercer sees 6% market share by 2025. High-level forecasts of autonomous cars have been scaled back and the threat from ride-hailing services is marginal. There are some signs this business is already maturing.

Tags: 2020, dealership, dealership of tomorrow, Glenn Mercer, NADA Show