Inventory acquisition has long been a pain point for dealers. It requires a combination of data, precedent, and dealer’s intuition to keep a lot stocked with in-demand vehicles that will move. And that’s before you consider other factors that fluctuate like changing consumer behavior, economic trends, and unanticipated events that affect supply and demand.
Dealers have been weathering changes and adapting their strategies for decades. However, the Covid-19 pandemic has had an unprecedented impact on the industry—particularly, on supply. It’s led to auctions moving online, manufacturing plants being shut down by OEMs, lease extensions, and an overall shift in consumers’ preferences. Together, these variables have added up to a shortage of quality new and used vehicles unlike ever before.
Hints of recovery evident
Used car inventory and prices showed a slight dip at the end of the third quarter, according to data released by Canadian Black Book (CBB), suggesting that the market may be stabilizing following a run of consistent demand and price increases that stretches back into June. However, the CBB report cautioned that pricing is likely to remain high amid a volatile market through the end of 2020.
The September 2020 report said that wholesale cars had decreased in value by -0.02% in the previous week and trucks decreased by -0.07%. These are minor week-over-week changes, the report clarified, but they offer early hints of equilibrium from the stress placed on the used vehicle market following the spring COVID-19 lockdowns. These factors included deferred lease returns and inventory clearouts by dealers who expected the market to be slower to bounce back.
Despite these hints of recovery, many dealers are still feeling the effects: they’re seeing fewer vehicles running through the auction lanes and an overall shortage of quality used vehicles. On the new vehicle side, though OEMs have reopened manufacturing plants, the shortage of new cars persists, which has had a knock-on effect up and down the supply chain.
Consumers’ preferences have changed, but demand remains
According to CarGurus’ Covid-19 Sentiment Study, 41% of respondents who previously used ridesharing, and 50% of those who previously used public transportation, expect to decrease their use of these services—or stop using them entirely. Dealers are seeing this shift in preferences come through in their sales too. An influx of younger buyers seeking lower-budget vehicles as an alternative to ride-hailing and public transit is leaving some dealers wishing they had held onto their inventory.
The change in preferences extends to the car buying process as well. Openness for buying online has roughly doubled as a result of the pandemic. Before, 36% of 2020 prospective buyers were open to buying online. Now, 60% are. Regardless, as buyers return to the market, it’s crucial that dealers offer innovative shopping solutions, both in-dealership and online, to address evolving consumer needs. According to the same study, 66% of current shoppers would prefer to use contactless services like virtual appointments, at-home test drives, or home delivery. They also expect dealerships to take basic precautions like wiping down services (64%) and wearing masks (57%).
Stocking the lot might take some creativity
With signs of stabilization showing and demand still there, it’s crucial that dealers get creative to keep their lots stocked. Consider:
- Looking to your service department. Have service advisors flag cars that are almost up on their lease as a way to identify inventory they can try to acquire.
- Experimenting with new acquisition channels. In particular, do more buying on channels like Facebook Marketplace. Even it hasn’t been as effective during normal times, it’s worth exploring alternative sources right now.
- Leaning into your existing customer database. Use your CRM to market to previous customers and offer to buy back used vehicles in good condition.
- Using data to inform decisions. Tools like CarGurus’ Market Analysis Tool give dealers insight into what consumers are looking for in their area, helping them identify cars that will sell in their area that they might not have chosen before the pandemic.
Overall, dealers must be willing to experiment during this time. Anyone waiting on the sidelines for things to go back to exactly how they used to be is going to get left behind. Covid has pushed consumers into online shopping, and savvy dealers will want to start to adopt digital retailing practices in their everyday operations.
As dealers navigate the remainder of 2020, it’s important to remember that this is uncharted territory for everyone. There’s no one-size-fits-all approach to supply issues—all you can do is stay flexible and listen to consumers.