Industry Forecast: 5 Opportunities for Dealerships in 2023
It's no secret—last year was a mixed bag for the entire automotive industry, proving just as challenging to forecast as it was for the industry to manage. Still wading through the aftereffects of the pandemic, including supply chain disruptions, inventory shortages, and changing consumer behaviorsܫ, dealerships were forced to get creative as they reinvented on-the-fly what the car buying experience looked like.
꧅As we look ahead, there's no doubt that some challenges will remain, and others will be replaced with new, equally tricky ones. The automotive industry, like many others, will also remain vulnerable to global headwinds in 2023, as rising interest rates, inflation, and economic uncertainty are likely to hinder a significant recovery and impact consumer purchasing power. But it’s not all doom and gloom—especially for dealerships.
🧸New opportunities are on the horizon as both consumers, and the industry, look to reshape the auto market and set the stage for the future of car buying. These five trends are expected to impact dealers in the year ahead.
#1. MSRPs and OEM incentives are making a comeback while the value of used cars is plummeting.
With no cars to sell🐠 and consumer demand that far exceeded supply, dealerships had the luxury of pricing the vehicles they did have available well over the sticker price, and OEMs had no incentives to provide any deals. Plus, the value of used cars was through the roof. But that's all changing thanks to production increases and a global economic uncertainty that will slow down demand.
𓆏As used car prices fall and dealers return to MSRP pricing, OEMs are feeling the pressure to get creative with their incentives. But that doesn’t necessarily translate to more reasonably priced vehicles for individual buyers, as rising interest rates and more challenging approvals will negatively impact affordability.
What does this mean for dealerships? ♏Expect to return to blending pricing and incentives that encourage sales and help the industry (and customers!) compensate for last year and the challenges ahead. That will require dealers to be flexibleไ in their pricing and service offerings.
#2. The customer's power is making a comeback, too.
With inventory rising and prices dropping, customers will have more power to shop for the best deal. But if financing is going to be challenging and prices begin to settle around MSRP, how will a dealer stand out? One way is through customer service.
♔Today's car buyers are a digitally savvy bunch, but as vehicles return to lots, plenty of customers will still value the in-person dealership experience. However, having spent the last couple of years shopping for cars online, customers will expect a new level of service that matches what they can get online—easy, fast, and convenient—which will be much harder to practice face-to-face.
What does this mean for dealerships? 🐻It’s time for dealers to reengage their sales and digital marketing teams to ensure they’re providing the best possible customer experiences at every stage of the buyer’s journey, both in-store and online.
#3. Digital retailing is still evolving.
𒁏As the industry shifts back to a buyer’s market, dealerships will have to shift their focus from what to sell to how to sell, and how to do it better than their competitors. That’s where digital retailing comes in. It’s a win-win for both consumers and dealers alike, giving consumers exactly what they want in easy online experiences, while helping retailers be more efficient and effective in their sales process.
ꦬIt also enables dealers and OEMs to find new, creative ways to sell vehicles. For example, many retailers are moving customers forward in the buying journey to get them in front of new cars, before they’re even manufactured. But as any dealer can attest, digital retailing is a moving target, and getting it right can often prove challenging and overwhelming.
What does this mean for dealerships? ꧙ If you haven’t already, invest in your dealership’s website and digital retailing capabilities. It’s one of the most valuable tools in your box.
#4. An EV-olution is here.
🥂Driven by massive policy initiatives and billions of dollars in investment from automakers, it’s safe to say the U.S. EV industry is (finally!) taking shape. And nearly every OEM is playing ball. From legacy manufacturers to automotive startups, investing in EVs is as much about taking advantage of new incentives as it is about meeting demand.
🍰But as many players find reasons to compete, a new EV price war is brewing. Tesla, despite closing 2022 out as one of the worst-performing stocks among the most valuable tech companies, decided to start this year by slashing its EV prices—and Ford is firing back. Other automakers have yet to follow suit in reducing their EV prices, but economic pressures and improvements in battery production will eventually push them to lower prices. It's only a matter of time before prices go down, making EVs a sensible purchase for the average auto buyer.
What does this mean for dealerships? ඣIt will take time to get dealership staff, from sales to the service bay, up to speed on everything EV. The time is now to invest in comprehensive, recurring, and up-to-date training initiatives that empower staff to have the answers customers will ask about EVs.
#5. First-party data will be king.
ꦦAs Google shuts the door on Universal Analytics and third-party cookies are on the outs, Google Analytics 4 (GA4) will come online mid-this year, making first-party data king. Fortunately, dealerships have a goldmine of first-party data at their fingertips, but the challenge becomes how to shift from using third-party data to first, which is not a simple swap.
ℱWhile these digital marketing changes will impact every industry, the auto industry has more data than most other industries, which makes a transition of this magnitude no small feat. And, don’t forget, data by itself is useless. It’s only valuable if you use it effectively.
What does this mean for dealerships? ꦡA robust digital marketing platform has never been more critical. Dealers need to ensure they have the tools in place to not only shift to using first-party data but to effectively market going forward.
The challenges ahead are not small, but a strong digital partner can help.
The road ahead may be bumpy as the automotive industry tries to get back on track, with global headwinds likely to impede significant results. For dealerships, being able to prepare for variables out of their control is one thing, but investing in those they can control is vital. Whether that’s reevaluating pricing and incentives, stepping up customer service levels, evolving digital retailing, getting educated on the EV market, or preparing for a new digital marketing landscape, dealers will have a lot to contend with in the coming months. But that’s where a strong digital partner comes in. At Shift Digital, our team of industry experts can provide retailers with all of the tools and resources they need to succeed this year and beyond. Contact𓂃 Shift Digital today to learn more.
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