Why Dealers Need to Focus on Customer Experience Amid Inventory Shortages

September 10, 2021 automotiveMastermind

For many dealerships, success has hinged on their ability to stay ahead of a slew of evolving external challenges in 2021.

As ongoing inventory shortages, changing customer expectations and growing competition for buyers challenge dealers to engage and retain their audience, forward-thinking dealerships are using this moment as an opportunity to revisit what their dealership customer experience looks like.

To succeed in today’s challenging market, dealers need to ensure they’re offering a dealership buying experience that is true to their brand promise and tailored to their customer at every touchpoint.  

In this blog, we share three reasons why it’s critical that all dealers – even those with vehicles in-stock – focus on customer experience to secure immediate and sustainable success:

–        Inventory challenges are likely to last well into 2022

–        Loyalty is down and competition is heating up

–        Customers want convenience and the marketplace is delivering
 

Dealership Inventory Challenges are Likely to Last into 2022 

Despite global light vehicle production starting out strong in 2021 – growing by an estimated 15% in Q1 and continuing to grow continuing through Q2 – according to IHS Markit, new challenges emerged heading into the fall. 

While front-end supply disruptions had the biggest impact on chip production for the first half of 2021, back-end disruptions resulting from COVID-19 shutdowns and labor shortages abroad, are now posing their own challenges. Unlike front-end disruptions, assembly capacity constraints impact all semiconductor types including sensors, power supplies and more. 

As a result, early reports from IHS Markit forecasts inventory constraints to extend into Q1 2022, possibly into Q2. However, microchip producers have cautioned shortages could extend through 2022. 

On the sales end, consumer demand is still relatively high, but buyers are beginning to grow wary of minimal inventory and high prices for what’s available. Forecasts suggest demand will continue to drop as light-vehicle sales fell nearly 18% in August compared to 2020, while the average vehicle sale price hit over $41,000, a record according to J.D. Power.
 

Loyalty Is Down 

Unlike in the past when other rooftops and local dealerships were a dealer’s biggest competition, online-only retailers, rapid digitalization due to the pandemic has led to the growth of online-only retailers. In the first six months of 2020, Carvana, Shift and Vroom collectively experienced a 36% increase in sales year-over-year.

Online-only retailers are gaining even more momentum amid inventory shortages in 2021, generating record-setting sales as they compete against brick-and-mortar automotive dealers for both sales and pre-owned acquisitions.

At the same time, brand loyalty among U.S. consumers for new vehicles dropped to a six-year low in June according to IHS Markit, inevitably due, at least in part, to the major declines in inventory at dealerships. But while buyers are changing brands, body style loyalty remains strong, even increasing slightly by 1.1% in June. 

With buyers finding fewer inventory options at their home dealership and increasingly offered more ways than ever to purchase their next vehicle, customer loyalty is no longer guaranteed. 

As dealer inventory challenges drag on, dealers need to make an intentional effort to proactively protect their customer base from competitor’s conquest efforts by offering a dealership customer experience that keeps buyers coming back time and time again. 
 

Customers Want Convenience – and the Marketplace is Delivering

This rapid digitalization also led to a rapid change in consumer buying behaviors – and expectations. 

A 2021 study by Roadster found 86% of vehicle buyers state some portion of the transaction takes place online, increasing by 20% over the previous period. This shift is influenced by more than just inventory shortages. In a 2020 study by IHS Markit, 64% of consumers who bought a car online cited convenience as the primary reason for doing so. 

Make no mistake: Even if your dealership isn’t offering the sort of convenient customer experience today’s buyer expects, your competition will. A recent industry study found that in 2021, the time spent online for new-car shopping declined 21%. This shift towards convenience was well in motion before this year. From 2018 to 2020, the average time spent in a car dealership declined from 2 hours 55 minutes to 2 hours 37 minutes. As a result, buyer enjoyment increased from 60% to 74%. 

As customers crave convenience, the marketplace is delivering. To combat the convenience of online-only retailers and even other local rooftops, dealers need to ensure they’re simplifying every step of the buyer journey by meeting customers where they are with an exceptional customer experience. 

Start by ensuring your dealership’s buying experience is as consistent and cohesive as possible. Look for opportunities to engage buyers across channels with messaging that educates audiences about their various options. To stand out from the noise of spray-and-pray offers, it’s important dealers leverage advanced dealership marketing technology tools to tailor their outreach and personalize their messaging for each buyer. 

To further combat the convenience of online-only retailers, consider offering customers online options for transactional touch points like vehicle configuration, an inventory search tool, price negotiation and financing, in addition to relevant and personalized interactions to guide their purchasing journey. Further, to ensure customers have the immediate ability to test drive their desired vehicle at their convenience – even amid inventory shortages – look for digital marketing solutions to create a simplified process and drive sales using your online platform. Utilizing video or virtual walkarounds of the vehicles on your lot or available for pre-order gives customers the ability to reduce time at the dealership and experience dealership inventory in a matter of minutes.   

While the automotive industry saw some relief related to the microchip and subsequent new vehicle inventory shortage in 2021, new challenges are emerging, further complicating the timeline in which the industry will return to normal. As the latest forecasts punt recovery further in 2022 – and potentially even 2023 – proactive dealers are looking at their buying experience from their customer’s perspective to improve their approach and achieve sustainable success. 


Don’t lose out on maintaining a competitive advantage amid inventory shortages that could persist well into the future.

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