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After COVID-19: What Should Car Dealers Prepare For

The debate over when to open-up the economy continues to intensify. There are some states that are relaxing stay-at-home orders, while others continue to monitor the situation.


According to the Labor Department, a record 30.3 million Americans have sought unemployment benefits in the 6 weeks since mid-March and the US interest rate is at an historic low.

This is uncharted territory and as the various relief packages begin to filter into the economy, it's perhaps time to consider what the market will potentially look like when it begins to open back up.


While economists cannot accurately predict the future, there is consensus that there are three main scenarios that may play out.


We have been working with our customers to go through the implications and how it may impact their online retailing strategy.


1. A Recession


Many economists have commented on a potential recession, with a slowdown in manufacturing, record unemployment, and low interest rates as indicators that a recession is on the way.


If this scenario plays out, we may see a return to conditions of the Great Recession of the late 2000s, or potentially worse. Regardless of how long the economic uncertainty is, with lower discretionary incomes, consumers will reevaluate and / or delay any large purchases.


The implication for car dealerships is that there will be fewer consumers making car purchases and they will be focused on affordability. This may benefit Used Car Sales at the expense of New Car Sales.


Dealerships will be able to maximize inventory turn during a period of depressed demand by fine tuning their digital marketing to meet the needs of their customers by:


- focusing on the right models;

- leveraging OEM and / or government incentives; and

- providing appropriate financing options.


Another key area that dealerships should focus on is Service. Customers choosing to delay making a new car purchase will want to extend the life of their existing vehicle. Providing great service and value will help ensure that these customers return to your dealership when they are ready to make a New Car purchase.


2. Phased Start


A few states have begun a cautious and phased reopening of their economies, with essential businesses permitted to open with certain restrictions and others still to open at a later date.


If a Phased Start plays out, many consumers and businesses will also have to ramp up their operations in a phased way. While this happens, sales volumes will likely be slow and dealers will have to aggressively compete for the consumers that are in the market. Dealerships that have maintained digital marketing activity throughout the pandemic or are quickest to ramp up their activities are best positioned to capitalize on the available demand.


It may take a while before the economy fully recovers and consumer confidence returns to the market but with strong OEM incentives in place, New Car sales will be a key focus of consumers looking to get a good deal with extended financing arrangements.


However, it will still be important to reinforce the precautions the dealership is taking to ensure the health and safety of customers.


3. Complete Restart where it left off


The fact that some states have begun reopening is a positive sign. If the economy does restart where it left off, dealers will likely have a limited time frame to maximize any remaining OEM incentives. As the supply chain begins to come back online, dealers may face shortages in some of the more popular models due to the extended shutdown and strong demand from customers capitalizing on the available deals.


These OEM incentives may also entice customers initially looking to make a Used Vehicle purchase to consider a New Vehicle.


The average length of time that customers spend researching a vehicle before making a purchase is between 9-13 weeks, which is approximately how long the majority of people have spent at home already.


Dealerships that have continued to invest in digital marketing throughout the quarantine period are likely to capture a greater proportion of the customers that have already decided where and what they are going to buy.


As the last couple of months has necessitated customers becoming familiar with online purchases and dealerships may see a continuation of that trend with an increase in the proportion of vehicles sold online.


Regardless of how the next few months unfold, social distancing is expected to continue in the short term. One of the many things that these lockdown orders may have permanently changed is consumers' willingness to transact online. If this trend continues, there will be two things that will become even more important for dealers:


- having a strong digital retailing strategy; and

- being able to maximize your digital marketing budgets in an effective and cost-efficient way.


As the markets begin to reopen, please continue to remain safe and healthy!


The Carfeine Team


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