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How Digital Retailing Impacts Profitability



Retailing has moved primarily online for nearly every business during the coronavirus pandemic, including for America’s franchised new-car and -truck dealers. For business owners, monitoring and continuously examining profitability is more vital than ever.

As part of the Dealership Lifeline Webinar Series, NADA Academy instructor Michael Lucki and Roadster chief marketing officer Michelle Denogean examined profitability for dealership sales relative to a dealers’ digital retailing capabilities, and shared best practices on how to increase profitability per vehicle sold.

In their webinar, How Digital Retailing Impacts Profitability, Lucki and Denogean shared the results of a Digital Retailing Dealer survey that collected responses from nearly 300 Roadster clients, NADA 20 Group members, NADA Academy students and recent alumni. Survey results offered a comparison of gross profitability before COVID-19 versus during the COVID-19 environment, when digital retailing increased dramatically, and informed how digital retailing is impacting gross profitability per vehicle sold. For the month of April 2020, dealers who identified as having digital retailing capabilities indicated that their gross profit per vehicle sold increased versus dealers who identified as not having digital retailing capabilities. This is welcome news for dealers who have seen profitability steadily compress in their sales departments for a number of years.

Furthermore, the webinar shared how digital retailing is enhancing personnel productivity: “The average number of units delivered per salesperson has doubled from nine to 18 during COVID-19,” said Lucki. “Digital Retailing is more efficient for the customer and the employee which has created an opportunity around personnel productivity.”

When boosting digital retailing tools and tactics, presenters recommended using data to measure monthly personnel costs. Metrics to consider include units sold per salesperson, gross and net profitably per employee, and new and used department personnel cost per unit sold. Measuring performance will help dealers reflect on the changes they’ve made to adapt to the coronavirus environment and scale changes when the environment shifts.

In addition to highlighting the positive impact of digital retailing on profitability, presenters shared additional ways that sales departments can increase profitability. One way is to reduce expenses, starting with the top three controllable expenses for general managers: floorplan, advertising and personnel expenses.

“Digital retailing is not a new sales process, it is providing tools throughout your sales process to be able to be more customer centric,” Lucki said.

A recording of the webinar is now available to NADA members here.

Note: NADA’s webinar is offered to assist its dealer members in the operation of their dealerships and for general informational purposes only. Each dealer must seek their own legal counsel and make their own independent business decisions and work with their attorneys to ensure social media posts and advertising comply with state and federal consumer protection laws. Before attempting to sell vehicles online, dealers must consult with their attorney or state/metro dealer association or licensing authority to better understand the requirement in their state. The presentation of this information is not intended to constitute legal advice nor encourage concerted action among competitors or any other action on the part of dealers that would in any manner fix or stabilize the price or any element of the price of any good or service.

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