Though car buyers’ online research is lowering visits to dealerships, auto dealers have plenty of opportunities for growth.
US auto sales are on a tear. Earning reports out of Detroit have been a stunning counterpoint to the recent gloomy economic news. For one segment of the auto sector, however, the news hasn’t been so rosy. Despite the ongoing recovery and volume growth of the North American automotive sector, the profitability of dealers has been stagnating over the past three years. (As a percentage of total sales, the 2.2 percent figure represents sales in the new- and used-vehicle departments and the service and parts departments.)
Some 42 percent of dealers report declined store traffic compared with five years ago, according to a study conducted by McKinsey & Company in cooperation with the National Automobile Dealers Association (NADA). (This report is based on an extensive survey of nearly 800 new-car dealerships across all brands, a detailed analysis of financial metrics of more than 2,000 retailers, and a car-buyer survey of more than 3,000 US consumers.) That’s because new-car buyers spend almost triple the amount of time online doing research compared with ten years ago. (There is a silver lining: 61 percent of dealers report a rise in the conversion rate of store visitors in the last five years.)
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