Franchise Dealer Closings Hit all time high in 2009

Several days ago the statistics were released regarding 2009 dealership closings through the first 11 months of the year. The numbers, although staggering, should really not be surprising. And to people who deal with these stores on a daily basis, they are not surprising at all. Time and again, when dealing with stores that are still in operation in spite of themselves, it has crossed my mind that being in the dealer acquisition business, or to find use for empty buildings and paint for lease signs, might actually have some type of future.

So what are the numbers of stores that are closing exactly? According to results from Urban Science, an analytics company focused on retail performance, there was a 7.3% point reduction in dealers during the first 11 months of the year. That, compared to the average attrition of 1%, is significant. In the raw numbers, we are talking about 1,467 dealerships that shuttered their business this year. Another not surprising figure is that 90% of those stores closing were GM or Chrysler brand stores, many forced to close by the manufacturer.

Many of the OEM forced closures were really not ultimately the fault of the store, but the manufacturer themselves. Truthfully, just how many GM product stores does it really make sense to have within 15 miles of each other in a metro area? If I don’t want that Pontiac, I will drive over there and buy the exact same vehicle with a Buick nameplate on it, or a Saturn name plate on it (ok, that may be stretching it since no one was really buying Saturns to start with). But you get the idea. Too many vehicles with too few difference and too few miles in between the stores. And each store was willing to do whatever they had to, to move the unit, to go after the stair stepping hold back that was virtually the only thing keeping the domestic new car business afloat. That pushed an enormous amount of focus onto the used car business. I have heard more than one store say, “I am a used car dealership with a new car sign.” Then used cars got pricey, and the rental companies stopped buying new fleets, and program cars dried up, and used cars got even more pricey.

And then there was the media buys. Thousands and millions of dollars pushed into print advertising with very little ROI or trackability. Where did it really ever make sense to pay $10,000+ to advertise inventory on a weekend, with lots of color and those silly looking bursts? The Internet crept in, in the late 90’s and began to revolutionalize media buys and advertise. Newspapers jumped all over the media that would ultimately render them useless.

Believe it or not, there are still dealers out there that do not or will not recognize how important the Internet is for marketing and understanding their audience. Well, there are 1,467 less of those dealers around going into 2010, but there are still some of those stores out there. Here’s the facts, 80% of all vehicles purchasers will spend at least some time on the Internet as part of their buying cycle with most of them starting on search engines, 90% to be exact. Over 50% of the search engine traffic will happen on Google. Actual, trackable dealer “leads” will come from 3rd party sites and 3rd party site traffic that finds their way onto dealer websites. More people will walk into the dealership off of Internet information than will email.

As a dealer, that is no longer able to sell vehicles in spite of themselves, what should they look to first to be smart online marketers?

Search Engine Optimization/Marketing - The search engines are a key driver of online traffic to both a dealer site and to the 3rd party sites driving lead counts, however more and more search engine shoppers are researching based on options not brands. How well does your website, or your 3rd party site focus on feature and option visibility from the search engine path? How flexible are those sites in allowing for vehicle level data manipulation, allowing you to match features to true search phraseology? (does anyone actually search 32 mpg or is it more likely they would look for “great fuel mileage?”)

Social Networks - learn everything you can about Facebook, Twitter and every other site out there. It is a completely different marketing play, but one that has to happen. Did you know that there are 200,000,000 active Facebook users and half of them log in daily? Marketing within social media has nothing to do with being loud and proud, and everything to do with giving back. And being willing to share opinions. Yes, some of your customers may say some negative things about you, but they were telling all their friends all along, and without that knowledge you never had any way to repair the issue and retain the business. Now you do.

Remember the back half of your dealership - people are keeping their vehicles for longer than ever. Nissan put out a statistic years ago that the average Nissan buyer was worth $326,000 to the store, if they maintained that customer. Customer retention and service retention is very important. But the concept out there is that dealer service work is more important that aftermarket shops. Is it really? A year ago I was forced to buy 2 tires while I was on the road. I bought them in an aftermarket tire shop. A few months later I needed the other 2 replaced and my car was at a dealership. I told them what I paid at the aftermarket shop and asked if they would match it. They did, and they got the business. So are dealerships marketing their service or their parts and accessory departments online? For the most part, the answer is no. Maybe those departments have a neglected page on the dealer website, but rarely anything else. Start with search engine optimization and marketing, and quickly move to social media and you will create future customers for the front end of the house too.

So how do we keep 2010 from being as big of a blood bath as 2009 was, beyond the OEM failures? Review the media buys, demand analytics and justifications. Embrace new technology and never forget the service end of the business. Then I won’t have any reason to go into the real estate business to help you sell that big empty building.