Each month, Les Silver, chairman and CEO of Mobile Productivity, Inc. (MPi) will impartially answer dealer questions relating to helping increase service department sales and profits. This is an opportunity to have your questions answered by an expert who is genuinely interested in helping dealers maximize the profits from their fixed operations.
Q. There is a lot of talk about the number of dealerships being reduced. What do you see as the impact on the dealership parts and service operation? Travis Bostwick, general manager, Saturn of St. George, Utah.
A. Most of the reduction in dealerships will be within the domestic brands, GM, Ford, and Chrysler. These brands have many more dealership locations than their import counterparts, which results in less vehicle sales per location. This has made it much more difficult for the dealerships to be profitable, especially as the market share of the domestics has decreased. Current estimates are that as many as 3,000 dealerships will close in the next few years.
The closed dealerships will come from both rural and metropolitan markets. The majority, however, are expected to come from metropolitan areas. These markets have been targeted by the OEMs for brand consolidation, (e.g. GM combining Pontiac, Buick, and GMC into a single location) which will ‘encourage’ this reduction.
The customers of a closed rural dealership will likely split their service business depending on whether or not the vehicle is still covered by warranty. For a warranty service, customers will have sufficient motivation to travel a significant distance to the next closest dealership. This dealership should be prepared for a small influx of new business from this source. They should also be prepared to offer these customers the non-warranty services, such as scheduled maintenance, that may be needed. They should also use these visits as the initial opportunity to develop relationship with these customers in order to “capture” them for future service, parts, and vehicle sales opportunities.
The potential business lift is greater for dealerships that are located near a closed metropolitan dealership. Since there is typically much less distance between these dealerships, the chances of customers being willing to travel to another dealership and become a regular customer is greater. The “survivor” should do a profile of the parts and service business of the closed dealership. Were they in the wholesale parts business? Who were their major accounts? Are there parts, drivers, or counter people available with established relationships? Is there a parts inventory that could be acquired on favorable terms and either integrated or liquidated? Do they have a “database” of service customers that can be acquired? Are there service advisors from the closed dealership who have customer relationships that could be transferred? Are there quality technicians now available to increase the capacity or upgrade the skills of your shop?
It is likely that several of the “survivors” in the area will have the same idea. Most of the opportunity will go to the one who acts quickly and decisively. While it may seem awkward to take advantage of the misfortune of a former dealer, it is in your best interest and the best interest of the former dealer’s customers and staff for you to reach out before these customers disappear to another dealer or into the aftermarket.
To have your question considered for next month’s Q&A, email This e-mail address is being protected from spambots. You need JavaScript enabled to view it and please include your name, title, dealership, and put “Fueling Fixed Ops Profits” in the subject line.