These frightening times may prompt some dealers to venture into new strategies and tactics that make them stronger and more prosperous in the long run.
We all know the classic innovator’s dilemma in the automotive retailing world, don’t we? Dealers may want to try something new, but in good times everything is working well, making money, so why do something different even if it looks promising? It might upset a good thing. The downside is a risk and the upside is many times uncertain.
However, in a business crisis, all bets are off, survival is the key and the downside of not trying new, promising strategies when things aren’t working is almost nonexistent. Bad times force one out of a comfort zone to change and adapt.
I think it is the responsibility of vendors to help in any way possible to facilitate innovative strategic alternatives to help dealers weather this storm, and to have them come out the other side stronger and more prosperous (with more market share) than before the calamity.
One of the benefits of being an entrepreneurial cowboy is that I get to put my money where my mouth is, and if I believe something is good for dealers and customers, I do something about it.
Showrooms are closed, but some vital people need replacement cars as vehicles are totaled or come off lease. NADA has calculated that 1.8 million vehicles will come off lease in the U.S. between March and July.
Many states allow only online sales for health precautions, and naturally everyone is worried about the effect of COVID-19 and afraid of putting out a lot of cash or getting into a long-term financial commitment, such as a car loan or lease, at least until this emergency situation shows signs of dissipating.
This confluence of issues creates a situation where we can help, and I naturally want to do everything I can so dealers can safely and efficiently keep things going. Here’s a strategy that creates revenue now, reduces used-car inventory costs, fosters customer engagement (albeit remotely) and builds a queue of captured sales in the pipeline, to snap back faster once things start to get back to normal.
The program: Take a deal-maker from sales or your business development center and have them facilitate a long-term rent-by-the-month program for used vehicles, with a customer buyout option, in lieu of an immediate sale for skittish consumers. A brief sketch of the process:
1. Allow a prospect to pick a vehicle from your online used-car inventory, then contact your folks to work the deal — monthly rental rate (which includes insurance and maintenance), allowable miles, amount needed upfront or security deposit, purchase price and how much of the rental rate would be applied toward the purchase, if/when the customer wants to pull the trigger to buy (like an extended test drive, where the customer pays you for the privilege).
2. All of these terms are put on a turnkey phone app, where the customer consummates the deal digitally including all payments. Once the rental deal is consummated, register and tag the used vehicle in the dealership name, put the insurance ID card inside the vehicle and it’s good to go. (Depending on the customer and credit rating, a hardwired GPS might be installed.)
3. The cleaned, disinfected vehicle is delivered to the customer’s door: From a distance the delivery coordinator validates the customer’s identity, does a condition walk-around and delivers the vehicle. That’s it, no paperwork, no direct contact, no need for close interaction (unlike a sale or lease, only digital paperwork required).
A win-win for everyone. The consumer is coaxed off the sideline, as this program is designed to satisfy their immediate transportation need while addressing their concern for health and financial welfare during this stressful period, and dealers continue to build customer engagement, goodwill and revenue.
Once public confidence returns, you have either built a sales queue backlog to bounce back more quickly (what customer is going to walk away from significant built-up equity in the vehicle tied to your store), or you get your used-vehicle cost written down dramatically, so that any subsequent sale is much more profitable.
That’s it, little downside, strong upside, and the transactional heavy lifting is done inside the app.
Ironically, our own in-app, remote rent-to-own program was conceived targeting subprime buyers, those who didn’t have the down payment and/or credit score to buy a car immediately.
Now, however, this applies to a mainstream audience for these crisis conditions.
This may even usher in a new process for dealers that takes the wind out of the sales of disrupters such as Carvana, as it goes one better than just their innovation of at-home delivery and a seven-day return policy — it’s a completely in-app experience with home delivery and a forever return policy, with an optional purchase.
At this time, what could be more innovative, or customer pleasing, than this accommodation?