Dealers grappling with the impact of the COVID-19 pandemic are altering their sales models and reviewing traditional features of their bricks-and-mortar stores.
In Lethbridge, Alta., Greg Flom, general manager of McFadden Honda, said he was preparing to turn ground on a 28,500-square-foot (2,650-square-metre) dealership this spring. Managers decided to delay the project until they see how quickly the economy recovers and what impact the pandemic has on consumer behaviour.
The crisis, Flom said, has raised questions about what form a new building might take. While he thinks customers still want human contact, much of the conventional dealership configurations might change or disappear altogether.
“We don’t know if there’ll be a customer lounge,” Flom said. “We don’t know if there’ll be a showroom.
“Will service advisers be in enclosed areas? Will deliveries happen at the store or be delivered to customers’ residences? Will there [be] coffee machines, water fountains in customer areas? Or will we have less touch points?”
Those are questions weighing on dealers across Canada as they figure out how to operate in the wake of COVID-19, which is expected to entrench physical distancing throughout their operations.
NO MORE BIG SHOWROOMS?
The push toward online sales and new health and safety protocols could combine to prompt a rethinking of large dealerships, said Wolfgang Hoffmann, president of Jaguar Land Rover Canada.
“There will be changes,” he said in an April 30 webinar hosted by Templeton Marsh, a Canadian dealership mergers and acquisitions brokerage.
“These things might be revisited, and you might be scaling back a little bit in terms of showroom space. However, [there’ll be] another requirement in terms of having the right digital tools in your showroom and having configuration space dedicated for your customers where you can configure your cars.”
Dealers who spoke with Automotive News Canada anticipated strict safety protocols remaining in place for months, even as governments begin to ease stay-at-home orders.
“We’re going to enter a new way of doing business, and a lot of it is going to be digital and Internet-based,” said Robert Stein, president of Plaza Auto Group in the Toronto area.
In many provinces, dealers were forced to sell vehicles online after showrooms were shuttered. Demand, however, was limited, and some retailers said the refusal of some banks to accept electronic signatures complicated online sales.
Still, dealers foresaw much of the car-shopping process remaining remote in the coming months, with many customers coming to dealerships only for the final steps of the buying process, such as collecting signatures and going for test drives.
But even those processes will be altered by the pandemic, if protocols released by the Canadian Automobile Dealers Association (CADA) in late April are any indication. Those protocols, intended to be best practices for dealerships, include a seven-step process for test drives. They also encourage dealers to minimize the number of customers in a store at one time.
Governments are also issuing guidelines. Ontario, for instance, on April 30 unveiled a framework for how auto retailers and manufacturers can keep employees and the public safe. Guidelines included using floor markings and installing barriers, as well as rescheduling unnecessary visits by vendors, service technicians and others.
Dealers also took it upon themselves to find ways to keep their showrooms and service departments safe.
Newel DeSouza, general manager of Maranello BMW in Vaughan, Ont., said in April that service customers were banned from entering the store and were required to use a key drop-off. The dealership has also instituted a rule prohibiting employees in the store from being within two metres of each other.
“If they get caught inside a two-metre distance, they get a verbal warning,” DeSouza said. “The second time, they’re brought home and another team member is brought in.”
Honda Canada CEO Jean Marc Leclerc said auto companies and dealers must demonstrate to customers that retailing is safe. Otherwise, they risk damaging their reputations and losing business at a time when revenue has collapsed.
“Dealers are smart businesspeople that operate multimillion-dollar companies, and they understand they’re under scrutiny not just by authorities but by customers,” Leclerc said. “And if they screw up, it’s going to cost them business because people view things in a very different lens than normal.”
Kim Day, COO of Steele Auto Group in Atlantic Canada, said her company has posted several videos on social media explaining to customers what to expect when they visit its stores, be it for sales or service. The videos are designed to both help customers safely comply with the dealerships’ new protocols and illustrate the lengths to which the stores are going to stay safe.
“It’s a combination of communicating those protocols to our customers,” Day said. “And I do believe that as the number of cases confirmed comes down every day in the provinces, that will restore some consumer confidence.”
Tammy Roach, dealer principal of Charlottetown Mitsubishi in Prince Edward Island, said in April that customers seem to be adjusting to new service protocols, including those that bar direct in-store contact with staff.
“People have been very understanding and accommodating, which is great,” Roach said.
Doug Firby contributed to this report.