Canadian dealers have renegotiated vendor contracts and brought some services in-house as part of aggressive cost-cutting strategies aimed at preserving cash flow during a pandemic that has rocked automotive retail.
“You get sort of complacent with your vendors in terms of how you negotiate contracts in terms of value for money,” said Trent Hargrave, general manager of Riverside Chrysler-DodgeJeep-Ram in Prince Albert, Sask. The pandemic has “forced us to go through every single one,” he said.
Although the new-vehicle market showed signs of recovery in May and June, lingering economic uncertainty is forcing dealers to take out their scalpels.
“Heck, we negotiated with our cleaners to get a discount,” Hargrave said. “Where can we find that 10-per-cent or 20-per-cent [savings], or do we need to sever that relationship?
“The first couple months, vendors stepped up with discounts, which is great. But now those are starting to end. Now, for us, it’s: ‘Is this product necessary? Can we handle it in-house?’ ”
‘BUILT BY US, FOR US’
John Hairabedian, CEO of HGregoire in Quebec, said his dealership group has built out its digital platform in-house. That helped the company adapt quickly as stores, which closed during the first phase of the government-ordered shutdown, come back online.
“Our website technology and everything we do is built by us, for us,” Hairabedian said. “We are working on developing new technologies to support online sales, and we will be releasing them in the short-term future. We see ourselves as a technology company that happens to be in automotive retail.”
Larger groups also were looking for ways to save costs. AutoCanada Inc., the country’s only publicly traded dealership group, said in a June 4 quarterly earnings report that it “deferred, reduced or eliminated most discretionary and nonessential operational and administrative spending,” among other cost savings that included layoffs and salary freezes.
“Management continues to work with several vendors and landlords to reduce costs through this period and/or defer payments on goods, services and rent beyond the second quarter of 2020,” the company said in the earnings statement.
CUT THE CONSULTANTS
Steve Chipman, CEO of Birchwood Automotive Group in Winnipeg, said he expects dealers to forgo spending on outside consultants and instead look to existing staff for ideas to improve business.
“You’ve got a process problem somewhere,” Chipman said, “and over the years, you’ve thrown people at it.”
Spending, however, hasn’t come to a total standstill. Dealers found that they need to work with vendors to prepare their business for increasing digital and remote sales.
Wendy Bulmer, general manager of Acura of Moncton in New Brunswick, said her store has benefited from using Roadster, a digital retailing tool that allows customers to get appraisals, fill out credit applications and more online.
Her store began using Roadster before the COVID-19 pandemic struck Canada, she said, but it has since become an invaluable resource.
“The clients who wanted to buy a car during COVID really embraced it,” Bulmer said.
NEW PRODUCTS TO ADAPT
Vendors, meanwhile, saw an opportunity to market new products to dealers who needed to enhance their digital offerings. For instance, Rapid RTC, a Winnipeg-based provider of lead management software, rolled out a new product in May called Live Dealer. It allows a salesperson to seamlessly walk through a digital transaction with a customer, from doing a video vehicle walk-around to building and pricing a vehicle.
Glen Demetrioff, CEO of Rapid RTC, said interest in the product has “exceeded our expectations.” As of June 5, he said, more than 400 dealers had installed it.
About 60 per cent of those dealers did not have an endto-end digital retail presence, Demetrioff said.
“We really fast-tracked [development] once we saw COVID coming online and realizing that connecting salespeople to customers was going to be paramount,” he said. “We had the vision ahead of time to know where we thought the market was going to go, but this just helped accelerate that.”