How Technology Can Help Auto Dealerships Streamline Operations and Improve Margins

The industry's accelerating demands push us to reevaluate the business case for increased technology in dealership operations.

First published on
September 8, 2021
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Patrick Hauert

Patrick Hauert

Vice President of Product at RecovR

Since 2001, Patrick has held various security-related positions varying from fighting digital content piracy to pay-TV content protection product management, to cybersecurity business development for private and public-sector clients. He spent the early years of his career at Silicon Graphics (SGI). Patrick holds a Master's Degree in Micro-Engineering from the Swiss Federal Institute of Technology (EPFL) with a diploma from the University of California at Berkeley (UCB) and executive education from IMD, Lausanne, Switzerland.

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Auto dealerships range anywhere from pen-and-paper traditional to tech-savvy and fully digitized, so opinions on whether and how to integrate technology into the business run the gamut. Some processes are tried and true, which is why dealers use them to this day. Still, the industry's accelerating demands push us to reevaluate the business case for increased technology in dealership operations. 

One area that is ripe for digital transformation is lot management. Today, many dealerships still rely on porters or other staff who know every car's location on the lot. But when they’re not around, chaos can ensue. Taking inventory remains a time-consuming manual task, and potential customers get impatient while staff tries to locate a specific vehicle and its keys. A digital approach to lot management based on wireless GPS devices can help dealers achieve operational efficiency, streamline workflows, enhance the customer experience, and even add revenue streams, all of which impact the bottom line.

Better Visibility and Workflow

By far, the biggest benefit of incorporating technology is lot visibility. Having a real-time view of what's on a dealer's lot allows them to track how quickly cars make it from arrival to the sales floor, find vehicles more efficiently, answer inventory questions, and reconcile inventory discrepancies across lots more quickly. Whether on one large lot or several lots spread across town, the average dealer handles hundreds of cars each day, and they all need to be unloaded, inspected, onboarded, detailed, serviced, and sold. Optimizing the workflow to minimize the time to sale is a critical element to cutting costs. 

Picture another common scenario: A salesperson is trying to find the one key among hundreds that corresponds to a car the customer in the showroom is waiting to see. Because he's not entirely sure where the car is located, the seller hits the alarm button to try and find it as he walks around the lot. These moments seem small, but each inefficient step of the process adds up, creating a problem for a business built on traditionally thin margins.

Imagine, instead, a streamlined system for collecting and processing vehicle data where salespeople can locate any car at any moment, minimizing frustration and better serving customers. These tech solutions exist and can offer near-effortless adoption by dealers and unparalleled visibility and control over inventory. 

Improved Customer Experience

An optimized process saves time and money and improves customer experience, vastly increasing the likelihood of closing the sale. If a customer is looking for a specific car and has to wait for an extended period for the seller to find it, they are more likely to walk away. On the other hand, moving the customer seamlessly from the door to a car to the F&I desk in less time does wonders for sales conversion and even CSI scores, long-term customer loyalty, and referrals. 

Consumers have become accustomed to quick and often automated service across their lives -- from food delivery to document signing to telehealth. If one dealer doesn't keep up, customers will seek out the most frictionless experience possible. This is especially true as customer bases are increasingly digital natives who are more prone to buy cars online if they are not satisfied by the service of a brick-and-mortar dealership. 

Introducing technology that solves daily dealership pain points allows salespeople to focus on the two things that matter: selling cars and happy customers. 

Bigger Margins

Now, let's talk numbers. No dealer wants to deploy new systems without ensuring: a) they are future- proof, and b) they benefit the bottom line. Margins naturally improve from the ability to sell more cars in less time. Some market tech solutions also increase margins through disruptive business models that offer lot management solutions at no cost to the dealership. They can be entirely funded through upsell of the wireless GPS device to car buyers as a theft recovery solution. 

The good news is that research shows consumers are open to the upsell. They're spending a lot on a new purchase, and protecting it is top of mind for them when they’re sitting at the F&I desk. The National Automobile Dealers Association reports 90% of new -- and 73% of used -- car buyers purchased an after-sale product, used financing, or both.

With car theft and consumer concern on the rise, research also shows a significant willingness to pay for theft recovery services. According to a 2021 survey by RecovR, a two-in-one lot management and theft recovery solution, 63% of consumers in households making $75k+ reported that they'd be willing to pay anywhere from $15-25 per month for vehicle theft recovery services. Dealers can bring incremental revenue to the business by selling solutions that offer customers immediate peace of mind.

Opportunities on the Horizon

Let's go beyond the dealership and into the entire industry ecosystem. It becomes clear we've only begun to scratch the surface regarding what integrated technology can do for this sector. There are early-stage opportunities in the works, ranging from automating flooring company audits to creating new communication channels between dealerships and vehicle owners that increase each customer's lifetime value.

But such technology must come at a reasonable (and preferably no) cost to the dealer -- not only in terms of buying the technology, but also in implementing and future-proofing it as well. As OEMs (especially of electric vehicles) start to look down on after-market wired devices, it will be critical to transition to wireless devices that are easy to install and don't run the risk of voiding manufacturers' warranties or leaving consumers with empty batteries. 

Technology is the partner dealers need to optimize operations and send satisfied new car owners driving off the lot. New solutions could help dealers gain control over the little things that make a big difference in the bottom line and solve many of the age-old problems dealerships face.