In many cases, Gillis says, the car-buying process becomes so frustrating and anxiety-laden that consumers give up.
“By the end of it, we’ll do anything to just get out of there and just get our car,” he says. “People sign on the bottom line for things they don’t really need—like rust proofing and special mats and paint sealant—just to get away.”
Coronavirus will change this by winnowing out the worst dealerships and demanding efficiency and better service in others. The good news for consumers, he says, is that we won’t be going back to this condition as normal—ever.
Well, how good are dealerships at doing socially distanced transactions?
It depends on where you are. Some dealerships are better at it than others. They’ve got their work cut out for them: According to Cox Automotive, some 60% of consumers would rather not visit a car dealership at all.
“Are car dealerships future-proof? No, no they’re not,” says Glaeser.
Plastic wraps on steering wheels and seats, driveway drop-offs for test drives, and personalized new-car deliveries are all on the table for dealerships motivated to support safety-sensitive customers. The points of contact between consumers and salespeople should be minimized, with one person, rather than two or three or five, devoted to each customer. There will be much more one-one-one attention for customers who engage with sales people, especially at higher-end brands, predicts Glaeser. (The business case for that is simple: Get a consumer in a cozy, comfortable, safe, and intimate environment, and they’re more likely to spend money. In Los Angeles, Glaeser is doing selective, masked one-on-one test drives with customers from their homes in the Pacific Palisades.
“The best dealers we see are taking social distancing very seriously,” says Jeremy Anspach, chief executive officer of Purecars, an automotive digital marketing firm. “When you think about all the cars in the showroom and the spacing, compared to a box retailer or a grocery store, the idea of social distancing is quite easy.”
That said, there will be culling. Some automakers have too many dealerships dotting the country; this has led to some splintering business profits that will be exacerbated during and after the pandemic, says Kevin Tynan, director of automotive research for Bloomberg Intelligence.
Exhibit A: Fiat Chrysler has 10,271 dealerships in the U.S. while Toyota has 1,400, according to Bloomberg Intelligence. Last year, the average Chrysler dealer sold 656 units, while the average Toyota dealer sold 1,700. Assuming an industry average of 5% margin profit for each sale, it’s easy to see which dealers fared better.
“Toyota doesn’t have the footprint, but they have a much healthier base because [each dealer] is getting theirs,” explains Tynan. “The domestic guys look at the numbers and would likely say we have too many of these damn things. They’re eating each other. Politically, of course, they won’t say, ‘We would just love to kill some dealerships.’”