Dealers brace for shutdowns, absences as cases surge

Industry

This time, dealers are better prepared.

With coronavirus cases rising across the country, retailers are guarding against outbreaks among their own staffs and bracing for new restrictions, which have been issued from California to Minnesota to New York.

After their experiences in the spring shutdown — lobbying to be classified as essential, expanding digital processes, adding pickup and drop-off service — dealers are generally better prepared for whatever may come.

“Dealers have been resilient through this unpredictability, and dealers will continue to adapt to whatever is thrown at them,” Rhett Ricart, chairman of the National Automobile Dealers Association, said in a webinar last week. “Do you know why? We have to. Dealers are not only essential, but we’ve been critical.”

Although dealers have added capabilities to handle economic restrictions, orders can be complicated and confusing.

During New Mexico’s first stay-at-home order in March, Melloy Chevrolet in Los Lunas, south of Albuquerque, started its Melloy Personal Shopper Program to make the virtual car-buying process seamless for its customers. But on Nov. 16, the dealership closed again, saying the state’s new shutdown doesn’t allow any contact with customers.

“We did a lot to make sure it was simple to shop online, but right now, it isn’t doing us any good,” said Dennis Taylor, the marketing manager.

Charles Henson, president of the New Mexico Automotive Dealers Association, told Automotive News on Tuesday, Nov. 17, that Gov. Michelle Lujan Grisham’s orders didn’t address online sales specifically, so he was advising dealer members to err on the side of caution and avoid deliveries.

An update from the governor on Wednesday, Nov. 18, specified that auto repair is essential, so it is allowed up to 25 percent of the building capacity. Nonessential businesses, including “big-box retailers,” may “provide curbside pickup and/or delivery of goods to customers.”

But Taylor said the clarifying statement didn’t make any difference.

“It doesn’t seem like there is any reason for this shutdown to be different, but it is,” he said.

The pressure is on for dealers to be community leaders when following protocols set by the government, said Ricart, who is also CEO of Ricart Automotive Group in Columbus, Ohio.

“No one wants to be on the front page, or be on the television news at 6 o’clock, talking about how the health department had to come in there and cite them because they didn’t have their people” follow health and safety protocols, he said in the webinar, hosted by the Automotive Press Association.

Ricart said being strict on safety protocols is necessary to keep his community safe — including his 500 employees.

“I’m not going to put my people at risk because I think I’m going to walk around without a mask on,” he said.

The updated guidelines implemented during the past week have varied from state to state, but few have affected dealership sales departments, which is good news for retailers — and for consumers on the hunt for a vehicle.

The economic disruption caused by COVID-19 has not dampened consumer interest in new vehicles. A Cars.com study for the third quarter showed higher demand for vehicles than a year earlier, even amid the pandemic. And limited entertainment options have people spending more time online: Digital engagement during the pandemic was up 10 percent year over year in the third quarter, and the in-market audience was at an all-time high of 85 percent.

Throughout the pandemic, the consumer has been interested in buying cars, said Doug Miller, chief revenue officer at Cars.com.

Dealers developed a “digital front line” during the first shutdown that will serve them going forward, Miller said.

“I think dealers are better prepared than ever,” he said.

In April, hundreds of dealers successfully lobbied, and sales were deemed essential under the Department of Homeland Security’s Cybersecurity & Infrastructure Security Alliance guidelines, which most states are following.

With COVID-19 cases surging around the country, the virus remains a threat to dealership employees. In Lansing, Mich., Ralph Shaheen closed his store, Shaheen Chevrolet, for cleaning Nov. 7 after eight employees tested positive. Sundance Chevrolet in Grand Ledge, Mich., had 13 employees test positive at the beginning of November, and Spradley Chevrolet, Hyundai and Kia dealerships in Pueblo, Colo., had five employee cases in September.

Such outbreaks are a concern for dealers and for their customers.

Consumers were patient as dealers learned new programs and navigated online sales for the first time in the spring, said Ian Isch, director of in-market sales development at Edmunds, but the expectation for smooth transactions will be high — and competition will be elevated.

Dealers need to make it clear that service and delivery will be accessible from home, even if they haven’t quite figured out how they are going to do it, said Dave Zuchowski, chief strategy officer of Unite Digital.

“Get the message out to consumers that: ‘Don’t worry about COVID; don’t worry about a pandemic. We have processes in place that we can do exactly what we would do if you came to the store — we can do with you never leaving the comfort of your couch,’ ” he said.

Dealers who implemented online platforms and rigorously reduced costs at the start of the pandemic have benefited the most in a stretch when dealers in general reported record gross margins and net profits, Zuchowski said.

“COVID showed us that those progressive dealers that responded quickly to this with skeleton crews and heavily reliant online practices did really, really well,” he said.

Dealers will have to focus on keeping operational costs down, including having a lean staff, low inventory and low incentives.

Federal assistance during the first shutdown played a huge role in the success that dealers had afterward. This time around, dealers shouldn’t expect monetary help from the government, Zuchowski said, so if they didn’t save up in recent months, they need to be working with their banker to secure lines of credit and other funding sources.

“The key now,” he said, “is nobody is counting on a bailout of any type.”

Audrey LaForest contributed to this report.

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