Focus on car count, sales flexibility in 2023 – Modern tire dealer | CarTailz

This MTD Exclusive was provided by Dennis McCarron, author of MTD’s monthly Business Insights column and Partner at Cardinal Brokers, one of the leading brokers in the tire and automotive industries (www.cardinalbrokers.com).

So 2022 actually happened! (Hard to believe!) My brain tells me it’s still late spring, but the calendar tells me it’s time to bring 2023 and all its craziness.

But first, look at what we’ve been through over the past few years.

First, there was 2020, which brought us the pandemic, riots in cities across America, and a host of other disasters. This year has been difficult with lockdowns, home schooling, illness, deaths and enough mental health issues to last a lifetime. Many could hardly wait for the end of the year. People even posted online, “Goodbye 2020 – hello 2021!”

And 2021 has not disappointed us. It started with a political slap in the face. Lockdowns continued in most states, masks were everywhere and can anyone say the word ‘inflation’?

Last year too has had its moments of continued inflation, supply chain issues as far as the eye can see, and of course the invasion of Ukraine and serious talk of what happens if a tactical nuclear bomb goes off somewhere.

We in the tire industry are thinking about 2022 with the optimism of a pessimist – or is it the pessimism of a optimist – while also forecasting what we can reasonably expect to see in 2023.

Last year should have been a financially successful year for tire dealers. People were spending money to fix their cars while money was still flowing across the country, and sky-high new and used car prices made many people consider keeping their current car longer.

Upsells were relatively easy to negotiate with customers and wage increases kept pace with wage income.

Hopefully you’ve been giving generous raises to employees who deserve it, as the pipeline of new talent has all but dried up — making employee retention a key factor.

And while volumes have been falling or flat, unit prices have also been high thanks to multiple – and I mean multiple – manufacturer price increases. I can’t remember a 24 month period in my now long career where prices have risen so often and so much.

Net profits for most of the aftermarket remained strong as of 2021, likely setting or close to records.

From the data I was able to glean, the larger department stores weren’t doing as well — with the biggest difference being that independent companies weren’t conducting mass layoffs. They’ve done it while big department stores have had sizeable layoffs and don’t seem to have fully restored staff numbers, hampering their continued ability to serve customers. But they will recover.

Going into 2023, I see three main areas we need to focus on – vehicle count, sales agility, and business discipline.

Car count is the lifeblood of a business when faced with near-certain ARO declines. While a recession is yet to set in, consumer sentiment is retreating. At least for the first quarter — when more than 30% more Americans are expected to use credit cards to pay for Christmas gifts — there won’t be much left in the wallet for this traditionally underbudget auto repair.

Workflows and processes will play an even more important role over the next year as dealerships push to be even more efficient while adding one to two new cars per store per day.

Selling agility is a service advisor’s ability to adapt to new conditions. The simple customer yes of 2020 and 2021 falls by the wayside. What worked for sales reps then probably won’t work in the first quarter or the first half of next year.

Consultants need to dust off their presentation skills and hone their empathy radar—while paying close attention to margins. Strong advisors will adapt with a new approach. Bad advisors will complain that “nobody buys anything”.

Business discipline means sticking to logic, not gut instinct. We’re already seeing benchmark interest rates at 2008 highs. That means if you’re borrowing money to buy inventory or pay other bills, you’ve probably forgotten how painful it is to pay off that debt.

Last year at the same time I advised you to get out of debt. I hope you did and I hope you keep staying out. There will be many “deals” ending this year and beginning the next. If you’ve got the cash on hand and the hole in your inventory, by all means grab the deal!

But if you don’t have the cash and your inventory is pretty full due to a flat year in unit sales, stick to your guns and pass the deal. There will be others.

I wish all readers happy and rewarding holidays. Congratulations on a tough and hard fought year – again – and I wish you all the best in the new year.

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