Car Dealers Profits Improving Quickly

by Jeff Gilbert
WWJ AutoBeat Reporter

Interview: Randy Berlin of Urban Science talks with WWJ’s Jeff Gilbert

As car sales slowly improve, things are improving much faster for auto dealers.

“We’re not back to they heyday yet, but there’s light at the end of the tunnel,” says Randy Berlin, global account director of the industry consulting firm Urban Science.

Urban Science reporting today that dealer profits have increased between 38 and 129 per cent over last year, with an average increase of around 50-60 per cent.   Dealers are expected to sell an average of 745 vehicles per dealership this year.  That rate is very close to the level during the peak years of the past decade

“Dealers are in a good position to be profitable and increase their profit rates,” said Urban Science Vice President John Frith.

One reason is there are significantly fewer dealers than there were before the recession.  The dealership ranks were reduced by 8 per cent in 2009, and another 4.4 per cent last year. 

“We’re seeing some very, very positive increases for those dealers both in profitability and in terms of volumes,” says Berlin. 

During the recession, Berlin says dealers cut back on unnecessary overhead, and found ways to make their used car and service operations more profitable.

“Dealers, because of the decline of the industry, are proving their resilience once again,” Berlin told WWJ AutoBeat Reporter Jeff Gilbert.  “They cut back on costs, focused on areas of profitability in the dealership that are more stable and less reliant on the cyclical nature of new cars.”

That, Berlin says, will position dealers to sell a record number of vehicles per dealership as car and truck sales return to normal levels.   And expect many of those new shoppers to make their first contact with the dealership over the Internet.

“The Internet as a medium plays a critical role in increased sales,” says Jody Stidham, Global Practice Director at Urban Science.

Stidham says, depending on the brand, Internet leads account for between 15 and 30 per cent of all sales.  That, she says, increases the importance of coming up with systems that accurately help dealerships separate people who are interested in buying a car, from those who are just “kicking the tires” on web sites.

With fewer dealers, Stidham, expects car companies to put more pressure on remaining dealers to improve everything that touches the customer, from the physical dealership, to the dealership’s Internet portal.

Urban Science’s Randy Berlin says the recession has taught the industry a lot of valuable lessons, that should not be forgotten. 

“In terms of the lessons, they have to keep those costs in line, and they have to understand that a few years from now, we’re likely to be back in a dip again.”

Follow Jeff Gilbert on Twitter @jefferygilbert


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