Marco Schnabl started in the automotive industry 20 years ago selling vehicles at a car dealership in his native Germany.
He enjoys auto retail, but one thing he didn’t like there very much: the European dealership business model stocking low levels of inventory, and therefore taking vehicle orders from customers who would wait for weeks. and the months that the automaker builds and delivers the vehicle.
This is a stark contrast to the traditional way of selling cars in the United States: Consumers in the marketplace choose a vehicle of their choice from the dealer lots (or web pages) packed with inventory and walk away immediately. .
Schnabl, who then sold cars in the United States, says, “I’m not a fan of the European system. It’s too much of a wait for customers. And as a salesperson, you’ve had to wait a long time for your commission check.
That said, he believes the current national circumstances – limited stock at dealerships because a shortage of microchips has forced automakers to cut production – require the implementation of at least an interim system of manufacturing at home. order in the United States.
“Consumers have heard that inventory shortage is a real problem, so mindsets have changed enough to make pre-orders,” says Schnabl, co-founder and CEO of automobileMastermind, a unit of IHS Markit and a supplier of predictive analytics and marketing automation software for dealerships. .
His company has expanded its data-driven product offerings to help dealers manage inventory issues, interact with buyers and retain customers.
“Dealers need to figure out what’s possible and work with customers to set expectations,” he told WardsAuto, explaining how an order-and-hold system might take hold in the United States. – only temporarily. “This is the best time to do it.”
He recommends dealers running out of inventory tell customers, “I want you to have a great experience, so let’s order a car now. The promise of a $ 500 loyalty rebate, for example, would reward customers for their patience. “
If a purchase order takes months to wait, dealers should communicate with customers regularly to let them know the store hasn’t forgotten them, says Schnabl.
Could an ordering system like this take permanent root in the United States, moving away from dealers stocking acres of inventory? Schnabl doubts it. “It is unrealistic to think that in two or three years the United States will have a European-type system.”
On the one hand, automakers want higher inventories than they currently are. Most of the automakers are state-owned companies facing pressure from shareholders to sell lots of cars and carve out a healthy market share, he says. “There is also the problem of capacity” of keeping auto factories buzzing, of not slowing down or even operating below full capacity. Some large auto factories have shut down completely for lack of sufficient semiconductor microchips.
But running at or near full capacity doesn’t mean pushing too many vehicles into the market. This push rather than pull strategy has been tried before, usually in desperation, with costly consequences, especially for residuals.
But in any business, supply should be close to demand. Currently, this is not the case in the automotive industry.
Some dealers agree with the current inventory situation. They say it allows them to sell cars for higher profits. And it takes less time to sell if customers are in line while waiting to buy.
“The change (of inventory) was so quick that a lot of people are wondering what happened,” says Schnabl. “It’s a wild time. The dealers are resilient, especially in this country. The best dealers think about keeping their customers.
“Dealers have to make money; I firmly believe in it. But not at the risk of maximizing profits to the point of losing loyalty, and we’ve seen loyalty plummet lately.
Due to the shortage of new vehicles in stock, many consumers are heading to the dealership’s used car fleet. It also caused a shortage of inventory there.
Schnabl says AutomobileMastermind’s predictive analytics capabilities allow dealerships to find creative ways to replenish their used vehicle inventory.
One way is to use customer data to reach the people who are statistically likely to sell their current vehicles.
“Look at the customers who will be in the market soon according to our predictive analytics,” says Schnabl. “Some households change vehicles like clockwork. Some consumers have more than one vehicle in their garage. It’s a quick inventory acquisition to contact them. “
Schnabl lives in New York City, which he fell in love with when he traveled to the United States as a Daimler student intern.
He was working at Mercedes-Benz in Manhattan when he and Johannes Gnauck, a fellow dealership colleague and German compatriot, came up with the idea for the automobileMastermind. This happened nine years ago at a kitchen table in Gnauck’s apartment above the dealership.
Steve Finlay is a retired editor of WardsAuto. He can be contacted at [email protected].