Margin compression is an ongoing problem in the auto retail industry. But at least it’s somewhat predictable. Margin compression almost always accompanies economic slowdown—when economic times get tough, profit margins usually start to slim. You might have even seen some of the telltale signs of margin compression at your dealership in recent months—customers taking longer to purchase cars, fewer cars sold, more discounts, and worst of all, less profit per car sold.
As margin compression creeps back into the auto retail industry once again, there are ways your dealership can combat its profit-slimming impact. One of the most important ways you can do this is to focus on process improvements and implement technology to find hidden advantages, opportunities, and areas of improvement.
Insights Lead to Improvement
When it comes to implementing new technology to combat margin compression, the natural starting place is the DMS—the technology that touches nearly every aspect of your operations. The DMS can show the small details that explain the root causes of shrinking profits specific to your dealership. Because, while every dealership has to deal with the problem of margin compression, every dealership combats that problem are differently, depending on the data.
Look for a DMS that offers ongoing support and resources to help you dig into your data, understand it, and make changes to boost profits. Look for smart software solutions and smart people to help you take advantage of your technology. Look for a DMS that provides access to experienced industry professionals who have seen the ups and downs of margin compression before, and know how to leverage your technology to tell you where to make improvements.
Create Efficiencies of Scale
Margin compression demands efficiency. It is a complex, interconnected problem that requires intelligent, integrated solutions. By implementing smart technology solutions that require fewer inputs (in terms of cost and work hours) to achieve the same output, your dealership can create economies of scale. These newfound efficiencies can reverse the profit-slimming effects of margin compression and give you a competitive advantage over other dealers.
A modern DMS can integrate with your dealership’s existing software solutions, resulting in less duplicated work and better, faster inventory turnaround. It also provides real-time data to help your dealership scrutinize each deal and track margins over time. A modern DMS isn’t just a simple management software that works in the background, it’s an active tool to help you gain insights and make changes that impact profits.
Margin compression is a constant problem in the auto retail industry. It comes and goes, and more often than not it overstays its welcome. But your dealership doesn’t have to stick it out and wait for times to improve. You can combat margin compression right now with a modern DMS that helps you stay profitable.
If you’re interested in learning more about combating margin compression, including more about how technology can improve profits, download out our free guide, 7 Solutions to Margin Compression, Strategies for Preserving Dealership Profit Margin.