The success of car dealerships today depends on myriad factors and management need to be abreast of the evolving dynamics
To start with car dealers besides selling automobiles are also required to provide a variety of additional services like offering technical assistance and financing facilities. At times business of providing these ancillary services has been found to fetch substantial revenues than thus the number of such facilities provided by the car sales point is an important factor in determining its success.
Moving on, another factor that affects the revenues collected by such points is the "selling potential of salespersons" employed at the showroom. The negotiations carried out by sales force, often referred as "desking" is the magic wand in this case. So, appropriately trained staff must be given the responsibility of striking deals with the clients.
The procedure followed by such sales points is a complicated one. Dealers, usually set the mark-up cost of vehicles at less than 2% over the "invoice cost" incurred. So, it is generally accepted that profit margins are not substantially attractive. Also, car dealers often borrow some amount from the manufacturer (as "inventory handling cost") and pay interest on it. In some cases, manufacturers offer a "hold-back" amount, which is about 1-2% of vehicle"s wholesale price. This is provided to improve the fiscal position of the dealer by helping him recover a portion of the cost borne by the dealer to "keep the inventory".
Though it has been discovered that a significant fraction of profits comes from additional services rather than the main business, the highly regulated environment regarding the financing again makes it difficult to extract the maximum. In most of the cases, dealers don"t themselves provide the finance; it is via third party. This requires abiding by all the guidelines issued by the governing authority, owing to the previously happened scandals in this direction. The overall environment in which car dealerships tend to function makes it imperative for car dealerships to employ a holistic "Performance Management" tool. One can use perspectives like Financial, Internal operations, Customer Focus and Employee and Training Perspective. Financial aspect can be evaluated with indicators like profit margins earned by the sales point, % drop in operating costs, % increase in sales and rise in earnings from tie-ups and co-branding opportunities. Internal Operations can be had from number of tie-ups, hold-back margi ns
received from manufacturers, % increase in maintenance agreements and level of transaction transparency. Customer Focus can be attained from % reduction in number of customer complaints, response level, customer oriented schemes developed and quality level of aftermarket accessories offered. The employee and Training perspective can be had from target meeting fraction, conversion rate and number of training sessions arranged. Moving on these lines and customizing the scorecard as per the external and internal environment of the organization, one can be relieved of the performance issues. Once this is done, better communication and coordination results and the car dealership can expect to be rewarded with increase in revenues and profits.