Auto sales per dealership could hit record levels this year, say industry insiders

If the positive trends among automotive dealers continue and automotive forecasts of 14 million vehicle sales this year come true, average sales per dealership could reach record levels this year, said John Frith, vice president of Urban Science, a Detroit-based retail consulting firm.

Average sales per dealership – also known as throughput – was 719 in 2011. The forecast is to hit 785 this year, Frith said, beating a throughput of 775 vehicles in 2000.

The number of automotive dealerships in the U.S. grew by 100 last year to 17,767, including four more in Michigan, in further evidence of a healthier industry, according to a report released Tuesday by Urban Science.

“To put this into perspective, in a normal year we see a 2% decline in the number of dealerships nation-wide, which makes an increase, even a small one, very unusual,” Frith said.

He noted this is only the second time since 1990 he has seen the count increase year over year.

While the demise of Mercury and a consolidation of Lincoln dealers in metro markets lowered the number of dealers – including the loss of a couple in metro Detroit – Fiat added 135 dealers in 2011 and Chrysler-Jeep-Dodge-Ram added 50 dealerships.

Looking at the number of franchises in the U.S., which refers to the number of brands a dealership sells, there was a 2.4% decrease last year from 30,098 to 29,380, largely because of the loss of the Mercury brand.

Economic conditions forced a downsizing of automakers and their dealer networks in 2009 and 2009 but the ones that survived are more profitable now, Frith said.

But he cautioned that inevitably there will be another downturn and dealers must be careful not to abandon the more efficient practices they have put in place.

After cutting staff and inventory, rebuilding to handle a larger sales volume in the future must be done prudently. “It needs to be done in a controlled way,” Frith said.

And dealers need to recognize the increased role the internet is playing.

More sales leads are coming from third-party internet sites or mobile apps, said Jody Stidham, global practice director at Urban Science.

Internet lead volume could be up 15-20% in 2012 and dealerships need trained staff to handle them with responses that are quick and include enough information to close the deal. That includes price quotes – 30% of dealers don’t provide pricing – as well as arranging test drives and providing information such as hours and directions, models in stock and anything else that will differentiate the dealership from the others that the consumer is planning to cross shop.

“Close rates are higher when dealers do these things,” Stidham said, adding that up to 30% of sales come from internet leads.

One internet sales manager can handle 80-90 leads a month and dealerships receiving more should consider adding more staff, Stidham said.

As read on: http://www.freep.com/article/20120214/BUSINESS01/120214036/Urban-Science-vehicle-sales

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