Market Distortion!
During the last recession, as dealers (both small and large) started to fail we saw that poorly capitalized ones became increasingly desperate to delay the inevitable. Dumping used inventory, selling hot new product at low to negative margins, advertising product at giveway prices. All to try to outlast the inevitable: going out of trust and then locking the doors.
While “margin is a function of attitude” (TM – Spader Business Management), there does come a point where the price discrepancy between two dealers can be so large that it’s just an insurmountable obstacle to overcome, and the customer just won’t pay the additional premium to conduct business with the stronger dealer.
With industry dealers coming into this pandemic with huge inventories, record low turn ratios and unsustainable floor plan payments, the market distortions from failing dealers could last longer than what we have seen in the past.
What’s your backup plan to combat the increasing likelihood that you’ll have one or more Market Distorters in your neighborhood? Are you positioned to survive?
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