Challenges and Evolution of the Dealer Model

In a dynamic conversation focused on Succession Planning and Strategic Considerations in Automotive Retail and moderated by Jason Stein of Flat Six Media, industry expert George Karolis from The Presidio Group and Champ Rawls a succession planner with The Rawls Group, sparks a discussion about the evolving landscape of the car business. As recent changes and challenges disrupt the status quo, Karolis emphasizes the need for reeducation and adaptation to ensure sustained success. While the industry witnessed remarkable profitability in recent years, signs of stabilization and shifting market conditions now emerge. Public companies report lower earnings, margins stabilize, and inventory levels return to pre-pandemic norms. Against this backdrop, Karolis cautions that emotions and sentiments can be influenced by the decline from peak profitability. Dealers must proactively prepare for headwinds and embrace the significant evolution of the dealer model. Staying vigilant, embracing change, and investing in new technologies is paramount, demanding human and financial resources. Karolis predicts that the coming years will likely present more challenges compared to the relatively smooth sailing of 2021 and 2022.

Karolis highlights the industry’s recent history of record profitability, underscoring the need to recognize the signs of stabilization and evolving market conditions. Publicly traded companies are experiencing lower earnings than last year’s quarter, indicating a shifting landscape. Margins are stabilizing, and inventory levels are reverting to pre-pandemic levels, necessitating a proactive response from dealers and their key leaders.

George Karolis: “We’re coming off of two years of the highest profitability for all dealers ever, and we’re starting to see kinks in the system, lots of headwinds. We’ve already seen a couple of public companies announce earnings that are well off levels of the same quarter last year. We’re seeing margins stabilize. We’re seeing inventory levels come back to close to pre-pandemic levels. So this is changing. It’s evolving. And those record profit levels are evolving.”

While the industry remains resilient and poised for future success, Karolis acknowledges that emotions and sentiments can be swayed by the decline from peak profitability. Dealerships must manage these emotional fluctuations and avoid complacency. Preparing for potential headwinds and challenges becomes paramount to maintaining a competitive edge and capitalizing on emerging opportunities.

George Karolis: “We still think it’s a great model, and businesses and dealerships will do well, well into the future. But it is, we’re off the peaks. And with that comes a lot of emotion and different feelings from business owners and folks that work in these dealerships. We often think things will last forever, but nothing lasts forever. And even though we’re still making great money as dealers, it doesn’t feel as good because it’s off those record levels. But preparing for the headwinds here and the evolution of the dealer model, which is quite significant, electrification, new entrance, lots of disruptive forces, and new companies disrupting the retail model. Dealers have to be on their toes and continually evolving and adapting.”

Karolis stresses the importance of reeducation and adaptation in the face of evolving market dynamics. Dealerships should vigilantly monitor industry trends, invest in new technologies, and cultivate a culture of continuous improvement. Adapting to changing consumer preferences, embracing digitalization, and optimizing operational efficiencies will be key to thriving in the future dealership landscape.

George Karolis: “Dealers have to be on their toes and continually evolving and adapting, focusing on new technologies, folks investing in their business that requires capital, resources, human resources, and financial resources.”

Looking ahead, Karolis foresees more significant challenges than the relatively smooth years of 2021 and 2022. Dealers must remain agile, resilient, and prepared to navigate the evolving auto business landscape.

Strategic Planning

The only constant one can plan for is change.  Strategic planning positions the business to address the probable, possible, and potential contingencies impacting business success. 

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