3 Emerging Dealership Challenges and How Dealers are Overcoming Them

Jan 5, 2022

The automotive industry was one of many that were forever impacted by the COVID-19 pandemic. Dealerships across the nation were affected by this pandemic in many different ways, but they continued to persevere. Dealership owners and managers had to find new strategies for attracting customers; otherwise, their businesses would fail. 

While COVID-19 has played a role in the way consumers make purchasing decisions, the trajectory for the dealership industry has not been significantly altered. The business was already at a crossroads and social distancing has only accelerated changes that were already underway. Dealerships are already working on the new challenges they face in this volatile environment. Finding ways to adapt to changing consumer preferences and expectations while developing new income streams is critical to long-term success

Here are three of the most significant challenges that dealerships are set to face moving into 2022 and beyond and different ways that you can address these issues. 

Challenge 1: Increasing Demand for Online Sales 

With the massive shift towards online shopping, traditional dealership models are being challenged by the rise of decentralized marketplaces. Dealerships need to find ways to adapt their showroom spaces and sales techniques to meet this demand for more convenient purchasing experiences to avoid losing out on vital revenue streams. 

According to Cox Automotive, 64% of shoppers want to do more online purchase process the next time they buy a vehicle. This shows that dealerships need to capitalize on this trend by providing their customers with online sales portals. Dealers can also create apps for mobile devices where consumers can purchase vehicles and schedule test drives directly from the app without ever stepping foot in a dealership showroom or meeting with a salesperson. Dealership owners should also be using tools like Lead Driver that Kelley Blue Book offers. 

Strategies to Help 

While online sales will add barriers to purchase for many dealerships, there are some great ways to overcome this challenge. 

Create an “Omnichannel” Sales Presence 

An omnichannel sales presence combines all of the dealership’s sales channels to provide a cohesive, user-friendly experience. Dealerships are increasingly tailoring their digital experiences for customers on different devices and making online services available through smartphones, tablets, laptops, and desktop computers. 

Dealerships need to offer an attractive combination of traditional face-to-face interactions with staff members and personalized customer service over phone calls or emails. As a dealership, you also should ensure you offer modern digital options like interactive websites that display vehicle inventory alongside pricing details and extensive information about each model line. This is especially important given that most car buyers will begin looking for cars online before entering showrooms at some point during the purchase process. 

The more seamlessly you can combine these avenues into one single, streamlined platform, the more likely customers will remain loyal to a single dealership. 

Install an Augmented Reality Showroom for Your Dealership 

Companies such as Mini Cooper have now created augmented reality experiences that can be downloaded to a phone for customers. People can view all of the mini cooper’s vehicles in their own home or office and walk around them from different angles in the app. 

Provide Online Sales Calls or “Consultations” for Customers Who Can’t Visit Your Dealership 

Digital sales channels aren’t the only option available to dealerships. Dealerships need to invest in developing online sales call services that potential buyers can initiate over a video consultation with a staff member. This way, your sales staff can answer questions without the customer having to drive to the dealership. Using this approach, even those unable to make it out into showrooms will still have the opportunity of being exposed to dealer-provided information about inventory and pricing options. 

Challenge 2: Inventory Shortages 

One of the primary challenges that dealerships are now facing is a shortage of inventory. According to NADA, new light-vehicle sales have declined nearly 13% YOY. This is being accredited to the global microchip shortage. The shortage has lasted far longer than industry experts had predicted and there is still no immediate end in sight. CNBC has reported that this microchip shortage is estimated to cost the automotive industry $210 billion in revenue in 2021. 

While the vehicle demand has increased in recent months, the capacity to produce semiconductor microchips has not been able to meet demand. Dealerships are now finding it extremely difficult to find vehicles on the lot, let alone have enough inventory for customers. Dealership owners need to adjust their strategies for this challenge by focusing heavily on marketing and sales tactics that generate leads rather than closing deals with prospective buyers. 

Strategies to Help 

This is a perfect opportunity for dealerships to figure out how to best leverage digital channels over traditional ones to boost revenue despite the low supply of cars available at your dealership. 

Implement Price Matching Strategies 

Dealerships whose inventory mainly features new cars must remain competitively priced and continue providing incentives such as low financing rates or extended warranties. Dealerships should consider implementing price-matching strategies for new vehicles so they can still compete in the market. 

Provide Free Incentives and Perks 

It isn’t just about price matching your competitors when faced with increased competition from other car lots. Dealerships also need to provide exclusive perks like free pick-up service for people purchasing online. Hence, customers have peace of mind knowing their vehicle has been safely delivered at no extra cost before purchase completion. 

Provide Unique Services to Stay Ahead of the Competition 

By providing unique services such as buying customers’ cars or free pick-up service, you will be providing a more convenient experience for buyers and encouraging them to come back to your dealership. Dealerships need to invest their resources into developing new strategies that set the customer’s mind at ease before purchasing from another dealership. 

Challenge 3: Increased Competition for Consumers’ Attention 

With industry giants such as Carvana, Vroom, and Carmax offering low-cost strategies and ease of access, dealerships are finding themselves with a lot more competition than ever before. Dealerships need to find ways of remaining competitive in the market or risk losing customers at an alarming rate. 

Strategies to Help 

Dealerships should focus on digital marketing and sales tactics that encourage consumers to visit their dealership rather than simply purchasing online from another competitor. 

Focus on Customer Service and Follow-Ups 

The data shows that individuals who purchase a car from a dealership are more likely to return for a future purchase. Dealerships need to provide excellent customer service, so buyers remember their experiences and return when they are in the market again. It would be best to always prepare your Dealership staff with information about warranties, financing rates, or additional services that may interest potential customers. 

Integrate CRMs To Increase Prospecting Initiatives 

Many of today’s Dealerships are integrating CRM software into their business. This allows the dealership to be proactive in upcoming deals rather than reactive by allowing access to a large volume of information about individuals who visit their lot or express interest through online forms. 

Dealership staff can also use this data to follow up with potential customers and schedule test drives when they’re most likely interested in purchasing a vehicle. 

Use Display Advertising 

Display advertising is a great way for Dealerships to draw leads, as it can be highly customized and focused on location. Dealership owners should focus advertising efforts on individuals who may fit the target market of their dealership and encourage them to visit in person. if you are looking to get started with display advertising, contact Kelley Blue Book today. 


The dealership industry is facing constant challenges. From increasing competition to a lack of inventory due to global shortages, dealerships must be proactive to remain relevant in the market. Dealerships should focus on digital marketing and sales tactics that encourage consumers to visit their dealership rather than simply purchasing online from another competitor. 

While challenges will always exist in the automotive industry, being well informed of trends and preparing your staff for a rapidly changing market will allow dealerships to succeed in an ever-evolving environment.