Urban Science Annual Franchise Activity Report: U.S. Dealership Network Stabilized, Healthier

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DETROIT — Urban Science released statistics and insights from its 2011 Automotive Franchise Activity Report (FAR), which shows a slight uptick in the number of automotive dealerships nationwide after two years of significant attrition. As of Dec. 31, 2011, there were 17,767 dealerships in the U.S., a 0.6 percent increase from 17,659 in 2010. In a normal year, there is a 2 percent decline in the number of dealerships, making the rise quite significant.

The two largest contributors to the increase in dealerships were Fiat, which added 135 dealerships in 2011, and Chrysler-Dodge-Jeep, which added 50 dealerships. Other manufacturers also added dealerships, but in smaller amounts.

On a state level, the largest increases of dealerships occurred in: California, 31 dealers; New Jersey, 10 dealers; Ohio and Florida, nine dealers each; Texas, eight dealers; Virginia and North Carolina, seven dealers each; and Pennsylvania, six dealers.

At the same time, there were a total of 29,380 franchises (the number of brands a dealership sells) as of Dec. 31, 2011, a 2.4 percent decline from 30,098 in 2010. This decline is attributed mostly to the final stages of the Mercury brand being phased out last year.

“We have a stabilized, right-sized dealership network that has increased year-over-year for only the second time since we started this census,” said John Frith, vice president, Urban Science. “Automakers and dealers are in a good, profitable position. To maintain that momentum and keep profitability high, they will need to resist the urge to abandon the expense controls and processes instituted the past few years.”

Based on 2011 vehicle sales of 12.8 million, Urban Science’s analysis of throughput, the average number of sales per dealership, increased approximately 10 percent year-over-year to 719 in 2011 (up from 656 in 2010).  Urban Science estimates that if vehicle sales reach the projected 13.95 million sales in 2012, average sales per dealer could reach an all-time high, surpassing the previous record of 784 in 2005.

“This year, the key issue for many dealers will be figuring out how to handle a continuing sales influx,” added Frith. “This will shift more focus on ensuring that dealerships are meeting the automakers’ standards for staff, space, facility upgrades, policies and procedures.”

Urban Science is also anticipating that the expected sales increase will drive more online traffic to dealerships as a precursor to foot traffic. Based on Urban Science’s lead management data for its clients, lead volume could increase by as much as 15-20 percent, with the average dealer getting 85 leads per brand per month, which is up from 75 leads per dealer per month in 2011.

According to Urban Science’s look at best practices for lead management, dealers need to include the following critical elements in their online customer responses: responding quickly, quoting a price, providing alternative vehicles in a similar price range, confirming that the vehicle requested is available in a range of offerings, and that the dealer offers the customer next steps, such as coming in for a test drive.

“Dealers need to continue to focus on the online lead channel as an important source of sales because this growing space is here for the long term,” said Jody Stidham, global practice director, Urban Science. “We currently see as much as 30 percent of OEM retail sales originating from Internet leads. With more than 30 percent of customers submitting a request to at least two dealers, competition is increasing for dealers. As such, it will become more important for dealers to provide a quick, quality response to capture those sales.”

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