by JM&A Group


Inventory shortages

The pandemic created numerous supply chain disruptions, including shortages of both materials and workers. As a result, car microchip manufacturers struggled to keep up with demand in 2021, impeding the overall vehicle production process and leading to vehicle shortages (which are expected to continue throughout 2022 as supply chain disruptions resolve).

Shortages have been compounded by an increase in personal car ownership. Stimulus checks and a decrease in ride-sharing and public transportation mean that demand is high, and both new and used vehicle inventory is in short supply. According to Wards Intelligence’s report on U.S.

Light Vehicle Inventory from November 2021, dealerships that previously operated with an average of a 58-day supply in 2020 are now working with 26-day supply, less than half of what dealers and customers are used to seeing on the lot.

Source: Wards Intelligence

In response to low inventory and limited options, consumers are more open to sold orders. Haggling, test-driving, and discounts are less common than they once were, and many cars are sold — sight unseen — before they even arrive on the lot.

Used cars are also more popular thanks to low inventory — from March 2020 to September 2021, used car prices increased by almost 40%. For some people, purchasing a used car that’s available right away is a more attractive and realistic option than waiting weeks or months for a new car to arrive.

With inventory in short supply and used vehicles gaining in popularity, dealers have more opportunity than ever to earn more per deal both on front- and back-end profit.


Because total sales volume is down, it’s more important than ever to strategize for downstream revenue. That means building customer loyalty and emphasizing offerings like F&I. Virtual F&I in particular can offset inventory challenges by helping you create a consistent process, earn more sold orders, expand your audience, and maximize every deal.


·        Take a customer-centric approach to build loyalty and trust.

·        Ensure consistent, quality customer service in all departments.

·        Maximize every deal with F&I offerings.

·        Leverage virtual F&I to meet customers where they’re most comfortable.


Increasing demand for omnichannel options

Consumer expectations are changing across industries. Convenience and choice define the customer experience, with more emphasis on on-demand reservations, purchases, and deliveries.

In 2020 and 2021, the need for contactless options forced many dealerships to offer online purchasing experiences for the first time. Now, the same omnichannel experience consumers have come to expect for grocery shopping and other retail experiences also applies to buying a vehicle.

In the past few years, consumers have become more comfortable with buying vehicles online. Here’s a quick look at the numbers:

55% of franchise dealerships and 39% of independent dealerships say their customers have been completing more buying process steps online.

These statistics reveal that while many consumers are willing to complete some steps online, a significant portion would still prefer at least some of the buying process to take place in person. Still, even as more people become comfortable with in-person buying again, the convenience of virtual options will continue to play a huge role.


To meet consumer expectations, dealerships need to create a seamless, omnichannel retail experience. Customers should be able to complete the entire car-buying process online, in-store, or mix and match depending on what’s most convenient for them.

Perhaps the most obvious component of an omnichannel retail experience is the technology that enables it (retail software, mobile apps, etc.), but that’s not the only ingredient for success.

It’s also important to fine-tune your sales process to operate efficiently across channels and properly train your team in omnichannel sales.

In short, stay focused on modernizing your dealership to give your customers options in the sales process.



·        Leverage omnichannel retail technology to create a seamless buying experience.

·        Adjust your sales process for maximum omnichannel efficiency.

·        Train your team so they have the skills to tackle sales both in person and online.


More focus on electric vehicles and direct sales

As climate change remains a concern for many consumers, more eco-friendly vehicle options — including hybrids, plug-in hybrids, electric vehicles (EVs), and even hydrogen fuel-cell vehicles — are transforming the automotive industry.

EVs still make up a relatively small percentage of car sales, but their popularity is growing rapidly:

To keep up with consumer expectations, both traditional and new manufacturers are placing a lot of focus on developing electric vehicles.

Volvo and Jaguar have already committed to being 100% EV by 2030, while EV startups like Rivian and Lucid are looking to compete with Tesla by selling directly to consumers.

Before they can move forward with direct-to- consumer sales in certain states, car manufacturers might need exemptions from laws that require them to sell vehicles through franchised dealerships. While some manufacturers have lobbied lawmakers for those exemptions, many dealers worry that the proposed legislation could result in millions of dollars of lost sales.


About 1 in 4 global consumers say they’re “very likely” to make a battery-powered car their next vehicle.

Source: AlixPartners


All hope is not lost. Some manufacturers, like Ford and VW, have committed to continuing to work with dealers on EV sales even if laws do change. No matter what happens, it’s critical for dealerships to offer — and successfully sell — hybrid and electric vehicles.


·        Ensure that your fixed operations department is set up to enable revenue streams from EVs.

·        Train salespeople on how the sales process for EVs differs from traditional vehicles.

·        Offer a wide array of F&I products for EVs.


Evolving recruitment and retention challenges

Hiring the right people, placing them in the right roles, and keeping them engaged is directly tied to your results and revenue. Recruitment and retention were already huge challenges for dealerships, and now there are even more complications to consider.

“The Great Resignation” was a topic of much discussion in 2021, and this trend will likely continue in 2022. A significant number of employees are leaving their jobs, or intend to do so.

In 2022, 5% fewer employees plan to stay at their current jobthan in 2021. The difference is even larger for middle managers— 14% fewer plan to stay at their jobs in 2022.

However, the auto industry is seeing the reverse, especially in sales and F&I roles. With record dealership profitability and employee earnings, these teams are having a banner year, making them more likely to stay in their roles for as long as the tide is high. However, as auto inventory and sales regulate in 2022 and into 2023, be on the lookout for staff who are dissatisfied returning to pre-pandemic expectations.

Additionally, as baby boomer retirement rates accelerate, millennials are in the recruitment spotlight.

But with a new generation comes new retention challenges — almost 60% of staff hired by dealerships are millennials, but the turnover of those employees is over 50%.