Over the last two years, the automotive industry has experienced a great deal of turbulence, weathering many challenges, including auto parts shortages, supply chain issues, and fluctuating consumer demand. Although many shoppers are turning to online car buying, all-time-high car prices and inventory lows have led to slower than expected growth for many dealerships. This has ultimately led to layoffs at Carvana, the nation’s largest online used auto dealer.
While Carvana may not fit the stereotypical dealership mold, the recent layoffs there offer lessons from which traditional dealerships can learn. To see success, dealerships need to make sure they stand out as reputable and trustworthy businesses, creating a more efficient, personalized, and transparent auto buying process. The automotive marketing specialists at Safeguard can help with relevant, custom solutions made for your business.
Why were there layoffs at Carvana?Citing rising expenses and slower growth than expected, the online automotive retailer Carvana recently announced the layoff of about 2,500 employees, or 12% of its workforce. After missing expectations for earnings in the last three quarters, Carvana anticipates that the layoffs will bring staffing and expenses more in line with current sales volumes.
Lesson #1: Effectively Prepare for the Future
Carvana and other online companies grew exponentially during the pandemic as car buyers embraced a virtual car-buying experience. The company realized its first profits in the second quarter of 2021, spurring an acceleration in company growth. Carvana released lofty 2022 retail sales targets, a whopping 550,000 cars, which amounts to about 29% more than the 425,237 units it sold in 2021. In preparation for anticipated demand, Carvana purchased a record number of vehicles in 2021 and acquired car seller Adesa’s vehicle auction business.
Unfortunately for Carvana, demand for used cars has plummeted since its height due to the combination of a tight labor market, higher interest rates, all-time-high car prices, and inventory shortages. For Carvana in particular, which expected more demand going into 2022 than materialized, the mismatch between supply and demand, and increasing long-term debt due to higher fixed costs, have caused analysts to be concerned about the company’s liquidity. This concern has led to Carvana seeing its stock price drop by more than 85% since the start of the year.
Dealerships must effectively plan for the future without under-preparing or over-preparing. After initially not being prepared to meet rising consumer demand, Carvana became over-prepared with an excess of costly inventory. Dealerships should focus on sustainable success, engaging with customers, maintaining communication with them, and building relationships that keep them coming back again and again. The automotive marketing specialists at Safeguard can help with relevant, custom solutions that help to build consumer trust and maintain loyalty.
Lesson #2: Focus on Business Efficiency
Paperwork slip-ups and delays on titles and registrations led to a poor shopping experience for some Carvana customers, which caused the company to struggle to list its entire inventory on its website. Further, inefficient business practices led to the company failing to be able to provide enough trucks to complete deliveries, occasionally causing customers to be asked to pick up their new cars. As the company prioritized future sales growth, it neglected to implement business practices to support that growth. This lack of prioritizing business efficiency ultimately caught up with Carvana, contributing to the need for recent layoffs.
Inefficiencies at an auto dealership can easily lead to inconsistencies, delays, and mistakes. Keeping improper records can have even more significant consequences, including fines or suspensions. Focusing on business efficiency means that dealerships must learn how to use their resources most advantageously, eliminating waste, promoting continuous improvement, increasing profit, and providing better customer service. Safeguard has the business essentials that streamline daily operations and help you maximize profit.
Lesson #3: Invest in Ongoing Innovation
Car buyer expectations are changing, and the shift to online car shopping has represented a tremendous opportunity for auto dealerships. Despite a dip in demand, the global online car buying market, valued at $237.93 billion in 2020, is expected to grow to $722.79 billion by 2030. Even as online car sales increase, it is becoming an increasingly crowded business.
While Carvana initially found success with its business model, becoming the leading e-commerce platform for buying and selling used cars, it has ceased to focus on innovation. Even as Carvana continues to break the traditional dealership model, it has become one of many car dealers doing business online. To maintain success, dealers need to create an auto buying experience that alleviates as many pain points as possible. The automotive marketing experts at Safeguard can help you with specialized marketing strategies to reach potential buyers.
The automotive marketing experts at Safeguard can help you with specialized digital marketing strategies to reach new audiences, convert leads into sales, and build long-lasting relationships with customers. Your Safeguard advisor has tips, ideas, and traffic-driving solutions for your automotive business. Call 844-4CARBIZZ to get started and learn how you can grow your automotive business with these efficiency tips.
- Layoffs at Carvana show dealerships that they need to prepare for the future effectively, focus on efficiency, and invest in ongoing innovation.
- Dealerships should focus on sustainable success, engaging with customers, maintaining communication, and building relationships.
- Dealerships need to focus on business efficiency, using their resources advantageously, eliminating waste, and providing better customer service.
- The automotive marketing experts at Safeguard can help you with tips, ideas, and traffic-driving solutions for your automotive business.