There’s nothing like it—the cleansing fresh start of a brand spanking new year. Let’s face it, 2023 was as weird, messed up and as hard to swallow as your Great Grandma’s legendary marshmallow Ambrosia salad. But hey, you made it. You’re here, we’re here, and we’re all ready for some positive vibes in 2024.
So, grab your crystal ball and fasten your seatbelts because we’re about to take a ride into the future with our leader and visionary of Leadbox, President and CEO Ian Cruickshank. We’re not just talking trends; we’re predicting the twists and turns of 2024 with Ian’s forecast. From groundbreaking tech and EV demand to inventory challenges and the ever-so-exciting interest rates, Ian’s CEO predictions will have you intrigued and maybe even breathing a sigh of relief.
What do you think will happen to interest rates in 2024?
- Ian: Yeah. So, interest rates are a tricky thing. Interest rates will definitely continue to be a problem for automotive retail and, frankly, for everything that requires money throughout 2024, anyone in the market, anyone making predictions in the Canadian market, is talking about the reality that there likely won’t be any decrease to interest rates until late 2024 or even early 2025. So everybody’s tightening their belts, and that’s for automotive retail as well as just household economics.
What are your thoughts on inventory and turn rates?
- Ian: So we had a few years of really high turn, where basically, any vehicle that hits the lot is already spoken for. But now, with inventory in general, the market continues to see inventory challenges with slower than normal turn. Vehicles are really starting to stack up on dealers’ lots as a function of increased production and increased interest rates, making it trickier for dealers to move their vehicles. When you look at the OEM landscape as a whole, Stellantis is sitting there with the most vehicles on their lots, and then if you go down to the low end, Toyota has the fewest cars on the lots. It’s been interesting to see the Toyota side continue to struggle with inventory, or it might be just a strategic move, time will tell. Anecdotally, I was in a Toyota store recently, and in the dealer’s showroom, there were more Porsches than Toyotas, if that’s any indication of what’s happening at Toyota. Bringing pretty cars into the showroom is never a bad idea. We saw that a fair bit through COVID, where there were all sorts of different brands of vehicles. The coolest pre-owned cars were sitting in dealers’ lots, and that’s still the case for many Toyota stores.
Tell us what you think about EVs in 2024
- Ian: On the EV side of things, it’s quite a lot of fun to see how things are going. EV sales through 2023 grew significantly, and the percentage of vehicle sales was up in the double digits of EV sales in the market, which is exciting. It hasn’t happened in previous years. The tricky part now is that interest rates and lower gas prices are slowing things down. So when we look at 2024 for electric vehicle sales, we’ll likely see it continue to grow, but likely not at the rate as 2023. So, as we keep moving into early 2024, we’ll continue to see some growth in that area. But, like I said, not at the same rate. However, that rate might increase towards the end of the year, depending on what happens with interest rates and gas prices.
What about EV Demand?
- Ian: The two significant factors, in my view, are the ones I stated relative to interest rates and fuel prices. But there are certainly stories of people acquiring electric vehicles and finding it doesn’t fit their lifestyle. Local commuter second-vehicle households are significantly more likely to get into an electric vehicle than a single-vehicle rural household. And that is that infrastructure issue. The charging availability, the range, and what people use their vehicles for impact those decisions. But frankly, over the next number of years, battery technology is going to continue to improve. Infrastructure is going to continue to improve. There’s a lot of contradictory talk, people being naysayers relative to the electric market and talking about hydrogen or water cell vehicles and other things. That’s all well and good, but the government has invested heavily in EV infrastructure. Billions of dollars are going into EV infrastructure across the country, throughout North America and beyond. These investments will continue to push things in the EV direction. Is it the right answer? Is it the best answer? Maybe not, but it’s the answer that the government has got behind, and until they pull that back, it will continue on that path.
Can you tell us what your predictions are on sales volumes?
- Ian: Sales volumes have remained relatively high in 2023 and through 2021 and 2022. The post-COVID demand has been fantastic. Dealers have really been benefiting from that post-COVID demand, though, frankly, dealers will need to fight a lot harder in 2024 to keep market share. And if they want to win that unfair share of market, as I like to call it (you don’t want your fair share, you want an unfair share, you want more), stores, retailers, and our partners will have to fight even harder than they probably ever have. You’ve got a situation where there’s more supply than demand, and economics suggest you will have to reduce price. So discounts and offers are certainly going to be coming back at a greater rate in 2024. Manufacturers, as well as dealers, will have to fight using tactics like buying down interest rates and other tools to help consumers acquire the vehicles that, frankly, consumers are holding back from buying. Now, the reality is that sounds bad, right? You’re going into 2024 and dealers aren’t stoked about the fact that they’re going to have a lower profit environment. But the last three years straight have been record profits for dealer operators. Undoubtedly, reduced flooring costs with most vehicles just coming in presold has been extremely beneficial. 2024, unfortunately, will not likely follow this trend. So it’s going to be important for dealers to fight back hard.
Selling vehicles on Amazon…will this actually work?
- Ian: Amazon loves to challenge the marketplace. In recent years, we’ve seen difficulty from automotive marketplace businesses like Carvana, Canada Drives and Clutch here in the Canadian market. The reality is this style of business has been under attack. They’ve suffered from the change in used car prices based on used car demand, and the reality is, these are very strange economic factors affecting business models that I think have merit long term. So, the idea of a dealer operator having a secondary business, which is an online pre-owned retail business, is a great idea. Amazon getting into it and spending the time to go the path with Hyundai is a good example of helping people understand that online buying of vehicles is relevant. It is going to be relevant long term. Does it mean that everybody’s going to buy their car online? Heck no. But does it mean some people want to purchase a vehicle online? Absolutely. Enabling that for the people who want it is an important thing for you to keep in mind, and if you don’t get involved, it’s something that you’re leaving on the table that you could be winning in your market.
How can Dealers be successful in 2024?
- Ian: So, with these trends, there are a few things to keep in mind. And top line, we’re talking about inventory management, nailing process, employee training, taking advantage of technology and crushing it on digital marketing.
- Inventory Management – Keep turn as quick as possible. You don’t want any cars having a birthday. Frankly, you don’t want vehicles that have been on the lot for 60 days. It’s been interesting chatting with various retail operators and folks that I would categorize as best-in-class operators who have required limits on how long a vehicle could stay on the lot. And we usually think about 60 days. Trying to keep that turn between 45 and 60 is a recommendation, and fighting hard to turn that inventory as a whole, let alone the individual vehicles that will go to that period. But how many times can you turn your inventory in the year? If we’re talking about an ultimate goal, turning that inventory over twelve times or more per year is a wicked target. However, different markets turn at different rates. So it might be something that you want to say, okay, we want to turn better than we did last year. So last year, we turned eight times; this year, we want to turn nine times. Last year, we turned nine times; this year, we want to turn ten times, so as long as you’re better than last year, or as I like to think about being better than yesterday.
- Nailing Process – Here, it’s thinking through the process of bringing in those vehicles and moving vehicles. Streamlining the sales process, streamlining the merchandising process, getting those vehicles in, photographed, dialled in on their website, streamlining the delivery process, making sure that consumers are coming in efficiently, learning about their vehicle, moving out of their vehicle, and making sure they’re coming back soon for their first service experience so that you win that customer for life. Are you getting pictures up first and fast? Are you working with a system that makes it easy, ensuring you’re using the tech you need to make it happen? How are your vehicle descriptions? Again, are you using technology to help you get vehicle descriptions up and on the site quickly to accompany your vehicles, whether they’re on your site or have them promoted to third-party listing environments? How fast are you completing service requests?
- Employee Training – How productive are your salespeople? Do you have the top-performing salespeople available in the market? Are they moving twelve or more vehicles a month? Can you find folks that can move more? There’s a lot of disruption in the market, so you might be able to find people from outside automotive to come in and learn the automotive sales process and perform really well. With all the market changes and economic pressures, there are organizations out there with outstanding salespeople that simply can’t afford to keep them. For service employees, when your customers are coming into your location, how quickly are you able to work with them to ensure their service is delivered smoothly and comfortably and that they’ve got that great car wash experience after they leave or when they get into their repaired vehicle?
Spend time on your employees the way you want them to spend time with your customers. You provide your team great value, and you will get more value passed on to your customers. So great people, make great companies, you gotta treat your people great, and when you do your customers will thank you. So train your team, love your team, and work with them to help them grow and improve, and you’re going to get more out of them; whether it’s process-based or whether it’s just customer care, you’re going to get a lot of value if you focus your energy on helping them grow.
- Technology – There is no doubt that every year in the last ten years, 15 years, or whatever years, it’s all about taking advantage of tech. Technology is changing faster than ever, with the most recent emphasis on artificial intelligence. GPT and OpenAI brought AI tools to the mainstream, and now folks are getting extremely excited. The rate of change has blown the doors off of how quickly things are moving. In our own organization at Leadbox, our most recent products all involve AI, machine learning and automation. They’re all ways to help dealer operators be more efficient, whether it’s vehicle descriptions or our new product, Highbeam, which is focused on selecting the right vehicles to market instead of just marketing all your vehicles. Highbeam is about automating vehicle selection based on age of inventory or lack of visibility. There’s absolutely going to be more tech daily within our business. For example, our simple online instant messaging chat at Leadbox has a section called AI. In every conversation at the executive level, we’re talking about different ways for AI to help our business be more efficient and to help stores be more efficient. So, in-store, you should always be asking yourself, could I do this faster with AI? Don’t be afraid of it. If you sit there thinking doomsday types of things, it’s just going to pass you by. And if you’re not on top of it, you’re behind.
- Digital Marketing – The interesting thing we’ve seen in our business over the last six months is that vehicle interest or demand has started to slow. We’ve been hearing since August, maybe even July, but certainly since August that Dealers are struggling and having bad months. The dealers we’re working with most closely at Leadbox, who are taking our recommendations and increasing their marketing activities or focusing on long-term thoughtful marketing plans and full-funnel strategies, are reaching out and finding buyers in the market sooner in the process instead of just focusing on search. Those operators are crushing it!
In recent months, one of our stores, an import store in Western Canada, nailed it. Everybody else in the market was struggling in August, and they crushed it. They won that unfair share of the market. There’s another domestic store in the GTA working with us, doing the same thing, pushing harder, crushing it, winning more than their fair market share. Same thing with a Highline retailer, a luxury retailer in the Montreal market in Quebec, doing the same thing, putting more effort into their digital marketing, spending more dollars on their digital marketing to get great returns, great return on investment, great return on ad spend, because they’re totally going for it. It brings to mind one of my favourite quotes, and it’s Henry Ford. And Henry Ford said, “A man who stops advertising to save money is like a man who stops a clock to save time.” It just doesn’t work. You have to get spending. You have to keep focused. You have to take the recommendations of your marketing partners and grow your business successfully.
There you have it—your exhilarating journey back to the future with President and CEO Ian Cruickshank. The landscape of 2024 is brimming with both challenges and opportunities, from the surge in groundbreaking technology to the nuanced dance of EV demand and inventory challenges. As you navigate the twists and turns of the upcoming year, arm yourself with knowledge, anticipation, and perhaps a partnership with Leadbox for a dynamic, exciting and successful new year!