Employee turnover has been cited as the #1 challenge for dealerships.
Recruiting, hiring, and retaining top talent has a price tag, and the revolving door of employee turnover impacts profitability. According to the 2022 NADA Dealership Workforce Study, "...employee turnover rate within the industry is currently at an average of 67 percent."
That’s a staggering number, considering that just one year before, Auto News reported turnover was the lowest it had been in a decade at only 34%.
Dealers put money into hiring a new employee, only to lose them before their 90-day assessment.
Employees that stick around longer end up irritated by the structured payment plans. And let’s face it, we’ve all experienced the pain of reduced margins which impact how sales consultants are compensated.
So, what can dealers do about this age-old problem?
We sat down with Alex Spence*, a former car salesman of eight years, to get his take on dealership turnover.
Alex worked for four different brands during his career and had multiple $20,000 months. The following is his experience on why salespeople left and what dealers can do about it.
Top 3 Reasons for Turnover on the Sales Floor
While dealerships vary in size and brand, the culture is consistent across the industry.
According to Alex, there are three main reasons salespeople leave the industry.
1. Lack of Transparency
Sales jobs are notorious for setting grandiose expectations.
“Many car salespeople have been told they can make $80,000 to $100,000 a year, yet they aren’t told what it would take to hit that goal,” Alex explains.
However, once a salesperson realizes the cutthroat nature of the industry, the time and experience needed to make that kind of money, or experience a catastrophic hit to the industry, disappointment sets in, and those numbers seem unattainable.
Then frustration. Then burnout. Then quitting.
Alex says it can be avoided altogether by setting the right expectation upfront.
“Tell the person the earning potential… follow it up with how many days per week and hours per day are usually needed to make that high income.”
As far as commission, a clearly laid-out pay plan (without too many clauses) is the best way to go.
“The worst thing about payment plans is having to wait days to find out how the deal shook out and what you made off it,” Alex said. “When you’re excited that you sold a car, you want to know your commission right then or at least as soon as possible.”
2. Lack of Training
Too often, a new salesperson is welcomed in with a handshake and then given over to a more seasoned employee as a shadow.
“The problem with the shadow method is that the sales manager is likely unaware of how happy the seasoned salesperson is with their job,” Alex explains. “If you’re a new hire and you get paired up with someone who is about to quit, what level of training do you think you’ll receive?”
Employees who don’t feel equipped to answer questions and close the deal lack confidence. Alex came in with a sales background yet was new to automotive.
“When I was new to car sales, I made myself learn about a new vehicle daily. I knew what every button did and all the details of every car. It built my confidence.”
Dealerships can prevent frustration by having every new hire take thorough sales training. A basic understanding of sales fundamentals, the sales process, customer objections, and more advanced car sales techniques are critical tools for a salesperson’s longevity.
Consider giving compensation or incentive to individuals who conduct the on-the-job training, and open the “training position” up every six months for new applications. Instead of being a thorn in their side, make training new employees a coveted position.
3. Lack of Profitability
Most people know that car sales are feast or famine when they come in. In today’s car-buying culture, that truth is magnified.
“Right now, people aren’t selling as many cars as they’re used to, so the money isn’t as frequent. When they do sell one, the commission is higher because the cost of the car is higher. So that is what is keeping people floating,” Alex told us.
Yet salespeople can only ride that wave until it breaks. At some point, the chip shortage will be a thing of the past, and inflation will do what it does; rise and fall. Regardless of circumstances, car sales naturally operate in extremes, causing even the best salespeople to have a high-profit month followed by a scarce one.
Accessories are the best way to boost profits. Dealerships that sell accessories, at the point of sale, help salespeople make more money. As a best practice, pay 10% off the gross profit of the accessory and see your sales team reacts.
“Again, it’s about doing quick math. Salespeople can quickly figure out how much they make, and it’s motivating to sell more accessories. And that’s more profit for the dealership,” Alex said.
Vehicle Personalization is a highly profitable industry. Alex says the popularity is obvious.
“90% percent of new-car customers customize within ninety days of vehicle purchase, and 6 million new car owners accessorize in the first two years.” †
Most of those purchases take place outside the dealership. The only question is if they will buy accessories through the dealership, online, or from a third-party accessory company.
Insignia Group Can Help Combat Turnover
Insignia Group’s accessory sales software is the leading provider of Vehicle Personalization in the showroom and online through your digital retailer. Dealerships that sell accessories at the point of sale reduce turnover, increase PNVR, increase CSI scores, and promote better cross-departmental relationships!
Our expert consultants can work with your dealership to create a custom process for accessory sales online and in your store.
Insignia Group’s Accessory sales platform offers an interactive, realistic 3D vehicle and accessory configurator. Our configurator is integrable into your dealership website. And, we have complete OE accessory data for most brands. Also, the system provides manufacturer-specific pricing, including labor rates, custom pricing, and more. You will even be able to create custom packages that can change with the season!
Are you ready to add more gross profit to your bottom line and better incentivize your sales staff? Contact us today to get started!
*Alex Spence is an alias for the salesperson we interviewed, who didn’t want to be named.