By John Spader and David Spader
As originally published in RVBusiness, March/April 2021
RV dealers must be exhausted, as 2020 challenged dealers in ways none of us could have expected just 12 months ago. But look at the results: unprecedented sales, inventory turns, and profits in almost every segment of the industry! Just a quick glance at a comparison with the average reporting RV dealer’s results in 2020 compared to 2019 tells quite a story.
The numbers seemingly speak for themselves: a dramatic increase in sales and gross, with no increase in headcount, leading to historic nets for the average dealer. Inventory turns climbed to 3.5 (from 2.2), and nearly all dealers report having completely eliminated old-age or problem inventory.
While we never hope for bad news in our industry, there are real reasons to be concerned about these numbers. Let’s look deeper into the data and explore what this might mean to two of our most valuable assets – the future goodwill of our customers, and the continued retention of our best employees.
In 2019, service sales represented 7.4% of the average dealer’s total company sales. In 2020, this percentage dropped to 6.2%. In fact, despite an additional $5 million in total retail sales, service sales actually decreased from 2019 to 2020 for the average dealer. The percentage decline is deceivingly benign until you put numbers to it: if the percentage of service sales had remained constant between the two years, the average dealer would have recorded nearly $651,000 in additional service sales – almost 30% of total department sales!
Desperate to get sales over the curb, and struggling to keep a full staff during COVID, dealers pulled out all the stops just to get units delivered. After all, who has time or space for warranty paperwork or customer pay labor when there are sales to be made?
Understandable? Yes. Sustainable? No. We all know what a dramatic increase in sales with simultaneous decrease in service work means: hasty PDIs, deferred warranty work, unanswered phone calls in service, and long wait times for customers wanting even the most basic work on their units.
As an industry, we are chasing volume at the expense of the customer experience, and there is going to be a price to pay in terms of repeat and referral business. We all know this surge is going to end at some point, and when it does, we’re going to have to rely on our good name in the marketplace to ensure our future volume. If your sales department ran well ahead of your service capabilities in 2020, be sure to take steps to re-establish the priority of a great customer experience in 2021.
Doing more with less has a nice ring to it, but in reality, pushing this axiom too far creates stresses that may have consequences well beyond the current year’s P&L. Everyone loves earning extra money, but there is no amount of pay that will make up for the stress of weeks of constant overtime demands in order to try to keep on top of sales deliveries. Our employees are used to the seasonal overload, but in 2020 we took it to new levels … and in many markets it hasn’t slowed down yet.
Two unintended messages might be sent to overworked employees. First, the continual push to deliver units at breakneck speed inevitably leads technicians to believe that the company values quantity over quality. Good service people won’t long suffer an atmosphere where they feel their integrity is routinely challenged, and that is just what we do in these hyper-volume years.
Second, remember that most employees believe that the dealership is making much more money than it actually is. Even before COVID, when we asked employees what they thought the net profit of the company was, it wasn’t uncommon to hear 25%, 30%, and even 40% of sales. Given that, can you imagine what they think is happening now? It is probably something like this: “I am being asked to work my butt off so that they can make even more millions!”
Taken together, these two unintended messages will almost inevitably lead to employee disengagement. Service employees in particular might see a gross inequity at the current pace of business. And make no mistake, a competent RV service technician has no lack of opportunities!
The financial success of 2020 can be the springboard to a great future for RV dealers. But 2020 could also be a flash in the pan. The difference will be how dealers manage their expanded customer base as well as their employees. Wise dealers will take positive steps to ensure that service capabilities reach parity with sales volume. They will also set aside time and money to show appropriate appreciation for the efforts of all front-line employees.