With the various car-buying services offered online, hardly anyone goes to a car dealership just to browse anymore—they do a lot of that on the internet beforehand. That, then, makes car dealerships question why they keep such large inventories on their lots anymore.
Dealerships and dealer groups are reacting to this shift in car shopping in different ways, reports the Wall Street Journal. Some are moving their inventory to less expensive off-site real estate. Others are selling off underperforming dealerships. From the story:
Nearly 90% of car shoppers use the internet to shop for a vehicle, according to a 2016 study by the third-party shopping site Autotrader.com conducted by the research firm IHS Automotive. Of the customers who use their smartphones at a dealership, the study found 59% are comparing prices for vehicles at other dealerships while 38% are comparing inventory at other dealerships.
Brad Carter, the principal of Greystone Valuation Services, specializing in auto dealerships, compared what’s happening to dealerships with what has been happening to bookstores. Small neighborhood bookstores have been gradually losing out to megastores like Barnes & Noble, which faces tough competition from Amazon.
Meanwhile, increasing commercial real estate values also make dealerships wonder why they are paying so much for land that doesn’t necessarily guarantee a return on their investments.
While this may be trouble to dealerships, it’s actually a good thing for the consumers. The internet has helped consumers walk into dealerships more well-informed and savvier than ever before, which leads to more options, and, hopefully, better deals.