Since the pandemic, Americans have feared another recession on the horizon. Dennis McCarron, a partner at automotive brokerage firm Cardinal Brokers, spoke to FenderBender about what a recession would mean to shops and how shop owners should respond.
It’s assumed that the auto industry in general tends to be resistant to economic downturns, as most consumers will always need transportation.
“When the economy goes down and people pull back on their spending, they still have to go to work, they still have to pick up their kids, they still need a mode of transportation,” McCarron says.
With a lack of adequate public transit and a long-standing “love affair with independent transportation,” as McCarron puts it, most Americans will not, or cannot, choose to give up their vehicle. This also means people hold onto vehicles for longer amounts of time, resulting in more repairs needed and profit for auto shops.
Though the auto industry remains an essential service for most people, shop owners will still see the effects of a recession with more people skipping out on necessary repairs.
How Customers Respond to Recessions
Most people do not budget for automotive repair in the United States, McCarron points out. That's especially true for collision repair. It’s typically something that comes out of emergency funds or money stowed away for vacations or other nice things.
In the case of a recession, as the cost of everyday essentials increases, people are not as willing to pay for repairs if they feel it isn’t urgent or necessary. Businesses will see their average repair orders decrease as people put off minor repairs due to financial issues, resulting in less profit for shops.
Caring for Financially Concerned Customers
There are things that shops can do to help themselves before a recession hits: they must take care of their customers.
“You have to develop a reputation as an honest, dependable, reliable business [so that] people will feel comfortable coming to you even when money is tight,” McCarron states.
McCarron says that one of the best things someone could say about a business is, “they’re expensive, but…” The worst thing a business could hear from the customers is “every time I come in here, it’s a thousand dollars.”
“To someone not in the industry those two things may sound like they’re the same type of sentence, but they’re not,” McCarron says. “One is representative of ‘that business charges a lot of money, but they always do good work.’ The latter is a representation of very aggressive over-selling: trying to force sales onto a customer.”
And that is the worst thing a shop can do: become pushy with customers. McCarron says it’s “never a good thing for a shop to do.”
The job of a shop is to inform the customer of the state of their vehicle. They need to decide from that point. Shops must know how to accept “no” as an answer and not let a potential rejection stop them from telling the customer about issues with their vehicle.
“My job is to help keep you informed and then educate you on how to properly maintain this vehicle, but I’ll never cross that line and tell you things like ‘you have to do this,’ or use safety as a weapon,” he warns.
Shops must make their customers feel they are in control. Interactions cannot simply be transactional. The biggest way to gain attention is through word of mouth, which is why taking care of existing customers is essential.
There are more initiative shops can take on their end to attract new customers, too. Getting involved with the local community will spread the business’ name and associate it with being a positive influence.
McCarron has plenty of ideas for such involvement, such as “local community projects like Girl Scouts, Boy Scouts, [events with] the town, maybe a church or a synagogue—any kind of local grassroots event.
“... I think you need to get involved and just make people aware that you exist,” he adds.
Don't Lower Your Standard
If shops are confident that they are offering quality service at a fair price, they shouldn’t be concerned with cutting their prices and should especially not consider cutting valuable technicians. Doing so would be “cutting off your nose to spite your face,” McCarron says.
Instead, they should focus on maximizing efficiency and productivity. Systematizing and finding the “rhythm” of the shop, as McCarron describes it, helps move business along faster, such as telling customers specific pick-up times instead of vague phrases like “end of the day.”
When people come in, shops should “interview the customer.” When they bring a vehicle in and they’re asked questions about the problem, if it’s a problem that the shop is not equipped to resolve, they can avoid wasting valuable time looking at a vehicle that they can’t even work on.
Systematizing the process, community involvement, and customer outreach: these factors can help a shop establish a growing customer base, even if times are rough–because people will always need cars fixed. Remind your community you’re there to take care of them and have systems in place to ensure every customer is satisfied.
