Chip, Inventory Shortages Impact Dealer Advertising

Professionals throughout the automotive world are losing hope that the worldwide shortage of semiconductor chips, which affects the global production of new cars and trucks, will resolve itself in the near term.

As the industry rethinks the way in which it sources chips for new vehicle production, a process that is sure to take several months to sort out, auto retailers are left to deal with the true fallout, a lack of inventory for car shoppers.

How Severe Will Chip Shortage Get?

Some industry observers believe the chip shortage could result in 2 million or 3 million fewer vehicles produced this year, according to McKinsey’s global semiconductor practice. Analysts from AutoForecast Solutions are forecasting 719,000 fewer vehicles this year in North America alone.

What’s at stake is the necessary rebound from COVID-19, where domestic new-vehicle sales fell from nearly 17 million in 2019 to just shy of 15 million in 2020 due to the pandemic. While consumer demand has roared back, retailers lacking inventory risk disappointing customers.

Semiconductor chips are needed to produce new vehicles because of all the technology now embedded in vehicles. Experts at the consultancy Strategy Analytics believe the total market for chips will reach about $66 billion by 2027, almost double that of 2020.

How Chip Shortage Impacts Dealer Advertising

The strategy for retailers is simple: Promote vehicles that are in stock. However, with the lack of incoming inventory available, keeping up with and maintaining accuracy of these promotions is an arduous task for dealers who excel at vehicle sales and service, but not necessarily advertising strategies.

Many retailers are relying on their digital advertising partners to provide more “just-in-time” promotions and advertising practices known as Ad Refreshes across their web and digital properties. These include dealership websites, third-party websites, Google and Bing display advertising, social marketing and even ads on YouTube and streaming video content such as Hulu.

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It isn’t a new concept, but ad refresh is a technique that allows dealers to increase the number of ad impressions served to a car shopper in a single session by refreshing ad sets based on preset triggers. These triggers can include user action (scrolling, clicking or using the search function), certain custom events, or time-based refreshes (every 30, 60 or 90 seconds).

In this case, refreshing the vehicle inventory on a digital property can help align inventory expectations in front of car shoppers, and technology today enables retailers and their partners to conduct this refresh daily.

Focus on Optimizing Digital Ads

Optimizing digital ads is extremely important because more consumers are leveraging these channels when researching and shopping for a new car or truck. According to PureCars data, auto retailers and their digital display ads on the web saw a 7% increase in March compared with the previous month, and a 152% increase compared with March a year ago. This also resulted in a nearly 11% increase in impressions in March compared with February.

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There is no doubt the shortage of semiconductor chips will impact the amount of new car and truck inventory coming onto dealer lots. However, retailers who work closely with their digital advertising partners can make real-time pivots to their digital advertising promotions to ensure they are constantly delivering offers on the latest new and used inventory to better serve in-market shoppers looking to avoid the frustration of falling in love with a car only to find out it is no longer available.

Matt Newsome (pictured above, left) is director-programmatic advertising for PureCars, an automotive dealer digital advertising and attribution technology provider.