Dealers, Customers See Positives in Megadealer Trend

This is the seventh and final in a series of articles analyzing the results from this year’s Urban Science Dealership Transformation Index™ survey, conducted alongside The Harris Poll, on auto-buyer perceptions about the impact of electric vehicles on the automobile dealership model.

Some auto retail onlookers may raise their eyebrows when they see the increase in buy-sell activity of dealerships in recent years, but dealers and many of their customers say the trend largely is a positive one.

In 2022, buy-sell transactions were brisk with 566 dealerships acquired, according to Haig Partners. That number includes 526 dealerships bought by private buyers, 7% more than in 2021. Public retailer acquisitions numbered 40 stores, 81% below 2021.

Although 2023 is off to a slower start, Haig analysts predict the number of transactions will continue to pace above 2019 levels. And like most other trends in automotive retail, there’s upside to most of the forecasts.

Analysts cite an almost endless number of factors that impact buy-sell activity, including the demand for certain manufacturers’ vehicles, the location of the dealership and, especially for mom-and-pop operations, succession plans.

The aging of the workforce population likely also plays a role. The average age of dealership owners reportedly is around 72 years old, well past the official Social Security retirement age of 66 or 67, depending on the person’s date of birth.

But the potential for additional dealership consolidation may not be all that bad for the automotive retail industry or for new-vehicle buyers.

In the 2023 Dealership Transformation Index (DTI) survey conducted earlier this year by Urban Science in collaboration with The Harris Poll nearly half (49%) of auto buyers report they are aware of the existence of megadealer groups. And many have highly positive viewpoints. Among the advantages car buyers see in shopping at big dealer groups are:

The auto buyers’ positive views are echoed in large part by dealers themselves. Eight in 10 dealer respondents say they find consolidation beneficial as well, pointing to the megadealer’s ability to:

In fact, a majority (56%) of dealer respondents indicate they already are part of a larger dealer group with an average of 14.3 locations. Of those dealers six percent plan to complete an acquisition within the next six months, 12% said they were very likely to do so and 20% reported they were somewhat likely to do so. Seventeen percent of dealers not currently in a dealer group said it was at least somewhat likely their dealership would be acquired in the next six months.

Of course, not every dealer is looking to cash out or merge with another dealer or supergroup. And that means many independent retailers will face having to compete with these larger groups that both dealers and car buyers see as offering several advantages.

Just under half (41%) of dealer-respondents report they are not concerned about large dealer groups increasingly acquiring independent or smaller dealers and less than half (48%) say they are somewhat concerned.

That likely means that while consolidation will continue and the number of fully independent retailers will continue to shrink over the next few years, there still will be many stand-alone dealerships choosing to remain in the game. Dealers must make high-stakes M&A decisions through the lens of certainty, not speculation, and intricate Designated Marketing Area (DMA) data that’s never been seen at the dealer level in order to truly understand market dynamics and opportunities for growth. In developing and executing an acquisition strategy or improving the performance of an existing dealership network, dealers need this level of data, depth and detail before investing their dollars.

Urban Science: Our unrivaled near-real-time industry sales data and consulting and technology offerings, have driven innovation, efficiency and profitability into every corner of the automotive industry. Our capabilities and industry expertise help OEMs and dealers, and the advertising technology firms that support them, stay ahead of industry trends and achieve business certainty in even the most chaotic market conditions.