Exploring the reemergence of auto dealerships, and the latest stall in traffic

PlaceIQ ,  July 1, 2020

Last week was the week foot traffic tapped the brakes as consumers grew cautious in the face of rising case counts in several states.

After nearly a month of strong growth across most categories – including some surprising gainers like malls and casual dining – foot traffic stalled for 7 of the top 9 categories. Big box retail, grocery, pharmacy, mall, fast casual dining, and fast food all paused their reemergence and shrank a few points.

Our timelines are getting long, creating some dense charts. Let’s zoom in a bit so you can see the deceleration:

The story is more complex at a regional level, of course, but the direction of growth is widely shared.

Auto dealerships were one of the top categories which tapped the brakes (pun intended), coming ever so slightly down from its high. This breaks a trend of strong growth since the start of April.

Today, we’re going to dive into dealership growth to see what nuances may reveal themselves.

Exploring the Reemergence of Auto Dealerships

Measuring foot traffic to auto dealerships has always been – and continues to be – one of the most challenging tasks we perform at PlaceIQ. Dealerships are unique venues which pose all sorts of challenges for those who attempt to measure them. We’ve invested countless hours and the sanity of several data scientists to solve “the dealership problem”.

First off, dealerships are geographically complex:

• Dealerships are oddly shaped. They can be longer than they are wide, and sometimes come in funny shapes.
• Dealerships exist in high traffic areas, abutting busy roads. To our eyes (which have reviewed far too many satellite images), dealerships often grow in the “armpits” of freeway interchanges.
• Dealerships are often next to other dealerships. Or worse…in between!
• Dealerships have no buffer between the business and its surrounding context. Their parking lot is part of the store.

All of this provides little room for error when you’re trying to determine if a lingering cellphone is visiting a lot or pausing on an adjacent sidewalk. It’s very tricky.

But, it gets harder. Dealerships are also behaviorally complex:

• The minority of dealership visitors are there to shop for cars. Most are there for service.
• Dealerships generate relatively lower traffic than other venues like retailers or restaurants. Most dealerships would be thrilled to get as many visitors over a day that an average Subway gets for lunch.
• There are many employees working at dealerships. So, the ratio of employees to customers is dramatically higher than you’d find in a grocery store or other venue.
• Therefore, visitation tends to correlate with service (people waiting for their cars to be fixed), not sales.

This last point is what’s been bothering us as we’ve watched dealership foot traffic reemerge dramatically over the last two months. We know most visits are for service and we know that customer visits during shelter-in-place could only be for service, since showrooms were closed.

Which raises the key question: how much of the rise of auto dealership traffic is due to car shoppers?

To bring some light to this question, we compared dealership traffic to other auto-related categories:

This plot helps us a ton.

First, overall dealership reemergence tracks nearly one-to-one with auto service retailers (like Jiffy Lube or Pep Boys) and tire shops. As usual, dealership traffic is closely following service demand, though with slight differences. You’ll note that general dealerships (non-luxury lots) pulled out of the service pack around the start of May and kept that distance until early June.

That slight divergence hints at the buyer demand for reopened showrooms. Dealerships were about 5-6 points higher than service shops for most of the Reemergence Ramp. Sales reported for May were up significantly from April’s bottom (though still down vs. 2019), indicating dealership foot traffic’s gains over auto service retailers in May was no fluke.

Second, auto parts retailers are doing very well. As essential businesses, most remained open throughout the shutdowns. Sheltering-at-home DIYers with more time and less money hit up stores like AutoZone at amazing rates. And, their traffic is holding high.

Finally, those same recession-like shopping mindsets driving auto parts retailers is dragging luxury dealership traffic below its general brethren. Our partners at IRI have seen shoppers transitioning from name or luxury brands to private labels in grocery stores and big box retailers. We are guessing that a recession mindset has made its way to auto as well.

Across the nation, traffic is generally up, though the biggest gains for dealerships are coming from the midwest and the west south central. We’ll be watching closely to see if the foot-traffic stall at dealerships persists, or is merely a bump in the road to more general recovery.

To learn more about the data behind this article and what PlaceIQ has to offer, visit https://www.placeiq.com/.