The Great Normalization, TomTom Is Back, Shopping Soundtracks

Paul J Daly: 0:27

It is one of my favorite days of the year, December 21. We'll tell you why. But we're also talking about the great normalization, Tom Tom is back and shopping soundtracks. The people really want to know, who isn't who I need, they stopped and see when they see. No, this is, this is actually a really fun day for several reasons. The first that we need to make sure you know about here about to tell your friends about is that at 1pm. Eastern today, we will be premiering our year end extravaganza, our third annual, if you don't know go to LinkedIn, go to a so to actually the easiest way is go to our website, ASOTU.com scroll up just a little bit, you'll see it, you're an extravaganza, we have a ton of guests, or we're gonna have a lot of fun. And we have guests from like, the from, like PDI tech to Jonathan smoke, and everything in between, which I think is just a great embodiment of what makes this industry truly great. And we're gonna do predictions, we're going to do looking back insights on what's going on right now we're gonna do a lot of fun, we have some really fun monologues poke a little bit of fun, good natured ribbing, we're gonna give away a really special prize to a really special person. And you'll have to see what all that's about at one o'clock. So we hope you join us on what

‍Kyle Mountsier: 1:48

that's about. Yeah, it is, it's gonna be a really fun time for it to be the third annual like that is, it's kind of blowing my mind. Even still, I wrote a post about it on LinkedIn this morning, but like to do anything third annual that has been like created kind of by our hands and our team's hands. It's kind

Paul J Daly: 2:06

of cool. It's three years, three years in a row. And Doug, Doug Classen is like he knows already. He's like winter solstice, exclamation point. Talk about that. Because I've been saying this, again, when you live in upstate New York, right, the days get a little shorter than they do down south faster. And also, you know, it gets cold, it's kind of cloudy. And so Winter Solstice is actually the shortest day of the year, which means the day start getting longer again next year, and just you know, I know this, but how faster they get actually looked up the little data. So here's some facts about winter solstice. Basically, if you're in New York, northeast Chicago, today, you're only getting nine hours and seven minutes of daylight. That's not a lot that that is not a

Kyle Mountsier: 2:52

lot more than Alaska, but it's still not a lot it is

Paul J Daly: 2:55

so basically by January, so the days are going to start getting two minutes longer a day, but it actually increases in velocity. So by February 21, right, that's not too long by now. We're going to have almost 11 hours of daylight. That's almost two extra hours. Huge deal when it's four o'clock and it's dark versus six o'clock and it'd be dark so I don't know I like to find those little celebration moments. And that's my that's mine for today. So the days are getting longer today. So I'm excited celebration Yeah, Doug and I can be excited about it.

Kyle Mountsier: 3:27

You and Doug double exclamation I don't know we're gonna

Paul J Daly: 3:30

have a thing like winter solstice is going to be a thing from now on.

Kyle Mountsier: 3:33

Mine's always been a thing for me. All right. So

Paul J Daly: 3:35

let's let's get into some news. We have a lot to do before the livestream today. So here's here's a good one. The first of I read this whole report yesterday, by the way, the first of a new quarterly report from a partnership between the Buy Sell firm the Presidio group and NCM which everybody knows, reviews the data of 4400 franchise dealers just a couple and it's revealing some stark changes in dealership profitability, dubbed the great normalization I thought that was a great love of that edition because I read that I was

Kyle Mountsier: 4:04

like that is exactly what actually what it is just everybody getting normal, right

Paul J Daly: 4:09

and that's the thing like we're trying to inject a little bit of like rational thinking into what could easily come across as Henny Penny The sky is falling so the data reveals a 19% drop in average dealership pre tax profits through q3 of 2023. So nothing to like ignore steep decline also in gross profit per new vehicle by 26%. dealership profitability is returning to more traditional patterns following unusually high profits. During the COVID 19 pandemic notes the Presidio President George Karelis, and this really reflects and he said it goes on to say I think it gives a really good barometer and different perspective to folks interested in following the industry. He's talking about this report. This collaboration between NCM Presidio group reminds me of something Alan Haig said in his q3 report, where he was just kind of painted the picture of profitability, early, pre COVID 1.9 million to like the height, which was like 6.9 million, he's like, Alright, let's get rational here, things are still pretty sweet NADA, stop, redo, stop releasing this type of data in 2021. So like, this is kind of like a breath of fresh air, we get to see this data again. And also notable and report, f&i income this is a little different is down 8.1% to seven, but not too bad, but it doesn't have anything to do with

Kyle Mountsier: 5:30

inventory. Right? Well, yeah, it has to do a lot with affordability and interest rates, right as climb, affordability changes, monthly payments start to get a little bit more strict, you start to see people you know, you know, potentially, there's rate differences and wholesale and retail rates and what banks and dealers are charging, so the profitability there, I think the most stark thing is 26% Decrease in new car profitability. That's huge. That's a big number. And I'm hearing a lot of people talking about, you know, if you don't know kind of the the payment terms on a commission, salesperson in auto, if, if the deal doesn't make money or loses money or, or makes less money than what a commissionable percentage would be, it's called a quote unquote, Mini. And typically it's a flat it's like 100 or 150 bucks just to sell a vehicle. And I don't care if that vehicle is $20,000 or$80,000. If there's no profit in the deal, that salesperson gets paid a mini and that is coming back in droves. Yep, especially to the manufacturers with a high day supply. And so this normalization, remember, this is the way that the majority of new car Commission's new car and new car profitability was pre COVID. And so starting to understand how that works in pay plans, how that works in how these people have been compensated over the last couple of years what the potential turnover is going to be an even where the profitability lies in the dealership, which is typically finance used cars and service, instead of where new cars have had a high margin. Over the last couple of years, it's going to be a challenge for dealers to understand and to work through how their expense structure marketing structure payroll structure is, is balanced against the profitability structure.

Paul J Daly: 7:22

There's, I mean, all I can think about the gross profitability drop. I wonder if we adjusted the number for market adjustments that were added? Like, I wonder what that number is like if all of a sudden you take away all the five that out $20,000 market adjustments that were just added as gravy and on top of the whole deal? And what that number would actually look like instead of 26%. Like, just straight straight. I'm talking straight market adjustments people were just like, actually, the cars worth more because I have it.

Kyle Mountsier: 7:55

I mean, probably not as dramatic for sure. I wouldn't be as dramatic of a

Paul J Daly: 7:58

Yeah, yeah, I want I really want to I don't know if anyone can even like, I guess somebody could have either no idea. But if we know it enough. So Presidio group NCM. I don't know when I figured that out. I'm gonna help us out with that video group.

Kyle Mountsier: 8:13

The profit? Oh, yeah, the difference between the profitability of a dealership now that didn't charge over MSRP versus dealership that did charge me the MSRP. And what that variance drop is because the ones potentially that have a less variance are going to be more structured and set up

Paul J Daly: 8:31

to be more profitable moving forward. That's a good point. I don't know that's beyond that's above our pay grade. So but you can get this Presidio report by going to the company's website or clicking link in the show notes. That'll take you right there so you can sign up and get those. Oh, this is good one. I don't have a segue for this. So we're just gonna stop it. But GPS company TomTom. Remember them I want them so still exists. They do. They're collaborating with Microsoft to introduce a sophisticated AI powered conversational assistant with in cars, enhancing voice interactions for navigation and vehicle control. So the system's built on open AI is model and also Microsoft's as your cosmos and cognitive services, and is supposed to have really great capabilities, that technology is going to be integrated into tom toms digital cockpit, and various automotive manufacturer interfaces. They haven't announced who it is who they're partnering with, but the brands will remain maintain their brand identity, which means you're gonna see the TomTom logo and iconography, even inside the manufacturers dashing infotainment system. So no specific partnerships have been disclosed. But you know, this is kind of following an attempt by Mercedes to integrate chat GPT in their thing, and I think we're just seeing a lot of partnerships a lot of collaborations and man when I heard the word TomTom, all I could think about is that little GPS unit Do

Kyle Mountsier: 9:55

you remember like back in the day, let's call it like late 2000s. The whole the whole GPS thing was Do you have a tomtom? I mean, I think that's more like early 2000, maybe early 2000s. Right. It was just Do you have a tomtom? There was no other brand identity. That was it.

Paul J Daly: 10:14

And the FBI was slinging those things and working to come back

Kyle Mountsier: 10:17

through autos, in partnership, auto partnerships, pretty cool. You know, Microsoft open AI are obviously trying to find partners that can leverage their technology, and take it into more spaces so that they're developing on this platform of, you know, large language models. I'm interested to see exactly what this like conversational assistant does, or doesn't do. Like, I can pretty much talk to Siri, through my iPhone, or Apple CarPlay. And get most of what I need, unless you're in a GM, GM, so I wonder who they're going to be talking to.

Paul J Daly: 10:57

Kody in the livestream comments. I remember trying to win my parents at TomTom in an old movie theater arcade game back in the day. That's exactly what it was, you know, but I guess they've really just shifted from a hardware company to a software company. Yep. You know, in a data company, and maybe they'll come back as a hardware company.

Kyle Mountsier: 11:13

I know, there's a lot of the there's a lot of companies that did that. There were there were big companies in the late 90s, early 2000s. That

Paul J Daly: 11:21

and then all of a sudden an iPhone was like, you don't need the hardware. We had hardware. Yeah. So all right. Well, speaking of bad day for segways, bad

Kyle Mountsier: 11:30

day for segways. All right. It's the holidays, Paul, let's see the holiday. So as we all know, the holiday season is shopping season is just at its peak when it comes to shopping, if you haven't been out, don't go out because it's nuts out there. You've probably noticed also an increase in music being played in retail stores. It's not new. But there's a lot to learn about the strategic development of music and deployment in a shopping experience to in purchase to influence purchasing behavior. Recently, a study was done that just showed and this this article on on retail wire highlighted how some brands are leaning into connecting the shopping experience and the audio experience in retail specialists like audio socket and jukebox de emphasize the psychological impact of music on shopping behavior, suggesting that uplifting holiday music can encourage longer store visits, and increased browsing. According to Magnus Ryden of soundtrack your brand creating a brand sound involves aligning music with the brand's identity values and customer demographics. So you only got a few days left to figure this out. But if you haven't kind of like tune the music, to your holiday experience to what's going on in your showroom to kind of enhance the the experience of the visit, or enhance what exactly someone's feeling when they're in your store. It can have a massive impact. But it's not just during the holidays. It's all year round, aligning your brand with the audio experience in your store.

Paul J Daly: 13:07

So okay, there's like pros and cons to this. The cons are, if I like how they I don't know if it was in the show notes. Talks about the impact it has on your own team. Yep. And I think that that is massive. I remember working at a Denny's when I was in my teens, and they had like the same 90 minute loop on Yes, constantly just obliterate it was disgusting. For

Kyle Mountsier: 13:32

the time second shift came around, you were just

Paul J Daly: 13:36

out of the wall. But we've we've seen good and bad examples of this as we've gone through lots of dealerships, right. I think a real bad experience would be when you have some type of music playing that actually has ads in it. Right? It just it doesn't feel right, it takes you out of the mode. But we've also had a lot of experience where the energy of what is being played, contributes to the mood on the floor. And you can experiment with this. I mean, most dealerships have the ability to play music we know because whenever we're shooting in one, we're like, Can you shut the music off? Right while we're shooting. And being intentional here like Toyota, they actually time of day? Well, that's why I was just gonna say like, if you if you think of very intentional hospitality, hot hotels, restaurants, they actually curate a little bit of a music journey from like the beginning of the meal through the later in night and the mood and the energy shifts. And so that is a very like in the morning. You don't want to be playing a certain type of music at the end of the day. You don't want to be playing a certain type of music and being intentional about it. For those of you paying attention might make a significant difference. Whatever you do, don't take a poll of your people which music don't

Kyle Mountsier: 14:47

do that. That's just gonna get sideways. Yeah, yeah, let the brand people let the marketing people people that are thinking about experience all day think about exactly what music should be played on the showroom and the service drive. And yeah, may have you think about what what do people want when they first walk in during the day or what do people want when they're kind of closing out the night? What what what does a busy Saturday as opposed to a chill Monday morning look like chill

Paul J Daly: 15:11

Mondays? That's new. We should just put together playlists for dealerships we maybe will do that. Maybe we'll do five playlist for dealers. I think we might just do that won't we'll consult our buddy Jonathan smoke Jonathan smokes gotta be on the air and extravaganza make sure you go to a soda.com Attend the LinkedIn event will be in the comments. We can't wait to see you there.