Detroit, Michigan – A record number of new vehicle dealerships were lost in the U.S. in 2009, according to data collected by dealer information resource Urban Science.
The company’s Franchise Activity Report showed that the number of dealers was reduced by 1,605 to 18,841, a drop of eight per cent. Normal attrition is one per cent. The decline was double the 2008 record of 881 dealers lost, which had been the largest since Urban Science began collecting data in 1991.
The numbers were mostly a result of automakers taking proactive action to reduce dealer count, with General Motors and Chrysler accounting for approximately 90 per cent of the consolidation.
“While automaker bankruptcies and bad economic times drove the closures, all dealers have to deal with a market that has dropped from several years of 17 million units in sales to somewhere around 11 million,” said John Frith, Urban Science’s vice-president of retail channel solutions. “Automakers and dealers have to reach a greater territory with fewer resources. It’s more critical than ever to work together for mutual, profitable growth. With change comes an opportunity to build a stronger network of optimal size and makeup.”
Frith warned that consolidation alone will not increase sales at surviving stores, and closing a dealership in a market does not mean a customer will necessarily stay with a brand or travel to the next closest location. Factors to consider for successful consolidation include convenience, competition, brand strength and market demand.