US auto retailers have embraced multiple new technologies over the past decade, from next-generation core systems to AI and digital sales platforms. Yet, despite sometimes significant investments, dealer productivity has remained stuck in a rut, with vehicle sales per employee averaging between 14 and 16 each year.1 To boost technology’s impact, a new playbook is required—one that shifts the focus away from point solutions and toward collaboration and deeper tech integration across the business.
Technologies such as dealer and customer relationship management systems, omnichannel engagement tools, and AI promise game-changing productivity uplifts. But many auto retailers have seen the benefits of innovation offset by SG&A costs that have risen by 8 percent, on average, over recent years (Exhibit 1).2 In parallel, they have faced challenges including rising customer expectations and high levels of employee turnover, with accretion rates averaging 34 percent.3 Even more concerningly, attitudes have been slow to change, with many dealerships yet to adopt the latest technologies. As a result, sales reps have not had the benefit of the tools at hand.
As customers interact across more channels and the number of car days on lot rises, the art of selling in building sales momentum is more critical than ever. Moreover, for the average US dealership, every 1 percent rise in sales productivity is worth about $500,000 in revenues, McKinsey research shows. We estimate that if dealerships used technology effectively across both customer-facing and back-office processes, focused on cutting inventory and other costs, and adopted a clear strategic agenda, they could lift sales per employee by at least 25 percent to 20 vehicles or more per year.
How a holistic approach to digitalization can create possible productivity gains
There is no magic bullet for the productivity challenges facing US auto retail. But leading dealers have shown that a more holistic approach to managing digitalization can reap dividends. In practice, this means moving away from pick-and-mix solutions and toward deeper integration across key elements of the sales process—both offline and online. In our global engagements, we have seen forward-looking dealers focus on six elements to boost sales productivity:
- Embrace AI- and gen AI–enabled lead management. A good lead is worth its weight in gold, but too many dealerships let promising situations slip from their grasp. One reason is that more than half of new leads (56 percent) come in after hours and do not get a timely response. Just 37 percent of dealerships address after-hours leads within one hour.4 That’s important because delays in connecting can significantly reduce conversion rates.5 The good news is that readily available gen AI technologies offer a solution (Exhibit 2). Large language models can automatically draft high-quality responses and progress the conversation 24/7 before seamlessly handing over to sales teams. The trick for companies is to balance AI’s capabilities with a personal touch and to ensure customers enjoy a seamless and personalized buying journey.
- Integrate online and offline sales channels. The past two years have seen rising consumer demand for digital options. In a 2023 survey, less than 3 percent of consumers said they bought cars fully online, but 29 percent said it will be their preference next time. Another 23 percent favored a hybrid approach, ordering online but retaining a physical touchpoint—for example, to take a test drive.6 In navigating these shifts, leading dealers understand that digital sales are not just about websites. Digital classifieds, dealer group portals, and OEM-specific solutions must also play a role. With the help of these platforms, forward-looking companies are creating a digital path into physical sales, often using business development centers (BDCs) to manage the process.
- Use data to optimize inventories. As data proliferates, there is an opportunity to do a better job of “getting the right car to the right place at the right price.” Productivity leaders have shown that real-time, data-driven inventory management can be transformative, helping dealers achieve higher margins by choosing sales locations based on zip code–level insights into customer and competitor behaviors. And an inventory sourcing strategy based on wider market trends and customer needs can support better acquisition choices—for example, optimizing the price paid. Based on McKinsey analysis, dealers that have made the switch have seen front-end margins rise by 1 to 2 percent and days on lot cut by 20 to 50 percent.
- Proactively manage customer relationships and loyalty. With supply and demand normalizing in 2024, industry participants raised their average advertising spending to about $700 per new vehicle.7 There is an opportunity to reduce those costs and engage more effectively by developing 360° customer insights and taking a proactive approach to lead generation and customer loyalty. The unlock would be more effective use of data and analytics, which can help retailers monitor variables such as customer buying and engagement patterns. The resulting insights can be used to create compelling and timely offers (for example, a new vehicle offer ahead of a service appointment) tailored to individual preferences.
- Drill down into operational performance. As the sales process becomes more digitalized, leading dealers are finding it easier to track the key drivers of performance. A range of metrics (marketing engagement, leads, and customer loyalty) can move the conversation beyond daily huddles and offer decision makers more visibility into the sales pipeline—in addition to shaping longer-term training programs across the dealership (sales, service, and finance and insurance [F&I]).
- Make the most of network scale. The average dealership size has grown significantly over the past decade, and the top 150 US operations now account for 30 percent of the market.8 But few businesses are realizing the full benefits of scale. More could be done, for example, to share sales or F&I expertise across groups, indexed to predicted store volumes. Some leading dealers are turning regional and virtual BDCs into profit centers. They use these to collectively manage inventories so that cars can be swiftly assigned to the most promising locations.
A playbook for sales excellence
Achieving a step-change in dealership productivity is unlikely to be a one-shot exercise. Instead, decision makers must think strategically, put strong foundations in place, and then plan carefully to ramp up capabilities over time. Leading companies base their efforts on three key principles:
- Create a vision. Leadership vision is a well-established imperative, but it can mean different things to different people. Forward-looking auto retailers have shown that higher levels of productivity are predicated on a clear view of how the business could operate, given effective use of technology and sales process optimization. A good early step is to establish key metrics and dedicated targets, which can be used to prioritize use cases offering the most potential for value creation.
- Create a lighthouse dealer. Leading companies build toward their vision by launching new sales processes at a subset of dealers. The piloting group can learn from their own experiences and create a playbook for those next in line. Quick wins can be rolled out speedily across the network.
- Scale approaches and impacts. Once a productivity playbook is established, decision makers can start the process of scaling, potentially supported by cross-cutting structures such as centralized BDCs. Some companies have shown how a dedicated performance management culture—for example, tracking sales metrics in real time—can make a difference, helping them monitor progress against targets and fostering continuous improvement.
With the US cars sales market set to grow in 2025,9 dealerships have an opportunity to turbocharge their productivity, boosting sales per employee by 25 percent or more, according to McKinsey analysis. In a world of rising costs, the key to achieving that goal will be to take a hard look at the role of technology in operations and the customer journey. Leading dealership groups have shown that a holistic approach to managing tech integration can produce both an upward shift in productivity and a positive impact on the bottom line.
