United States Loses Record Number of Dealerships in 2009, Says Urban Science

Decline is Double the 2008 Record

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Feb 03, 2010, 11:00 ET

DETROIT, Feb. 3 /PRNewswire/ -- Urban Science today confirmed that 2009 holds the record for automotive dealerships closed in the United States in one year. The company's Franchise Activity Report, the nation's most accurate data on dealers, showed the nationwide dealership count for the year fell by 1,605, or 8 percent, to 18,841. Normal attrition is 1 percent. The decline was double the 2008 record of 881 dealers, the largest since 1991 when data was first collected by Urban Science.

The numbers were mostly a result of automakers taking proactive action to reduce dealer count, with GM and Chrysler accounting for approximately 90 percent 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, vice president of retail channel solutions, Urban Science. "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 warns, however, that consolidation alone will not increase throughput at surviving stores. Closing a dealership in a market does not mean a customer will stay with a brand or travel to the next closest location. There is a mixture of factors to consider for consolidation to be successful, including convenience, competition, brand strength and market demand.

Dealers unaffected by consolidation faced challenges caused by the recession and credit crisis. As long as dealers maintained required financing, they survived by cutting expenses and concentrating on used vehicles and parts and service — traditionally the most profitable areas of a dealership. With consumers holding onto their vehicles longer, dealerships were able to gain profits from an increase in non-warranty service work.

"Dealers are resilient entrepreneurs who survived this year just as they've survived tough times in the past," said Randy Berlin, global practice director, Urban Science. "They reduce variable costs and focus on parts, service and used cars for revenue."

Urban Science's Franchise Activity Report, a subset of its monthly Automotive Dealer Census, analyzes dealership data on national, state and market levels. Other findings include:

Cities with the largest percentage net decline include Charleston, S.C. (16.3%), Stockton, Calif. (16.2%), Albany, N.Y. (15.5%), Poughkeepsie, N.Y. (15.2%), and Greensboro, N.C. (14%).
475 out of the 932 markets surveyed either stayed flat or had an increase, however no market gained more than one dealership.
- The largest cities of that 475 include Thousand Oaks, Calif. (1), Tucson, Ariz. (1), El Paso, Texas (1), Canton, Ohio (0), and Daytona Beach, FL (0).
States with the highest percentage declines are Alaska, Mississippi, South Carolina, Arkansas and Missouri.

About the Automotive Dealer Census

Urban Science maintains a list of current new vehicle dealership and franchise information for all car and light truck brands in the United States. Compiled on a monthly basis, the census is the most reliable source of dealership statistics. The data comes from a variety of sources, including feeds from automotive manufacturers as well as phone and field verification. Urban Science has been collecting this information since 1990.

Founded in 1977, Urban Science takes a scientific approach to helping companies identify where they should allocate resources to increase marketshare and profitability. With headquarters in Detroit, Urban Science serves global clientele from offices in the United States, Spain, United Kingdom, Germany, Italy, France, Australia, China, Mexico and Japan. urbanscience.com.