How Retailers Can Better Align Advertising Offers with Chip Shortage–Induced Inventory Changes

Professionals throughout the automotive world are losing hope that the worldwide shortage of semiconductor chips, which affects the global production of new cars and trucks, will resolve itself in the near term.

As the industry rethinks the way in which it sources chips for new vehicle production, a process that is sure to take several months to sort out, auto retailers are left to deal with the true fallout, a lack of inventory for car shoppers.

How Big Will the Chip Shortage Get?

Some industry observers believe the chip shortage could result in two or three million fewer vehicles produced this year, according to McKinsey’s global semiconductor practice. Analysts from AutoForecast Solutions are predicting 719,000 fewer vehicles this year in North America alone.¹

What’s at stake is the necessary rebound from last year’s pandemic, where domestic new vehicle sales fell from nearly 17 million in 2019 to just shy of 15 million in 2020. While consumer demand has roared back, retailers are now faced with disappointing customers with a lack of inventory.

Semiconductor chips are needed to produce new vehicles because of all the technology now embedded in them. Experts at the consultancy Strategy Analytics believe the total market for chips will reach about $66 billion by 2027 — almost double that of 2020.

How the Chip Shortage Impacts Dealer Advertising

The strategy for retailers is simple: Promote vehicles that are in stock. However, with the lack of incoming inventory available, keeping up with and maintaining accuracy of these promotions is an arduous task for dealers who excel at vehicle sales and service, but not necessarily advertising strategies.

Many retailers are relying on their digital advertising partners to instill more “just in time” promotions and advertising practices known as ad refreshes across their web and digital properties, such as dealership websites, third-party websites, Google and Bing display advertising, social marketing, and even ads on YouTube and streaming video content providers such as Hulu.

Maximizing Real-Time Ad Refreshes

It isn’t a new concept, but ad refresh is a technique that allows dealers to increase the number of ad impressions served to a car shopper in a single session by refreshing ad sets based on preset triggers. These triggers include everything from user action (scrolling, clicking, or using the search function), certain custom events, or time-based (refresh every 30, 60, or 90 seconds). In this case, refreshing the vehicle inventory on a digital property can help align inventory expectations in front of car shoppers, and technology today enables retailers and their partners to conduct this refresh on a daily basis.

Focus on Optimizing Digital Ads

Optimizing digital ads is extremely important because more consumers are leveraging these channels when researching and shopping for a new car or truck. According to PureCars data, auto retailers and their digital display ads on the web saw a 7% increase in March compared with the previous month, and a 152% increase compared with March a year ago. This also resulted in a nearly 11% increase in impressions in March compared with February.

People clicking on a video-based ad were 13% higher in March compared with February, and more than 70% higher compared with a year ago. Nearly 40% more video ad views were registered in March compared with February, and 153% more compared with a year ago.  

No doubt, the shortage of semiconductor chips will impact the amount of new car and truck inventory coming onto the lots. However, retailers that work closely with their digital advertising partners can make real-time pivots to their digital advertising promotions to ensure they are constantly delivering offers on the latest new and used inventory to better align expectations with in-market shoppers looking to avoid the frustration of falling in love with a car only to find out it is no longer available. 

Matt Newsome is director of programmatic advertising for PureCars, an automotive dealer digital advertising and attribution technology provider.