Shops without employees, car dealers without cars, luxury cars from vending machines. These digital innovations are surpassing the traditional automotive retail business, at an unstoppable speed. Manufacturers and dealers must reinvent themselves and set the pace for the future, with key fundamental changes.

The Automotive Industry Is Being Challenged

The automotive industry is undergoing rapid changes, that are fuelled by future developments, which put the industry’s traditional business models and sales’ formats under close scrutiny.

Manufacturers are reacting with different approaches to change. For instance, they are experimenting with new business models, such as mobility on demand or shared mobility. The move towards alternative business models is important.

As the Cars Online Study 2017 shows; already one third of respondents see mobility services as an alternative to buying or leasing their own car. This means that mobility services could reduce the number of cars sold which therefore puts pressure on the traditional car dealers.

Dealers are not only challenged by new business models; but are also increasingly threatened by online sales directly from the manufacturer. In order to react to these trends, it is not only necessary to execute fundamental structural changes across the supply chain, from sales up to retail; but there should also be a modified focus on manufacturers. Stronger customer-focused sales’ formats, such as pop-up stores in shopping centres or showrooms, yet not typical for car dealers, are already possible alternatives.

The Traditional Car Dealer Is Endangered

According to our Cars Online Study 2017, at present, a car dealer is mainly visited by buyers who are interested in test drives. The number of visits, however, is declining. In 2017, 73% of respondents visited a dealer at most three times during the whole purchase phase (source: Cars Online Study 2017 and 2015).

In the coming years, these visits are expected to continue to decline, as technologies such as augmented and virtual reality offer the opportunity for customers to virtually experience the car in the comfort of their living room. Currently, 42% of the respondents would be willing to complete the purchase process of their next car solely online. Figures which by no means put doubt on the future of traditional automotive retail.

Automotive Retail Needs To Reposition Itself

Are stationary car dealers still needed in the future, or can they be entirely replaced? Even if automotive dealerships become more or less substitutable, automotive retail will continue to play an important role in enabling a cross-channel customer experience. However, this requires a consolidation of the existing retail network, as well as a repositioning and relocation of new innovative sales’ formats.

First-mover OEMs have already taken the initiative to experiment with alternatives from the traditional automotive retail models. In Shanghai, for instance, one can buy luxury cars out of a vending machine. In Stuttgart, with Cayu, Opel came up with the opportunity to acquire cars in a shopping centre. Porsche has created a showroom on Sylt, in which the Porsche brand has become tangible, although there is only one car exhibited in the shop and there is no option to actually buy it there.

Although these approaches are very different, it is already clear that high-quality boutiques at prominent locations, with a stronger focus on the brand experience and excellent customer service, are a first step towards the future of automotive sales.

(Source: http://www.porsche-auf-sylt.de/de/drive_de_pas.html)

Courage Towards The Future Of Automotive Retail

Yet, the rapid development of the industry makes it almost impossible to accurately predict the future. What can be said for sure is that manufacturers and dealers should reinvent themselves, so that they are not overrun by digital transformations.

Currently; however, there is a lack of courage and innovative vigour to break fresh ground, like companies from other industries have already done. Even though some manufacturers already operate promising lighthouse projects, their experience-driven initiatives have rarely been successful.

Therefore, individual dealers often miss out. In close cooperation with dealers, manufacturers must focus on new sales channels, and deal with future mobility concepts, and eventually skew away from the pure selling of cars.

There are six possible approaches to aligning towards the future of automotive retail:

  1. Perceive new business models, such as “shared mobility”, as an opportunity for retail, not a threat.
  2. Reconsider existing retail landscapes and formats and align them more closely with customer needs.
  3. Involve dealers in online sales at the earlier stages and form a strong alliance between dealer and manufacturer.
  4. Identify digital technologies that help to ensure the best customer retail experience.
  5. Use AI, robotics, automation – all possibilities to increase customer satisfaction and process optimization.
  6. Implement digital retail solutions, that are fast and sustainable, through agile rollouts, structured change management, and targeted dealer enabling.

This article is part one of our blog series “The Retail Offensive”, in which we will discuss the future role of the automotive retail industry and the possible starting points for them. In the next article, we will examine new business models and the opportunities for automotive retail.