The phenomenon of a sharing economy, autonomous vehicles with alternative propulsion technologies, connected lives, and online direct sales is likely to succeed the current automotive retail landscape. With new, innovative retail formats, vehicles and services are no longer required to be handed over at the point of sale, instead at the point of experience.
Automotive retail – still under pressure
It is yet to be decided, whether an apocalypse is imminent for automotive retail (Retail Offensive Part One), or if the industry will successfully oppose new innovative business models for vehicle utilization (Retail Offensive Part Two). Clear opportunities are presented in both the previous blogs of the Retail Offensive series.
However, the perceptible megatrends (urbanisation and digitalisation), changing customer needs (personalisation, ‘always on’ and convenience), new retail trends (quality before quantity, multi-channel experience and power of data), and other automotive trends are putting pressure on dealer margins and respective dealer consolidation.
A distinct customer perception and change in retail landscape within the regions of highest sales, such as Europe, USA and China, are forcing this pressure even further. The heterogeneous European format landscape is facing a noticeable shift, with a large reduction in customer touchpoints. The stock market in the USA allows for further retail formats; however, is less receptive. In contrast, the Chinese market regularly requires new formats and is experiencing an expansion of their existing retail landscape.
Nevertheless, irrespective of these ominous trends for automotive retail, our international study (Cars Online 2017) shows a far more homogeneous customer picture. While only 38% of all respondents mentioned a dealer visit in the interest phase, almost 70% of international customers did not miss the test drive at a car dealership. Therefore, despite the use of digital channels to obtain information, it is clear that the future of automotive retail will consist of both, digital and analogue formats.
AECOS – Disruptive driver for transforming the format landscape
However, the listed roots mentioned are only the beginning for the change of the automotive retail landscape. The five pillars of automotive transformation, known by the acronym AECOS (embodied in BMW language as ACES, and Mercedes as CASE) – are of high importance. An internal study conducted by Capgemini Consulting examines the influence of AECOS on future retail: autonomous driving (Autonomous), electric driving (Electric Drive), networked vehicles (Connected), online sales of vehicles (Online) and shared services (Shared).
According to the results of the study, all areas (sales & service) do face challenges, but also pose many opportunities:
- Autonomous: Reduced sales and service business vs. Efficient and personalized customer interaction
- Electric Drive: Reduced service business vs. Increase in sales and service business through hybrid and conventional drives
- Connected: Expenditure and costs for dealer qualification vs. Individualized service business
- Online Sales: Online direct sales through OEM vs. Future customer and brand experience at the dealership
- Shared Services: Substitution of new and used vehicles vs. New remuneration models (e. g. management of fleet business)
The existing dealer formats are evidently under pressure. For example, there are large and expensive sales areas as there is a lack of personalisation, suburban locations – meaning a lack of convenience, and rather few customer insights due to insufficient use of existing data. Therefore, from the opportunities presented by AECOS, the key to success for automotive retail is an improved customer experience across sales and service.
A format mix for the future – digital, stationary and specialized
With the first innovative formats being implemented, OEMs are already trying to counteract these tendencies. Audi has established digital city stores, Mercedes implemented Mercedes-Me stores, Porsche- a driving experience store, Volvo set up new pop-up stores, and BMW created urban stores and innovative formats to offer customers a new customer brand experience.
Retail formats of the future, and the accompanying retail networks must therefore be further developed in close cooperation with OEMs and retailers. The aim is to transform the former “point of sale” into a “point of experience” and to develop these corresponding topics:
- ‘State-of-the-art’ digital technologies that will improve customer experience and increase efficiency
- A consistent customer focus along the customer journey (unique customer ID)
- An extension of the product and service portfolio with innovative services (mobility & on-demand services)
- A personalized, interactive and informative brand experience along the online and offline customer journey (omnipresent multi-channel)
In addition to the creation of new formats to promote customer experience, through dedicated Mobile Pop-up store events (lead generation), as well as the expansion of City-Brand Formats (lead generation/sales) and Dealership Concepts (sales/ aftersales); there are also a vast number of opportunities for trade, through new aftersales formats and services.
Driven by future environmental and noise protection requirements such as restrictions in paint shops, and customer requirements – pure Service-Step-In Centres, Service Experience Hubs and Service Fast Tracks, to name a few, can tremendously enhance customer experience. Appropriate after-sales formats that are tailored for efficiency and are superior in terms of scale, will offer retailers new opportunities to counteract margin pressure on service centres.
This third blog entry in the’ Retail Offensive’ series summarizes the requirements for OEMs and retailers, in terms of customer needs and competition. A dealer consolidation is therefore unavoidable, but the variety of formats will only continue to increase and become more innovative. These new formats enable manufacturers and retailers to fight against the challenges listed above, to avoid the threat of an apocalypse, and to consistently and profitably expand far-reaching opportunities for all stakeholders. However, one thing remains clear – digital, stationary and specialized – will be the measure of all things for the customer experience.
If this article raises further interest, then please get in touch to discuss the exciting concepts from OEMs, intermediaries and start-ups who are trying to disrupt an old-fashioned industry.
Expert in Automotive Digital Operations and Future Mobility
Nepomuk Kessler is a Senior Consultant in Automotive Digital Operations at Capgemini Consulting. His focus is on the development of innovation strategies, the digitalization of business models and future mobility concepts. By means of the digital transformation of customer experience, he accompanies his global customers in linking all on- and offline interfaces a long a variety of retail and mobility journeys.
Within the focus area “Future Sales & Retail”, Nepomuk develops innovative retail strategies together with leading OEMs and he sophisticatedly supports the conceptualization and roll-out of new retail formats as well as digital tools across all sales and service levels.