The future of the UK dealership: background

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Buying a car, especially a premium brand, requires a human/physical interaction and the expert who can give advice and recommendations on configuration and ownership is very important.

The automotive industry is besieged on many fronts by soundbites and critiques from many industry outsiders telling them where they are going wrong and what they need to do in the future. One such area is the dealership and its role in the distribution chain of new vehicles and aftermarket services. The dealer, it is claimed by many, is now largely irrelevant in the new digital world. Consumers will purchase vehicles online, book services, and generally engage more with mobility services – all with a view to bypassing the traditional interaction with the auto dealer. Numerous surveys over the past two years seems to back up this perception. The recent reports claiming that 50–75% of people would prefer to buy a vehicle directly online and that 45–60% of aftermarket consumers never want to visit a dealership again seem to indicate that this part of the traditional auto distribution chain is in decline. The success of websites such as carwow and the numerous repair-my-car sites indicates that this shift to the digital is already well under way. So where does this leave our UK dealers?

The landscape of franchised dealer locations has reduced since 2015. The reduction in physical locations is most notable across the volume brands – Ford, Vauxhall, and Peugeot – leading the reduction in physical sites at the rate of approximately 10–15% per year. The premium mid-brands –BMW, VW, Toyota, Volvo, Merc, JLR – have remained largely unchanged over the past three years. It is difficult to ascertain if customer distain is a factor in the reduction of the value brands. It is more likely that a mixture of new entrants to the market, such as Kia and Hyundai, are impacting volumes, driving down prices, and squeezing margins in that sector. Consumer age and type of purchase also influence behavior. Not many 20-year olds are in the market for a top-of the-range Mercedes E-Class. I think statistics proves that the death march of the auto dealer is slightly exaggerated, but it would be wise for all us to take heed of the general trends in both our own industry and in the wider digital economy.

Ultimately the purchase and ownership journey for such a high-ticket item will, without doubt, become more nuanced in the future. There is no dealer today, I am sure, who cannot see a change in the way they do business coming on the horizon. A mixture of clicks and bricks will enable the consumer to take more control and drive the interaction on their own terms. The retailer does have an important role to play in this journey and can still capitalise on it and add value. Buying a car, especially a premium brand, will require a human/physical interaction. An expert who can give advice and recommendations on configuration and ownership in a frictionless way. A digital compliment that provides an extension of the customer experience is critical. The retailer community is best placed to enable this evolution.

Over the course of the next few weeks I will document five key areas that all retailers need to embrace to ensure success:

  1. A seamless OEM-to-dealer partnership
  2. The collaborative digital footprint
  3. Multi-channel consumer engagement
  4. An expanded ecosystem
  5. The dealer organisation and the journey to profitability.

Our Cars Online 2018 Study reveals the steps OEMs should take to cater to the needs and expectations of the customers.

The second and latest trend study concentrates on electric vehicles and the challenges in its adoption.



James Hayes

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