Will Automotive Retail be able to tame the beast or will digitalisation drive away with tradition?
Every sector of our economy is facing numerous, complex and fast developments, so is the automotive industry. Due to the massive digitalization transformation, in the last few years, automotive dealerships are facing existential issues. The most important question being asked is about the very existence of automotive dealerships and the way we know them today.
According to recent trend reports almost 30 % of car buyers are likely to purchase their next car online, instead of going to a local dealership. Another statistic shows that 25% of car buyers that consult a dealership expert are not satisfied with their customer experience. Therefore, it is understandable that a question like this is not really absurd. As we will see in the following paragraphs, however, another scenario for dealership development is possible.
The Customer is King
The job of a car dealer will probably continue to exist also in the future, but it will change in many ways, such as the treatment of customers, the presentation of the cars and the way the customers are informed about products and services. The latter will hold a particularly important position in the automotive future. Car manufacturers and especially car dealers need to think of the customer journey within a dealership as a holistic experience, not neglecting the pre- and after-sales process. All other services around the car need attention to package and sell a personalized offer to their clients. The automotive industry and its retail sector are shifting, therefore, from a merely transactional and revenues perspective to a customer-centric one.
Customer´s buying behavior and service expectations have changed, particularly the millennial´s ones. Millennials approach the research process cautiously and pragmatically. What differentiates millennials from other generations, is also their use of referrals and their influence on each other regarding the purchasing decision. 82% of millennials shops online but nevertheless personal contact with the dealer and detailed information about technical features and digital devices of their next car, are still very important.
In general, the customer starts the research and the purchasing process journey online, on dealership or brand websites, as well as by visiting consulting car configurators, technical information reviews, social networks and community forums. Usually millennials visit a dealership only when the final decision about what car and model to buy has been made.
The Future of Automotive Retail
The car dealer’s job is, therefore, changing: they are no longer the source of information or hard-sellers but a product expert who delivers additional information and an outstanding experience. To exist in the future, it is essential that dealerships focus on a successful customer relationship management experience, integrating their online and offline services.
While some car companies have already opened their own online shops, others are opening flagship stores in city centers or the so-called experience stores, that create a buying experience similar to a coffee shop or high fashion luxury brand shop. In contrast to “old-school” dealerships, in these new digital showrooms the visitors are welcomed by customer relationship managers, who inform them on the brand and advise on how to digitally create their personal car from hundreds of thousands of potential configurations. This new digital approach has led to a 60 – 70% increase in new cars sales.
Another interesting factor is that almost half of the customers, visiting such new dealership, ordered their new car without having had a physical driving test appointment – they were totally convinced by the virtual drive test experience and the entire virtual environment. Dealerships in the future are expected to display a limited number of physical cars but have an unlimited virtual retail space. The customer will be able to create his/her car and transfer it to a digital power wall, to experience it in original size. Another feature will be that of the driving test simulations through virtual landscapes.
The conventional dealerships will, therefore, dramatically change their offer of customer experience. Today the average number of showroom visits per customer before he/she decides to buy a new car is 1.4 – down from four visits a few years ago. Customers come into the dealership already very well-informed and with a precise plan about their future car. It´s realistic to expect that, in the future, the customer will already have browsed websites, read reviews, visited social networks and community forums, and at this point the role of the dealer will be that of a highly trained professional that additionally enriches the customer experience. A crucial step here is a seamless transition from an online to an offline experience at the dealership.
Zulla Consulting & Partners with its strategic foresight and multiple years of experience will support your company by developing tailor-made solutions based on a wide series of methods and best practices to prepare your automotive business for the future, as well as adapting the solutions to the needs that the digital and virtual era brings with it.
For additional information and an initial consultation, feel free to contact Daniele Zulla at firstname.lastname@example.org.