Digital continues to change the shape of vehicle retail. The traditional car shopping experience is evolving as consumers focus on taking advantage of the latest technologies to shorten the overall process. Potential customers are well informed, even when they may not be actively considering a purchase. So, the industry’s focus is now much more customer centric, as the traditional sales funnel may have outlived its utility.
For manufacturers and dealers, success in the future can come through the adoption of innovative mobile and digital technologies. Through such technologies, the automotive retail industry can provide efficiency levels that consumers get while shopping for other services and goods.
Studies have shown that dealers and manufacturers who have invested in mobile technologies, digital advertising and digital retailing to offer a better online to in-store journey to consumers have achieved better profitability and customer engagement. For example, research has shown that those who have integrated mobile apps in their operations have achieved higher customer satisfaction and sales.
If you look at the trends in automotive retail, manufacturers have traditionally had dealers as the local representatives of their brands. The dealerships are generally run by business partners who are influential in the market. They can create and run tactical initiatives to provide sales and service to customers as they understand the industry. However, this reliance on dealers has distanced manufacturers to some extent from customers over a period of time.
- Better tracking of customer interactions: In the digital era, manufacturers can track the interactions and transactions between dealers and customers through modern technology. Manufacturers can monitor the customer experience quality, service levels and inventory at dealerships through such technology and help dealers and, in turn, themselves operate more profitably.
- Online sales improvement: Online sales are an area where manufacturers stand to gain directly. According to a recent study by Frost & Sullivan, nearly 5% of all cars are likely to be sold online by the year 2020. Several manufacturers have begun to sell their cars online, while using dealerships as a backup.
- Proactive service using modern technology: The coming of digital has meant that the cost of software and electronics content in automobiles has gone up substantially. Besides new infotainment features, telematics features that include a number of semiautonomous aids for driving and sensor-based reporting on car usage and maintenance are now available. Manufacturers and dealers can offer proactive and more convenient service. For example, they can alert car owners to repairs or maintenance coming up.
- More vehicle and customer data through digital technology: Most manufacturers are focused on collecting vehicle and customer data through digital technology and putting it to use. They may have to collaborate with experts and suppliers outside the traditional auto industry for that. They may even have to support and nurture software and hardware companies that can innovate technologically.
With growth in the industry, dealerships grew into multi-outlet and multi-brand models. In Europe, the automotive franchise market’s deregulation facilitated this. In emerging economies, this is an up-and-coming trend that is accelerating quickly. The need to offer buyers more service options, balanced portfolios, aggregate buying power and benefit from economies of scale drove this.
This was followed by the entrance of Lean principles, which had traditionally been restricted to manufacturing, into customer management. Firms began to remove capacity bottlenecks to obtain higher asset returns. Dealers tried to provide deliveries on time and to manage warehouses and parts to bring vehicle downtimes to minimal levels, to enhance service levels.
Dealership groups then began to evolve with the easing of regulatory norms in many countries. Several undertook global expansion, leveraging opportunities not only through their relationships with manufacturers but also through taking their advanced customer management systems and processes to new markets. This also marked the emerging of manufacturer sponsored or owned retail groups, along with multi-brand groups of dealers.
Globalization of dealerships led to a consolidation phases as many of the traditional dealerships were not able to withstand the competition that global dealerships offered. The global dealer groups acquired firms for new market access or for different product portfolios.
With the narrowing of differentiation between players, a new source of competitive advantage was required. Digital provided this in the form of emerging technologies. Automotive retail has been able to explore new differentiation opportunities and new business models as a result of the impact of converging technologies such as social media, big data, mobility and cloud computing.
- Dealers have to analyze websites and social media more closely: Dealers used to be the primary information source on services and products for customers. They took care of a substantial part of the brand experience. With the digitization of automotive retail, it has become essential for dealers to pay more attention to management and analyses of websites and social media.
- Digital technology in dealerships: Dealerships are now a confluence of digital visual elements, digital business processes, digital marketing and digital channels. The visual elements include digital signage, video walls, augmented reality and touch kiosks. The digital business processes leverage cloud computing, social media, big data and mobility.
- Improved customer experience through digital technology: Digital dealerships can offer customers the opportunity to explore car specifications in augmented reality through Google Glass, use touch surface devices to configure features or print brochures and even go on a virtual test drive.
- Improved staff efficiency and productivity through digital technology: The staff at digital dealerships may use tablets or iPads with customized apps to make it easier for them find data and to finalize sales.
- Better technology for customer care and data management: Dealers have to invest in technologies for customer care and data management to make buying more pleasing, efficient and faster for consumers. Like other retailers, they have to invest in their online capabilities. They can use apps and life cycle software for vehicles to nurture a continuous connection with customers.
Customers are becoming more and more well informed and their decision making process begins much earlier than they reach a dealership. They prefer to remotely connect before a visit and may not buy from a dealer in their area of work or residence.
- Online research before purchase: Before the Internet, people used to visit a number of dealerships to see what deals were available. Now, according to recent research, customers visit no more than 2 dealerships before they make a purchase. They do most of their ‘shopping’ online before they head out to a dealership.
- Uniform brand experience expected: Customers expect the kind of uniform brand experience that is delivered by other industries such as consumer goods. They are moving towards ecommerce for various services and goods and have come to expect transaction channels of a similar nature in automotive retail. This has led to centralization of customer care centers and enabled two way sharing of information, which is essential for delivering a better customer experience.
For many years, iconic brands have had self-managed and independent customer clubs. In the digital era, however, even mass brands are creating communities through social media to create real life experiences through virtual associations. The experiences have to be customized for particular target segments. For examples, those who own all-wheel drive sports utility vehicles can participate in off-road challenges.
Since interface in the real world improves advocacy and loyalty levels, successful clubs can help to promote products. Besides social media, analytics, big data and mobility can be put to effective use for this kind of customer connect. Customers can provide inputs for new car designs, service improvements, besides general feedback, through such clubs.
However, customers are wary of interference by marketing and manufacturers or dealers should not explicitly push their sales agendas. Clubs do well as customers get hobby or interest and social value from them. Manufacturers or dealers can generate customer data and enrich the profiles by analyzing customer information.
For providers of related services
Roadside assistance services, consumer data collection, insurance, market research, financing and leasing are among the areas related to automotive retail where there are a number of service players. Many manufacturers and dealers have expanded, through their subsidiaries, into these service areas in many regions. This requires transparency across the manufacturer, the dealer and any subsidiaries, to derive value from each sale.
On the other hand, there are dedicated service providers in many countries due to the investment appetite and regulatory norms. It is critical for manufacturers or dealers to collaborate with these players so that they can provide one-stop shop services even to customers who want to choose, say, their insurance and financial service providers on their own.
In the digital world of today, automotive retail is not confined to a manufacturer or dealer’s territory, products and brands or customers in any geographic location. Automotive retail is becoming customer centric and the business silos that dealers, manufacturers and service providers traditionally worked in are disappearing fast. The future of automotive retail involves successful integration throughout the value chain to cater to a well-connected and informed customer.
The way to success in digital automotive retail is through a seamless information flow between the manufacturer’s and dealer’s systems, the interface protocol, the underlying infrastructure and the scalability of all of them.
What are your views on digital disruption in automotive retail? Have you had any applications or other software developed for your dealership or car making company? Please share with us in the comments section below.