The digital revolution, tighter emission standards and alternative forms of mobility are reshaping the automotive industry, touching everything from the infotainment technology inside cars to the way in which they are bought. Megatrends spoke to Anil Valsan, Global Lead Analyst at EY, on the impact of some of these forces on the face of retail.
Desktop to dealership
Many studies have shown a growing interest by consumers in online retail, for both gathering information on a new car purchase as well as the purchase itself. A global study by Cisco probed the customer experiences of more than 1,500 consumers across ten countries, looking at the level of technology desired in cars around the world. Of all those polled, 83% prefer to research new cars on the Internet.
However, few dealers are effectively tapping into this. “I don’t believe they are doing enough in this particular space,” said Valsan. “In the US, there have been some initiatives. In Europe, I feel there is quite a lag in terms of capturing this.”
Some vehicle manufacturers have been making concerted efforts to engage with customers online, offering an experience of their vehicles and their brand during the research phase of the car-buying journey. Valsan believes the key is to continue that relationship when the customer eventually makes it in to the dealership for a test drive. “There is still a lot of work to be done in the dealer space,” added Valsan. “It has to be a seamless experience for the customer. Instead of a hard sell it should be about continuing the relationship that has begun with the research. It’s about taking that forward rather than reinventing it.”
In the future, Valsan believes most car-buying decisions will be made online. “The customer will come into a dealership to test-drive vehicles,” he said. “You won’t need the same dealer infrastructure as today, and not as much real estate as today.”
Education, education, education
In response to a growing level of in-car technology, dealers will need to take on more of an educational, hand-holding role with consumers in the future, believes Valsan. At the moment, many customers don’t understand how the many in-car systems operate, resulting in poor satisfaction or numerous trips to the dealership. Dealers need to take more time to ensure they explain all the systems and that the buyer is comfortable with the new technology. He believes the vehicle manufacturers need to “educate the dealer or even change the incentive structure for dealers, so that the dealers are more inclined to incentivise their own staff so that customers feel much more comfortable with the technology.”
Greater dealer and customer education will also come into play with the rise of alternative powertrain options, such as hybrid or fuel cell vehicles. “With alternative powertrains, there is a need to educate and spend more time with the customer to feel comfortable with it. There are concerns around range, about where they can fuel these vehicles. A lot of education is necessary. The challenge that manufacturers and dealers face is how to make this more intuitive and improve the process of educating the customer, so drivers don’t have to come back multiple times to the dealership.”
Alternative retail scenarios
Along with the rise of new technology, the industry has seen an emergence of alternative retail outlets, from brand experience centres without any cars at all to digital showrooms with nothing but projected images of cars on blank walls. For now, these alternative approaches have been limited to premium brands, but Valsan expects to see it spread into the mainstream. “It will trickle down and be relevant to all brands, not just premium brands.”
In the case of the volume brands, there may be slightly different approaches in the specific locations, making greater use of current assets. Mass market brands have considerable real estate, says Valsan, and there is an opportunity for these brands to recreate alternative retail scenarios within their existing dealer infrastructure. Beyond that, Valsan expects the mainstream brands to set up experience centres in specific areas that their buyers are likely to frequent. “I see opportunity for the mass volume brands.”
Accessing mobility
As for the future face of automotive retail, Valsan expects to see a number of approaches at work: “It won’t be consistent. We’ll probably see different formats in many ways.” In general, he believes there will be a movement towards offering more than just car purchases. “It’s not just about buying a vehicle but also getting access to different types of mobility,” he added.
These alternative mobility services could cover such approaches as car sharing. “In the future, dealers could be responsible for maintaining and running car share networks. It will be about moving away from just selling vehicles towards being associated with enabling the delivery of mobility services,” Valsan explained.
These mobility services are also likely to spur new services from dealers; over time, expect to see a rise in dealership services linked to aftermarket, financing, and other areas outside of direct vehicle sales.
