The road ahead: a look at the rapidly evolving automotive retail landscapes

Few landscapes have changed so little in the past 50 years as automotive retail. Even as online shopping, self-checkouts, and other innovations swept across other retail sectors, the car dealership model remained largely untouched.

However, just as it came to every other sector, so too has digital disruption arrived in automotive retail. With new technologies, platforms, approaches, and rising demand for contactless and efficient transactions, the ecosystem will change immensely in the next 5-10 years.

In fact, it already has. Agile startups in the EV, shared mobility, and online distribution spaces have shaken things up for dealers and OEMs alike. The only certain thing in the industry is that disruption is now the new normal.

Here is an overview of five of tomorrow’s biggest automotive retail trends that are already here today.

1. Transforming from manufacturer to service provider

In the past, the OEM’s relationship with drivers did not extend far beyond the vehicle’s four-doors. Now, however, all major OEMs have shifted into new territory as both manufacturer and service provider. Companion apps and other media, services that are sold and delivered digitally are opening up completely new opportunities and include avenues such as:

  • Enhanced connectivity and vehicle control (i.e., regulating cabin climate, locks, personal hotspot, etc.)
  • Commerce services
  • Aspirational customer experiences
  • Pay-as-you-drive insurance
  • Concierge services
  • Connected apps and services
  • Infotainment
  • Mobility-as-a-service
  • Roadside assistance
  • Autonomous Driving
  • Predictive maintenance

This is a huge shift in the relationship between OEMs and drivers. Dealers traditionally provided many of these services as well as managed the reputation between consumers and the brand.

Car dealers are increasingly will increasingly be left aside unless they start finding ways to integrate themselves into these interactions through providing third-party services or facilitating brand experiences.

2. Brand experiences

While online will be the driving force of industry sales, creating brand experiences is essential. To do this, researchers at Star Global noted that automotive retailers must create “seamless, digitally-enabled buying experiences.”

Both OEMs and dealers have successfully experimented with new spaces that combine dealerships with cafes, restaurants, live arts, and other faces to leverage new interactions and revenue streams into the current models.

Looking at the finance industry and examples like the Capital One Cafe, these spaces have been an excellent way of developing “emotional loyalty” in an era where consumers’ allegiance to specific brands and retailers is less than it’s ever been.

Alongside the proliferation of new AR/VR technologies, these types of tools and approaches will be essential for capturing customers in an ever more competitive space.

3. The digital journey

For the longest time, vehicle purchases resisted the shift to becoming completely digital. As a big-ticket item, most consumers prefer to see vehicles in person, test drive them, and speak to a real person to ask questions.

For now, the majority of people still prefer this offline component to the transaction. But this has greatly shifted from what it was in the past. Whereas somebody might go to several different dealerships on multiple trips in the past, now the average car buyer only visits one.

Since so much of the customer journey now happens digitally, automotive retailers need to position themselves accordingly. This includes integrated sales, marketing, and service teams, alongside closer collaboration with OEMs to better capture potential customers across the entire sales cycle especially during early stages interactions.

At the same time, they need to address offline issues such as long and complex negotiation processes and other consumer concerns to enhance consumer satisfaction rates. This hybrid approach via online-offline integration will be the most effective way for automotive retailers to drive sales for the foreseeable future.

However, they should pay close attention to the growing number of people who purchase vehicles 100% online. Carvana’s “car vending machine” and next-day delivery have shown a rising demand that will continue increasing throughout the decade.

Fortunately for retailers, creating effective digital platforms can serve both customers who want an offline component and those who want completely digital experiences very well.

4. Subscription services and shared mobility

The sharing economy will be worth $335 billion by 2024. Riding hailing apps like Uber and Lyft have done little to threaten car ownership thus far. But with both companies, along with countless others making major investments in everything from electric scooters to self-driving trucks, retailers need to be prepared for what happens as the idea of personal mobility head into new directions.

Lyft has one of the most innovative models out there. The Express Drive program allows people to rent a vehicle and make money driving for Lyft. The terms are quite fair too. The renters get unlimited miles and only have to make 20 trips in 7 days. Of course, they can profit from this exchange by driving additional trips and collecting tips for providing excellent service.

Likewise, the last few years have seen a huge growth in car subscription services that threaten to cut dealers out of the picture altogether. Mercedes, BMW, Audi, and Hertz are among the many players who offer either local or national subscription plans.

Although prices are higher than traditional ownership and leases, there are many advantages for drivers, such as the ability to drive a variety of different vehicles, insurances included, and the flexibility to cancel at any time.

Subscriptions, shared mobility, and new mobility are all in their relative infancy. But they will mature quickly over the next few years. Agile retailers have already adapted and profited from this too. Turo is one such example. Many used car dealers and rental agencies have used the platform to take advantage of their existing fleets in new ways.

They can earn revenue through renting out their vehicles while expanding the organic marketing reach effectively for free. This type of flexibility and ability to incorporate new approaches will be vital for retailers during the next decade.

5. Autonomous, EV, and education

Autonomous vehicles are both the largest threat and opportunity in the automotive industry. For decades, they have been on the horizon. Experts still believe the widespread proliferation of fully autonomous vehicles is about ten years away.

But the technology has advanced by leaps and bounds in a short amount of time. Tesla’s Autopilot has already shown what the technology will look like at a mass scale.

Similar to shared mobility, it’s hard to predict how such a fundamental shift will impact car ownership. On the other hand, EV has arrived already. While the 2010s were the rebirth of the electric vehicle, this decade, they will go mainstream.

There are already millions on the road. As many consumers still remain unconvinced or unknowledgeable, retailers will shoulder the burden of education. However, doing so creates an excellent touchpoint for them. Regardless of whether they ultimately sell an EV or gas vehicle, they can use this knowledge gap to make inroads with consumers.

The automotive industry of tomorrow, today

We don’t need a crystal ball. All of the signposts for how the automotive retail industry will evolve have been laid over the past few years. All of these transformations have been around for decades. However, the difference is that the technology and the demand have caught up enough for them to reach critical mass.

Whether it’s new services, harnessing the power of the internet, new mobility models, EVs, or enhanced brand experiences, we’ve seen this all before. But each one of them is individually poised to deliver a sizable impact that together will massively disrupt and change automotive retail forever.

Automotive retailers were lucky. They had decades of stability. Now they have to navigate decades worth change compressed into just a few years. The only question remaining is what players set the right foundation now to position themselves as the market leaders of tomorrow.

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