“The consumer always gets what they want. Think of any retailer category out there, and the consumer inevitable wins in getting it their way“.
The above quote is by Mark O’Neil, COO of Cox Automotive, at the recent JD Power 2017 Automotive Forum. The title of his presentation was Connected Retail: Deals in the Digital Age, but it could have just as easily been called something like “The New Order of Auto Retail: Transacting Business on the Customers Terms”. According to O’Neil, customers are quickly tiring of buying and servicing their vehicles the dealer’s way. “Digital Retailing”, in reality, is transacting outside of the dealership…in a digital environment. And if you really digest his presentation, I doubt that you will come away feeling any other way except that the present dealership model, especially in the “showroom”, is due to be “disrupted” sooner rather than later!
But some are going to say that auto retail “is different”, more complicated and fragmented than other retail. For those I would point to the most dramatic slide in O’Neil’s deck below. It’s a slide showing the growth of on-line shopping in every consumer category, soft and hard goods. It reveals that even during the great recession, consumers opted more and more to transact digitally. In other words, on their terms, instead of the sellers. Will this disintermediate the dealership? Not if retailers adapt to it. But, as O’Neil says, dealers will have to adapt.
The Digital Store Will Change Everything
In fact, O’Neil predicts that digital disruption will get well under way this decade and that by 2020, a full suite of digital transacting will be available to the consumer in 12 percent of the retailers. And that by 2022, that number will increase to 20 percent. But don’t get the idea that 12 percent digital store penetration won’t disrupt those auto retailers still doing business “on their terms”. My guess is that most of that 12/20 percent penetration will be in large markets that will affect many dealers doing business the old way, once the word gets out. Indeed, every retailer model is being affected by “the Amazon effect”. And why wouldn’t it? Just take a look at the contraction in number of square footage for many of the major retailers these days. Consumers are using the in-place store model less and less for the actual transaction.
In that same vein, what auto retailer could possibly argue that customers enjoy coming to the dealership, either to buy or service a vehicle? On the showroom side, and to be candid, what should be an incredibly exciting event many times turns into, arguably, a fragmented, drawn out and unpredictable process that can easily consume the greater part of a Saturday.
On the service side, and maintaining that same thought of doing more of transactions “the customer’s way”, we find the same level of consumer distaste with having to spend time at the service center. No matter how great the amenities of the waiting area are, customers would still prefer to spend the time somewhere else.
How Dealerships Can Start to Change
Where should dealers start to change? O’Neil recommends they should get their feet wet by beginning to embrace a few of the 5 key elements of a transaction “digitally”…a real payment, financing approval, the F & I presentation, a guaranteed value for the trade and the contract execution. But that’s going to be a huge lift for the store leadership and management, especially with issues of fixed costs, retraining and OEM cooperation, to mention just a few of the changes coming.
I have a different idea.
Start with something much simpler that will directly address two customer pain points digitally and begin to make the store culture more aware of the changes to come. Those two consumer pain points are centered on the new vehicle test drive and service pick-up and delivery.
In fact, there are two major automakers already implementing such changes—Lincoln with their dealer wide commitment to pick up and delivery and GM with their introduction of the new Chevrolet Bolt via their “Test Drive My Way” effort in California.
Why start the change to a Digital Retailing mindset with “away from store test drives” and “service pick-up and delivery”? Because it’s something dealers can begin to do TODAY that already has a proven track record, produces very little disruption, and will delivery immediate positives. Without getting commercial here, there’s currently only one company I know of facilitating both of these efforts with a proven model that is being used for both the Lincoln and GM (Chevy Bolt) efforts. Red Cap Automotive Technologies is providing the technology and the face-to-face service for both the Lincoln pick-up/delivery and Chevy Bolt test drive efforts.
And, as you see below, it looks like their efforts with service pick-up and delivery are really paying off. (from a Red Cap presentation)
But if you want to see an example of “digital retailing” available to a customer “today”, take a look at how Paragon Honda, one of the most successful Honda dealers in the country, is utilizing Red Cap’s program to dramatically differentiate their store “digitally” via the ParagonDirect program.