Changing consumer behaviours in the automotive retail landscape – a vision for the future
20 July 2015
There are increasing challenges with the traditional auto retail model. One of these is clearly visible on the peripheries of towns and cities across the country: expensive ‘glass box’ showroom/storeroom/service-centre combos, which risk, over time, becoming out of step with an increasingly digital world. Besides being a potential drag on profitability, are they already failing to fulfil what consumers expect and demand – from retail experiences in general and, more specifically, from car ownership?
Digital has revolutionised business in the past decade. To date, many retailers have responded by adding a digital channel to their existing physical presence. It’s proved challenging, costly and difficult to do well. There’s often been little or no value-add for the retailers’ operations. Worse still, it may well be the wrong long-term solution. Consumers think in terms of what they’re buying, not how they’re buying it. They want a connected experience that works right across the ‘see-buy-click-collect’ spectrum.
We at PwC call what we believe to be the optimum approach: ‘Total Retail’, where businesses are configured to serve customers in the way they increasingly want to be served – efficiently and seamlessly. Leaders, like John Lewis, point the way forward (and define consumer expectations) by successfully integrating their market-facing propositions, utilising physical stores as one part of the overall process – and online as the gateway. So are auto retailers doing the same and, if not, why?
The answer is that, until now, in this sector responses to new consumer behaviours have been largely shaped by manufacturers’ requirements. There’s perhaps been limited scope for retailers to create their own, distinctive solutions. So, we’ve seen relatively little deviation away from standard glass box retail premises – expensive pieces of real estate that make limited use of technology to drive customer engagement. Where digital does make an appearance, it’s typically through the dealership’s link to the manufacturer’s online vehicle configuration system. It is questionable what this adds to the auto retailer’s role – or to the in-store experience.
There is an additional threat in the form of increasingly stiff competition from sophisticated online ‘click & collect’ servicing websites – businesses that are successfully exploiting low customer loyalty to dealerships in this area. How will traditional dealerships respond?
These issues, together with the accelerating pace of change, represent big challenges for auto retailers. What could the changing automotive retail model look like? How do you operate to win in the digital world? The risks, shown by what has already happened in other sectors, include the prospect of increasing disintermediation and redundancy, whilst being saddled with long-term commitments to an expensive property portfolio that inhibits short-term flexibility.
But it also creates some outstanding opportunities for dealerships that can align their strategies to developments that create huge potential for new revenue streams – and new relevance. Could auto retailers develop an imaginative vision for their future in the industry by becoming an integral, value-adding part of the vehicle purchasing process?
The direction of travel towards connected cars and telematics is just one example. If auto retailers can respond to this in time, they could benefit from deep, real-time insights into driver behaviours and vehicle performance, and the chance to build long-term customer engagement – whether through predictive servicing or active participation in in-car entertainment delivery.
The changing attitude to car ownership is another clear trend. Younger drivers are reassessing their relationship with vehicles. They favour a ‘rent when you need it’ approach, not restrictive finance agreements (that traditionally tied drivers to dealerships).
Digital channels could provide the answer. Successful digital players reorganise their operations around the customer, defining a new strategy that puts them at the heart of every business process, physical, functional and financial. Whatever the customer wants to buy, and however they want to buy it, these players build systems that can talk to each other – bridging the gap between online and showroom to create immersive, compelling propositions.
Auto retailers can also learn from developments elsewhere, where the trend is to move towards experiential interactions that require less physical space. Surely, it’s time to ask why auto retail should be any different?
We believe the move towards a unified, customer-centric business model, enabled by digital, is the single most significant change in retail for decades. The challenge for the retail automotive industry is how to respond coherently and effectively with a long-term strategy to achieve profitable growth.
PwC can help with:
- Analysis through insight into the changes taking place in other industries;
- Creating effective strategies;
- Implementation – from redesigning processes to reshaping real estate portfolios and technology architectures to support new go-to-market approaches;
- Managing risks – including cyber security to data privacy.
It’s to time to get started. Contact us now.