Automotive: The Final Frontier for Retail Innovation
By Andrew Tai, CEO, Motoinsight
*Note: This is a featured guest blog by Andrew Tai, the CEO of Motoinsight, a technology company that makes buying cars easier. Andrew, is a speaker at our TakeOver Innovation Conference, and will be speaking on the Automotive: Picture Me Rolling panel with disruptors and innovators in the auto industry.
The rise of digital retailing technology has transformed the expectations of modern shoppers across virtually every sector. Car shoppers are no different. Consumers today want personalized experiences that put transparency and convenience at the heart of every process. They want the ability to shop how they want, when they want. And it matters to them: a recent study by Deloitte entitled The Future of Auto Retailing found that Generation Y car buyers “value customer experience three times as much as vehicle design.”
Generation Y car buyers “value customer experience three times as much as vehicle design.” — The Future of Auto Retailing by Deloitte
We’ve all read about the constant drumbeat of once mighty retailers — from Blockbuster to Toys R Us — that failed to adapt fast enough to changing consumer preferences and have since met their demise. While automotive retail has traditionally been a laggard when it comes to technology and customer experience, the gap as compared to other industries is rapidly closing. Tesla was once considered a fringe experiment for its unique retail model that allows consumers to order cars online, but this model is quickly becoming mainstream. Automakers including Genesis, Hyundai, Mazda, Mitsubishi, Volkswagen and others have all launched eCommerce-enabled vehicle-purchasing experiences in the past year. Here are a few key insights and trends that automakers and dealerships must pay attention to in order to survive, and thrive.
Disruption of the cliché car dealership
The pollster Gallup conducted a survey that asked respondents to rate various professions on perceived honesty — only 8% of consumers rated car salespeople “high” or “very high.” In addition to the issue of transparency, consumers experience frustration with today’s car buying experience because it simply takes too long. According to J.D. Power, the average car buyer believes it should take no more than two hours to complete a vehicle purchase from the time they walk into the showroom, but in reality, the median amount of time it takes is actually double that: four hours.
These critical problems underscore tremendous opportunity for automakers and dealerships to stand out from the pack. And they don’t need to look much further than omni-channel retailing experiences that have proven successful in practically every major retail vertical — from Starbuck’s mobile ordering app for coffee to Walmart’s buy online and pick-up in-store grocery experience.
Gone are the days when dealers could survive with websites that were just glorified brochures with outdated inventories and incorrect pricing. Forward-thinking dealerships now realize that their online storefront is just as important as their physical storefront, and customers want to do more than submit their contact information and wait for the dealer to follow-up.
Today’s consumers are masters of self-service and want to be empowered to do more on their own, including initial research to structuring their deal online and scheduling a delivery. In fact, according to Capgemini’s annual Cars Online study, 42% of consumers in 2017 said they were “likely” or “very likely” to buy a car entirely online if it were possible, as compared to 35% in 2015.
Genesis Motors Canada was the first in the industry to enable its dealerships to offer customers an entirely online purchase experience, including vehicle configuration, selection of accessories and warranty products, credit card reservation deposit, credit application, virtual trade-in appraisal, appointment scheduling, mobile document capture and execution, and more. Genesis customers can order a test drive to their home or office, and once purchased, the vehicle is delivered to their home in a big glass box. We’re proud to be working with disrupters like Genesis, but this style of elevated customer experience will soon become common practice
Physical stores have an important role to play
For the foreseeable future, brick and mortar stores are here to stay. Even Amazon, the quintessential digital retailer, is now building physical storefronts. The success of digital retailing lies in how online and in-store channels work together.
Digital retailing is about far more than just eCommerce, and simply adding a “buy now” button to your website is not a solution that will succeed. The average car shopper will switch between online and offline channels four times before buying, according to the Bain Global Automotive Consumer Survey 2017. This means that solutions that don’t seamlessly connect the consumer’s online experience with their in-store journey are bound for mediocrity.
Although today’s customers are visiting far fewer dealerships before purchasing than ever before, there is still an important role for the physical store. Prospective buyers want to complete at least a portion of the purchase in person, and according to a 2017 study by Capgemini, 71% of car buyers still want to take a test drive and see the car in real life.
Dealership store formats are evolving and boutique stores in urban centres and shopping malls are becoming more prominent, with the goal being to make car shopping more accessible by bringing the product to where consumers already are. Examples of this in the Greater Toronto Area include Genesis and Porsche stores that have opened in the Square One Shopping Centre and Mercedes-Benz’s store in the CF Markville mall.
New “ownership” models are coming
The traditional car buying transaction is experiencing significant disruption. And in the not-so-distant future, the nature of ownership will evolve as well. A growing segment of customers will not want to own a car — they will just want to drive one. Although ownership is not going away, the model of the future is flexible, simplified and — no surprise — customer-centric.
What will flexible ownership look like? When a customer walks into a dealership, the options to drive a car off the lot will go beyond cash, finance, or traditional lease. Similar to movies through a Netflix subscription, cars will be available for hassle-free ownership at a fixed monthly fee. It will be a commitment-free ownership-like experience with no “return by” deadline, no advanced booking, and no maintenance or insurance costs. They will be able to return the car whenever they want — whether it is because they no longer need a vehicle, or because they want to try a different model.
This new ownership model might be closer than it seems. Today, Porsche has a pilot subscription model in the market in Atlanta. For a fixed monthly payment, customers can subscribe to “Porsche Passport,” which gives them access to a variety of Porsche models. BMW recently launched its own subscription program in Nashville, called “Access by BMW.” For a monthly rate, members can choose from and switch between various car models. Many others, including Mercedes-Benz, Lexus, Volvo, and more, are following suit.
The rise of subscription-based models and flexible ownership will change the economics of the dealer business, and deliver new opportunities for revenue generation. Interestingly, 78% of subscribers to Porsche Passport are new to the Porsche brand.
The new retail paradigm
In automotive, the traditional retail model persevered decades longer than other retail sectors. But the time has come — a wave of disruption is hitting automotive retail in more ways than one.
Although there is plenty of debate on what the future holds and there is no one-size-fits-all solution, the modern automotive retail paradigm will be fundamentally customer-centric and digitally connected.
How can auto retailers evolve their retail models? Recognize the opportunity at hand. Put legacy practices to bed. Understand that digital retailing is more than just selling online. Offer a sales journey that is transparent, convenient and simple. Engage customers across channels, before, during and after the transaction. Take cues from other retail sectors. Realize that in today’s technology-driven world, no industry or business is safe from disruption.
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http://news.gallup.com/poll/159035/congress-retains-low-honesty-rating.aspx
Andrew Tai is the CEO of Motoinsight, a technology company that makes buying cars easier. Andrew’s love of cars and technology dates back to childhood when his prized possessions were a matchbox car collection and his computer, running an Intel 286. Andrew’s career started in a suit and tie, but the entrepreneurial bug led him to leave his roles in investment banking and private equity to move into his parents’ basement and pursue his crazy start-up dream in 2011.
