How Digitalization is Changing the Business of Automotive Retail

Apr 07, 2021 02:01 PM EDT | Staff Reporter

How Digitalization is Changing the Business of Automotive Retail

(Photo : Pexels)

Amazon, Uber, and Netflix are industry leaders and well-respected in their segments. With models that comprehensively embrace technology and online business, these companies are models for how consumers prefer to do business. Unfortunately, digital solutions for automotive have lagged near the back of the pack, leaving the industry open to disruptors like Tesla and Rivian to capitalize. OEMs and dealers have a challenge ahead to bridge the divide between traditional means and digitalized options that better engage and satisfy the consumers.

Customers are Going Digital Already

Research compiled by Star Automotive & Mobility experts identified that more than four in five car shoppers in the UK start their automotive retail experience on their mobile device. With an adoption rate of around 90 percent in developed countries, smartphones are a preferred method for car shoppers to begin their journey.

The attraction to digital solutions in automotive is evident in ridesharing provider Uber. The completely digital mobility option provided nearly 11 billion rides in the first quarter of 2020 alone. Tesla's direct-to-consumer model elicited around 368,000 sales in 2019, all digitally without the traditional dealership, proving that consumers have already embraced an online system.

Traditional Automotive Retail Solutions have Lost Appeal

Notably, dissatisfaction for the traditional dealership template has lost its luster. Star Automotive experts remark in the report Reimagining the Future of Automotive Retail that "56% of millennials would rather clean their house than negotiate with a car dealer". It reinforces Cox Automotive data that, rather than enjoying the process of shopping for a car, two in three consumers feel there's room for improvement.

CX Takes Priority

The traditional automotive shopping experience emphasizes finding the right car at the best price. It begins with a needs and wants assessment, continues into a test drive, culminates in a sales agreement, and is finalized with financing. However, the process that centers around the need for a vehicle no longer resonates as well with shoppers, and it has been eclipsed with a desire for a superior customer experience.

In the latest Star Automotive & Mobility blog Innovating Automotive Retail: the 5 biggest challenges shaping the future, consumers want the time commitment to buy a new vehicle cut in half from 4 hours to 2 or less. Reimagining the showroom as a Brand Experience Center is attractive to the majority of shoppers, alleviating the pressure a typical salesperson is trained to exert on buyers. Although driven by a millennial worldview, the consumer-centric experience is one all demographics can appreciate.

Mobility-as-a-Service on the Rise

Digitalization is pushing the boundaries with automotive retail solutions that defy traditional car ownership. Where OEMs and dealers have operated within an established lifecycle of vehicle purchase, maintenance, and nurturing until the next purchase, mobility-as-a-service (MaaS) upends the model. In fact, it's predicted that "95% of U.S. car miles will be traveled in self-driving, electric, shared vehicles by 2030", according to thinktank RethinkX.

Partnerships are being developed constantly between carmakers and mobility providers. Waymo and Jaguar, Cruise and General Motors, Aptiv and Hyundai, and several others have undertaken projects to change mobility options including last-mile transportation, connected cars, V2X infrastructure, and more. Electrification is widely seen as a game-changer, making many MaaS providers viable with low-cost operational and maintenance costs.

More directly, ridesharing has increased in adoption with availability in 93 countries, accounting for more than 900 cities. Helsinki-based Whim networks taxis, rental cars, and public transport to streamline end-to-end transportation cost-effectively.

The ability to move from A to B intelligently without owning a car is destined to impact auto retail and car ownership much more than it already has.

Reimagining the Relationship with Automotive Retail

OEMs and dealers have a challenge ahead as they face a transportation metamorphosis. EV adoption has been relatively slow-moving but is gaining momentum, and it's certainly a precursor for a dynamic shift in automotive retail. It's become clear that customers desire a change in how the industry operates, from connected vehicles and mobility options to the car-buying experience itself. Consumers expect better, but how is the industry responding?

An immersive shopping experience is an excellent step. Manufacturers like Audi have been using VR headsets for virtual walkarounds and test drives since 2016, and both Porsche and Jaguar Land Rover provide the VR/AR experience.

Offering direct-to-consumer sales from the major carmakers would put them on ahead of Tesla for convenience in automotive retail solutions by providing consumers the option of either fully online or in-person shopping. Dealers and OEMs would have the advantage with their dealer network already in place for a better maintenance and repair experience for owners.

Most importantly, by focusing on the customer experience rather than product, dealers and carmakers can better understand what it is the consumer wants in the evolving digital age, aiding in brand loyalty for whichever direction the industry goes.  

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