What will the auto market look like in 20-years?
Over the last 20 years, the on-demand economy has made its impact on multiple industries:
- The online music industry has practically obliterated the market for CDs and traditional albums sold in brick-and-mortar stores.
- The online travel industry has largely replaced main street travel agents with sites like KAYAK and Expedia.
- Airbnb has completely disrupted the hotel industry, challenging traditional establishments to rethink their place in the market, their offerings, and their value proposition.
These are just a few examples of the impact of the on-demand economy on traditional, entrenched, business models.
“Online” and “sharing” megatrends have been slowly making their way into the transportation world in recent years, too, presenting the industry with some of the biggest challenges it has ever faced. Information is now symmetrical; customers can get ratings, compare prices, and make decisions without ever visiting a dealership. New alternatives to ownership are available, from rental bikes in urban areas to the growing dominance of Uber, Lyft, and Gett for just-in-time rides and ride sharing. Add in the soon-to-be reality of autonomous driving, and we are faced with the need to address some fundamental questions about the relevance of the traditional car dealership and vehicle ownership in general.
When combining these trends with emerging technologies such as augmented reality, cyber security, and the role of data in the driving experience and the driver’s life, it is clear that car dealerships as we have known them over the last several decades are poised for major redefinition. Dealership owners are facing their biggest challenges and opportunities ever.
In their current state, car dealerships are arguably ill-equipped to deal with these new trends. The traditional dealership business model centers on “metal” – principally, selling it and servicing it. Dealerships have operated on the premise that customers will form an emotional connection to their cars and brands, and they will always come back. The products have been at the center of the relationship, and the prevailing assumption has been that car ownership is a right-of-passage, a staple of modern human existence, and a mark of success.
These assumptions no longer hold true. People no longer view ownership, specifically car ownership, as a given. Make no mistake: this is not just a generational thing. While millennials lead the charge in the on-demand economy, consisting of 49% of the total users, adults between the ages of 35-54 represent 29% of the on-demand economy users. Customers over the age of 55 represent 22% of the total usage. For those who had hoped to lean on their baby boomer customers for a few more years, it’s time to revisit this assumption. Or should we call it “unfounded hope?”
When distilling all the trends and challenges in the automotive world into a single question, car dealerships face the ultimate inflection point. The vehicle experience is emerging at two distinctly different extremes. On one side are the “utilitarian transfers” and on the other are the “rewards rides.”
On one side of the spectrum, customers will give up on car ownership altogether and treat vehicles as basic transportation mechanisms. They will be viewed as a functional convenience, to be rented or shared on demand and at the time of need. Customers will avoid having to maintain and park vehicles, and they might not seek anything more than a basic utilitarian tool.
On the other end of the spectrum, customers will cherish their rides. They will view their cars as extensions of themselves and their life experiences. Their cars will be expressive, individual, and integrated into their overall lifestyle.
The “utilitarian transfer” extreme will become the staple of the sharing economy, while “rewards rides” will be the pinnacle of the ownership economy. What will gradually erode is the middle- ground as customers decide where on the spectrum they fall.
The “metal-centric” dealership model is no longer sufficient to attract people to own cars. As purveyors of vehicles, dealers are losing relevance in the eyes of customers. Dealers that will continue with business-as-usual approach will find themselves in the utilitarian transfer side of the spectrum with an ever-increasing customer relevance erosion.
Only a radically different approach will address the evolving trends in a meaningful way. Dealers ought to reconsider their core competencies. While selling and servicing cars is foundational to the business, it is no longer sufficient. The new frontier of dealership role is shifting from “metal- centric” to people centric. It is the people-centric approach that paves the way to redefining the dealership as a home for driving lovers and a center of rewards rides. It is this approach that will attract new customers to the new dealership which represents a place of passion and not just an inventory lot.
The Four Dimensions of Future Readiness
The dealership of the future will have to shift its focus from the “metal-centric” to the people- centric. The emerging winners will create a new core competence that will not be defined by price, customer acquisition, or inventory.
The new people centric dealership as a home of driving passion will be based on core competencies that will consist of four core dimensions:
- Customer Experience
- Employee Engagement
- Technology Readiness
- Change Resilience
These four dimensions are no longer additional skills or attributes that will be used to pepper on top of the traditional automotive business model. They are replacing the core competencies relating to “metal” and inventory management. They are redefining the future value proposition of those who seek to sell and service cars.
While the future remains full of question marks — causing a great deal of doubt and discomfort — it is clear that the dealerships who master the future readiness dimensions will be in better positions to capitalize on the opportunities the future will bring.
- Delight your customers – Developing a keen understanding on how to delight a customer no matter what their transaction will become. No matter what the new business model becomes, customers will be central to it. Knowing them and understanding how to deliver to them will remain a key to success and a key to customer loyalty.
- Engage and empower your team – Your people are your operation! Engaging your team will enable you to retain the right talent, get the most out of your team and be ready to embrace the future.
- Embrace new technologies – Technology will continue to evolve at ever faster speeds. Our ability to harness the opportunities new developments present will continue to separate the winners and the losers. Dealers who maintain a keen interest in exploring and experimenting with new technologies will be best placed to take advantage of new opportunities and most likely to remain relevant to their customers’ needs.
- Embrace change as the norm – Change resilience is the new defining attribute of successful businesses. Change must not be feared — it needs to be embraced. We can no longer afford to be held back by the “old” ways of doing things. We need to get out in front and develop an outlook and skillset that views change positively and allows us to explore its possibilities with confidence. It’s not just about adapting to change; it’s about loving it!
The winners will secure their success based on their ability to adapt quickly to change, developing strong change resilience. They will shine in exceptional customer experiences, they will harness the skills of their team, and they will develop deep expertise in technology. By combining those core elements, dealerships will equip themselves with a platform for success — an agile approach that will support their role in delivering the future to customers quicker than the competition.
Love for cars and driving will not change. However, the way auto retailers deliver and support the connection will evolve. Customers’ expectations will continue to increase, and technology will become still more dominant. Acquiring and retaining the right talent to bring this commitment to technology and customer experience is critical. Adapting to change with passion and commitment will define our business in the future. The question for every car dealership is quite simple: will you evolve fast enough to be part of the future? Will you drive the future, or will you allow the future to drive you?
About the Author
Lior Arussy is the founder and president of Strativity Group and has had the privilege of assisting organizations in their customer-centric transformations. Arussy is the author of several books on customer experience, employee engagement, and experience innovation. His latest book, “Exceptionalize It!” is available on Amazon.
Follow him on Twitter @LiorStrativity.
Author: Contributing Writer
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