Automotive Retail Industry Challenges
The Covid pandemic has caused many businesses to change their thinking, forcing them to look for ways to go online. Automotive retail is no exception. Traditionally, this industry was divided between OEMs, national retailers, and a franchise network of dealers. However, the global crisis showed the failure of such a system in the new conditions.
The automotive retail industry faced the fact that each responsible party began to incur losses. Equipment manufacturers’ margins were falling due to the financing of alternative sources of transportation and technology. To increase profits, the number of mergers and acquisitions of companies increased to optimize production costs. However, this had only a slight impact on retailers. Yields continued to plummet as the traditional model of retailing remained unchanged. This course of events has prompted a rethinking of the industry’s operations and a search for new solutions.
Automotive retail industry players must consciously approach the issue of updating operating models, innovating, and optimizing service costs. In addition, updating communication and customer interaction channels plays a significant role. Seamless communication and service dramatically increase the business’s attractiveness in the customer’s eyes.
Solution Ways and Future Steps for Automotive Retail
The way people shop has changed significantly in recent years. The development of online services, convenient payments, instant transactions, and impeccable service has increased customer demands for goods and services, customer support, and the buyer’s journey.
Today, car sales are literally stuck in the last century, as they still require the buyer to be present at the dealership for a test drive, a transaction, etc. Unfortunately, this experience is no longer satisfactory for many customers.
Autonomous Vehicles and Carsharing
Carsharing has already had some influence on people’s purchasing habits. For example, owning your own car is becoming less relevant in large cities. It is due to both the high cost of vehicles and the associated costs of maintaining them. Also, alternative electric-powered automobiles are now becoming more competitive, as well as autonomous vehicles in potential.
The current model of dealerships needs to be adjusted. The reason is the electrification of the industry and the presence of a giant competitor in direct sales, Tesla. Such rivalry moves the industry toward price competition. The solution could be to tighten dealer sales norms and divide the centers into tiers (e.g., a tier that will sell only electric cars), and reduce advertising costs. Another solution could be consolidating brands under one wing, giving customers more variety and reducing inventory costs.
Direct Sales
Automotive manufacturers have reasons to switch to direct sales. The high markup at each step on the way to the customer leads to constant resentment of the latter. It causes a drop in the number of vehicles sold.
Manufacturers also try to minimize the effects of dealer inconsistency, which can directly impact brand reputation, OEM profits, and even the dealership networks’ profits. Consequently, distributors want to disassociate themselves from dealers, leaving them with only vehicle delivery and service points. Mercedes Benz, BMW, and Mini have already announced their desire to reduce dealer centers in favor of direct sales. The purpose of such a step is to be closer to the client and to have better control over the pricing.
Today’s target audience for automotive retail is younger, wealthier, and more digital. They choose to interact on multiple platforms and at any time. Online sales allow companies to control price tags and improve the customer experience. In addition, brands don’t have to maintain dealer inventories in warehouses and spend money on their advertising.
E-commerce Management Systems and Websites
The active user shift to online channels that began during the pandemic has shaped the digital consumption habits of the majority of the population, and the decline in familiar business promotion channels has focused attention on platforms that enable seamless, borderless fulfillment of every need, from private transactions to business development issues.
The platforms are designed for the complete cycle of online automotive buying without physical encounters. In addition, it allows for a carbon-free shopping experience.
Ecommerce software development performs remote sales and connects sellers to customers regardless of their location. The range of functions of online platforms can include car reservation, checkout with payment processing, 24/7 access to information and pricing, omnichannel communication, dynamic quote builder, integration of credit services and digital signature, price calculator, and payment customization.
The need for transformation and digitalization of the automotive industry around the world is long overdue. Automotive manufacturers must be in line with this trend and even ahead of the rest, anticipating the tendencies that will subsequently determine the new format of interaction with the customer. Sooner or later, online sales will become widespread. The motivation to introduce digital services directly from automakers will be simple: those who remain on the sidelines will lose more than half of their customers in the future.
Attention to the Customer Experience and Multichannel
It is crucial for today’s car sales industry to let customers buy a car in different, convenient ways. Although manufacturers have expressed a direct intention to move to direct sales, steps in that direction are somewhat tentative.
As of today, dealers can improve their situation. Yes, the trend is toward manufacturers being the ones billing customers and financing branding, but dealerships can still deliver cars to the customer and make money on commissions and service.
Dealers’ revenue rests on their reputation and customer experience. Dealers need to convince customers that their center is the best in service. Honesty and justified customer expectations, transparent pricing, and different ways to buy offline and online will be a massive bonus to reputation and bottom-line profits.
Meeting the growing customer demand for online services forces the industry to transform existing approaches to customer interaction and ensure quality production and the development of dealer networks.
About the author
Janet Polson is a graduate of George Washington University in International business. She is an unspoken expert in the study of science and philosophy. Janet is also a blogger, author of tech articles and she works as business analyst at Computools.