Today we find experts writing articles about the auto industry that have only set foot in a dealership a few times or may have never even purchased a vehicle. While most of these articles are well intentioned and help create a healthy discourse; many just try to prove a specific position for the writer or the company commissioning the tome. Many are hypothetical at best.
Recently Accenture released a study conducted by Coleman Parkes; 10,000 automobile owners were surveyed in eight countries: Brazil, China, France, Germany, India, Italy, Japan and the United States.
I find most of this particular article interesting and thought provoking. I believe as we examine the article; that we can get much insight from the article. The part that can lead to much worry and concern; is at best far down the road for any appreciable percentages and at worst almost like shouting fire in a theater. (The survey also showed that 75 percent of drivers polled would consider working through the entire car-buying process online.) The business of business plays out on many levels. The primary issue is SURVIVE AND ADVANCE*. In retail and especially with high capital requirement businesses you have to meet payroll every month. This requires doing the right things in all facets of the business. The owner/decision maker has to be very careful matching the here and now with proven practices. They have to be willing to make some risky but necessary adoptions of new and innovative ideas. The tough part is not buying some one’s opinion as an actual BEST PRACTICE. You have to match the here and now with changes, issues and opportunities that come up.
The article states 80 percent of drivers in the market for a new vehicle are using some form of digital technology to research before purchasing, while almost two-thirds (62 percent) are beginning the car-buying process online. I do not doubt these numbers and they could be even higher in some areas or for preowned purchases. Just think about you friends, popular culture, your family and even yourself. It is so easy to look things up on line. Why would anyone not take advantage of the wealth of information that is available?
The writer states that the digital customer has made things disruptive. We have found that the impact is a better educated customer, one that has done their homework. Just like in school some people do a better job of doing their homework. Teachers generally find those students are a pleasure to teach and work with. A well-educated customer when aligned with well-informed product experts that have the tools to make a transaction go smoothly; is a win for all. Time for all is more efficiently used, customer satisfaction and employee satisfaction is much higher. The customer gets what they need at a fair price and the company can make a fair margin.
The digital market place has had a tendency to be little more than the old Pay for Play; MAD MEN type advertisements. “Carpet mats so clean you could eat off of them.” Long lists of abbreviations, artificial hooks, read the fine print, more is better and just lots of hype. Customers have proven and the study restates they are looking honest and provable information. They look at social media not for thinly veiled ads but for peers opinions. They look at numerous sites, they ask questions. When they get to your site are you ads short, concise and do you back up with proof?
Accenture’s study really proves what we have said for a long time; make sure you use actual facts that can be proven. Give the customer a reason to see that you are supplying what they are wanting; not only the vehicle but the information and evidence.
The survey also showed that 75 percent of drivers polled would consider working through the entire car-buying process online. The two key words are DRIVERS and CONSIDER. Were these actual drivers or people that were thinking about purchasing a car but never have? Consider is much different than actually doing. Was there a trade involved? Was this purchase for a new or used vehicle? What was the age and purchase price point for the vehicle? An automobile is much more complex than the purchase of a smart phone or article of clothing. The digital age can smooth out the process and speed up the process. However, there are many reasons that a customer will want and need to go to a Brick and Mortar business for the final transaction. The factories, the public companies, the retailers all are investing more and more money on facilities to meet the demand. They must also invest in creating product experts with the right tools to make this process more efficient and palatable. Could there be transactions only on the internet? Of course there could be and will be. However, for the foreseeable future it is still a one on one transaction at the dealership. Invest in being able to do this the best way possible. Survive and advance, Just like Coach V in 1983; If you do that you will be around for the great future frontier and win along the way.
When Warren Buffett gets involved in any business, people notice… the car-dealership space is no different. Everyone has a perspective, but I wanted to take a moment to reply to a recent CNBC piece that is calling out Mr. Buffett as being wrong when it comes to his belief that the dealership model is not going to change. This is certainly a topic discussed at every dealership in the country and there are many leaders wondering what the future will hold in regards to how the current model will change. The author, Daron Gifford, lays out some compelling arguments, but I want to take a moment to illustrate how I see the model changing (and in some cases, has already changed).
Mr. Gifford refers to Walmart, Target and Costco as examples of Retailers who wouldn’t have two months’ worth of inventory on the ground. But is this really a fair example? The Automotive Industry is like none other. Perhaps the Housing Market is the closest as the price and sheer physical size of the product are factors when it comes to shipping and the ability to purchase the product.
But unlike most other retail, you don’t need good credit and a down payment to buy a pack of Hanes Underwear. I’m pretty sure that if the store runs out of the undergarment it could have them overnighted, but you can’t do that with a car. I also wager a bet that they don’t sell pre-owned either … or, at least I hope they don’t.
So when considering the auto sales industry it is hard to compare it directly to big box, high SKU industries. So what about the challengers in the direct space.
As Gifford points out, and everyone is well aware, Tesla is making a lot of noise with their push for direct sales, but when considering Tesla and the change they are bringing to the market a question that needs to be asked is “What will Tesla do with pre-owned?
What’s their model? If they don’t control remarketing like BMW does, their product residuals will diminish quickly and lenders will think twice about funding their deals.
Also, how will Tesla handle pre-owned without lot space?
Additionally, if the retail model of ordering a product online and then waiting for that product to ship is the future, then why do Windows and Apple stores exist?
American Consumers love to try out the product and “experience” those stores. The employees at those stores are “Product Experts” if not Geniuses on their product lines. American shoppers are not only impulse buyers, but once their research is done, they will purchase a vehicle with only visiting 1.2 dealerships in person. This is why the Automotive Industry must change … but it isn’t necessarily going to be the way Mr. Gifford explains.
I am certain Tesla will work through these questions, but this shows that the answers regarding the future of dealerships are not so simple.
The Model has changed … and it is the evolution from selling to becoming product experts
Now by pointing out why some of the comparisons need more thought, it is obvious that the consumer has changed and with that have demanded a new experiences in how they interact with businesses. They no longer want or need to be “sold.”
As Gifford accurately points out:
Buyers have changed, too; they are more informed, Internet-savvy and less likely to accept high-pressure sales techniques.
Most customers dislike the current model, despite recent enhancements. They still feel forced into a choice and lack trust in sales personnel. Buyers in one survey said they would rather give up sex for a month than haggle on a price with a sales person.
This is where the model needs to, and is being changed.
Forward thinking dealerships are currently at work changing both their process online and the in-store “Customer Experience”. The change is driven by the consumer raising the need for more relevant information, product experts and a shorter purchasing process.
The new model is more like the following.
Dealerships are responding to the fact that the buyer has changed. Progressive dealerships are changing to focus on how to keep customers engaged with their online inventory longer by providing consumers with specific relevant information about these vehicles. The more accurate and detailed the dealership can be the better served they are at establishing the true value for their inventory and driving more consumers to their websites.
After the online research is complete, the consumer chooses the dealerships that they will either contact or visit. In the newer, faster model, the stores have formalized the manner in which they can quickly communicate specific answers consumers have about the vehicles of interest. They need real, detailed answers … and they need them in real time. The consumer is informed, and dealership staff need to be experts too … on every car on the lot. Technology is a huge equalizer here. Dealerships also are working to transform the Sales Team from the salesperson of old to true product experts to handle the needs of the consumer once they arrive on the showroom floor? We now know that over 60% of consumers are using their mobile phones while on the lot, and progressive Dealership Sales Consultants are also using mobile technology while on the lot to facilitate their ability to get real time information when it is most critical.
Change is good and yes, dealerships must change. Will dealerships turn into order takers? I doubt it, but will they need to become product experts and provide a better customer experience? Yes.
I want to share some exciting news. Our digital marketing and retailing software company, MAX Digital, was recognized by Inc. Magazine as the #3 fastest growing software company in the United States in 2014 and #1 in the Automotive Industry. We are proud of the growth and the innovation that drove it. If you haven’t seen MAX Digital Showroom or MAX for Website 2.0 you will be amazed by the power that each provides your dealership in winning with today’s internet consumer, especially the growing Millennial generation.
To better serve our growing base of customers going forward, we are also excited to announce that the initial company that I founded, FirstLook Systems, is becoming a company under the MAX Digital umbrella. In addition to enhanced customer service, this merger will allow us to combine our engineering capabilities to ensure that FirstLook customers will get the benefit of the many cutting edge technologies responsible for MAX’s remarkable growth. The combined companies will conduct business together under the name MAX Digital.
As a part of this transition I have appointed our long time Chief Operating Officer, Steve Fitzgerald as Chief Executive Officer. Steve brings significant operational strengths as the leader of our talented (now combined) MAX and FirstLook management teams. John Aiello, an experienced and highly successful technology entrepreneur has joined the management team as Executive Chairman of the MAX Digital board of directors. I will continue to support the success of both companies.
With the incredible array of product engineering resources available, the new MAX Digital will be introducing a wide spectrum of cutting edge products for both our FirstLook and MAX suites of products in 2015. Please look for announcements from your Account Executive on the first of these many innovations in the coming weeks.
Pat Ryan, Jr.