The Future of Automotive Retail: from Bricks and Mortar to Digital Ecosystem

Jan 08, 2018

The traditions of automotive consumption in Europe are entering their 130th year. Stretching across three centuries, they are undergoing drastic changes.

Automotive retail – the situation

Automotive retail* has already begun its transformation from product to customer-centric approach, reflecting trends in changing consumer behavior and expectations.

The introduction of new mobile concepts and changing mobility expectations – both personal and business (car sharing, electric vehicles and the growing role of fleet sales and used cars), force manufacturers and their distributors to rethink their current business model.

Customers are now being able to get quick access and interact through various channels and devices – anytime, anywhere. This requires changes in both the principles of customer service and in the market strategies.

How the automotive retail can undergo digital transformation

Achieving such a historic transformation requires a substantial effort from vehicle manufacturers and their distributors but also imposes an unprecedented level of cooperation with the rest of the participants in the automotive ecosystem, such as insurance companies, banks and secondary market players.

From OEMs’ point of view, there is an opportunity not only to establish a direct relationship with the end-user through connected vehicles but also to convey brand messages through smooth integration of all communication channels.

From distributors’ perspective, the transformation represents an essential opportunity to optimize their activities by removing activities of no added value, unlocking capital from excess infrastructure, and expanding the portfolio of services that contribute to higher margins.

In short term, this means a clear need for the entire automotive distribution ecosystem to make a serious effort to change in order to catch up with alterations in the market and industrial landscape.

What will change in the automotive distribution?

Significant changes are coming to the automotive distribution environment in the next decade. That will require a fundamental rethinking of the business model in the following key directions:

Automotive sales are changing

  • Market players migrate from a multi-channel to a comprehensive business model
  • Online car shops will appear
  • The importance of working with “big data” and business analysis will grow dramatically

The automotive product is evolving

  • Its technical complexity is growing
  • Its product lifecycle is getting shorter
  • Its technological evolution is accelerating

The importance of other market participants is growing

  • Leasing and insurance companies
  • Comparison sites and online configurators
  • Financial institutions
  • System consultants

Competition in retail and after-sales service is growing

  • The number of independent repair shops is growing
  • Original service equipment suppliers enter the service market

Customer behavior is changing

  • The customer journey already has a digital beginning
  • New mobility preferences
  • Increased expectations for personalization
  • Growth in fleet sales and secondary market presence

Regulatory dynamics

  • Constantly growing susceptibility to exhaust emissions
  • Growing security standards
  • Direct sales regulation
  • After-sales service regulations

The main task of the distribution network remains unchanged: building relationships based on trust within the full consumption cycle to preserve customer loyalty.

We believe that in the process of transformation, a manufacturer and a distributor should act as one, turning into a credible organization. Creating a comprehensive customer service strategy is a key factor in building loyalty and maintaining it with respect to growth in sales and after-sales service margins.

Transforming the customer from a regular buyer into a brand ambassador happens only on the basis of trust, the components of which are contained in every consumer interaction.

In this aspect, it is increasingly important for OEMs and distributors to offer personalized packages. These include offerings ranging from buying vehicles to creating packages granting access to more than one vehicle or even transport type. Thus, the focus has shifted from driving the car to communicating with the brand. Along with the regulatory pressure for liberalization of the after-sales service market, this creates even more prerequisites for turning the overall customer interaction into the only opportunity to preserve consumer loyalty.

This is how the new automobile distribution agenda is gradually being formed:

  • The mobile services market opens
  • The need to turn alternative-propulsion cars into an equal choice to conventional ones
  • Growth of competition in after-sales service

What can you do?

  • Reconfigure both the offered services and the related processes
  • Identifying new business models
  • Encourage professional development of the staff
  • Reassess revenue streams

In such a dynamic environment encompassing, managing, and analyzing processes in organizations is becoming a key competitive platform that is yet to highlight market leaders over the next decade. They will transform the bricks and mortar of their historical infrastructure into the digital ecosystem of the future.

But first, have you got the tools that will help you successfully transform your business and become a market leader of the future?

* Note: This text refers to the primary automotive market, i.e. distribution and retail new cars.

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About the author
Kaloyan Jelev
Kaloyan Jelev
Kaloyan has been interested in the automotive sector for more than 20 years, 17 of which he spent on various positions in the distribution chain of three major manufacturers - GM / Opel, PSA / Peugeot and Volkswagen. An observer in the GEAR2030 work group at the European Commission and an associate of the "Electromobiles" cluster, he is entering into the DMS market. Besides his love with cars, he is also a curious traveler, biker, blogger and a keen photographer. Kaloyan is a hard reader believing that learning and self-development are lifelong activities.

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