How is digital affecting automotive retail?

How is digital affecting automotive retail?

Are the days of local car dealerships and test-driving cars coming to an end?

Try it out at your retailer – get a home delivery service – or pick up at the factory outlet!

These buzz words reflect recent developments in retail, but are they possible scenarios for automotive distribution? How is the digital revolution affecting the auto-industry and tangible purchases, such as cars that cannot be ‘downloaded’? Will dealerships become just show rooms for the manufacturer – without the after sales and service offer? Can the dealer charge for test-driving a car and who will pay for this?

The automotive industry is challenged with having a more customer-centric focus as the classical sales funnel has served its time. An abundance of digital information creates well-informed car customers, even when not considering a purchase. The accessibility of information through mobile devices speeds up this development. An increasing number of customers base their choices on ‘word-of-mouse’ rather than on word-of-mouth by peer consumers. The web is a large recommendation engine!

A recent industry study by Frost and Sullivan claims that by the year 2020, 4% of all new cars will be sold completely via an online sales process, including car customisation and delivery. Automotive distribution faces the same challenges as retail, bookstores, and record shops in recent years.  The existing distribution channel will change and dealerships need to adapt and the sales approach at dealerships will need to align. Dedicated digital staff will be required. Every sales person need to have full competence to manage processes offline and online.

Smaller dealerships are experiencing strong competition and manufacturers are facing the growth of multi-brand dealers with mixed feelings. They have to revisit their distribution strategy and need to become more customer-centric and maintain the brand experience over various sales channels. Dealers and manufacturers have to work together in this and strengthen their bonds: dealers need manufacturers to optimise their income stream and manufacturers need a consistent branded experience at dealership level.

In the future dealerships might look more and more like Apple stores with virtual presentations of cars and only a few cars on display to “touch and feel”. We are already starting to see examples of this from The Adam stores of Opel/ Vauxhall and the Audi stores in the UK and China.


You can read blog articles by other members of the Sevendots team here.