The future of automotive retail
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After years of growth driven by advancements such as alternative fuels, and the popularity of both personal contract purchases (PCP) and personal contract hires (PCH), COVID-19 transformed the automotive retail industry overnight. Sharp decreases in general travel worked alongside a 5% reduction in manufacturing to see roughly a 40% drop in automotive spending across the pandemic on average.1
Despite this, automotive giants have been working tirelessly to ensure that the industry can recover, and new trends are the catalyst that makes this a reality. Online markets and cutting-edge automotive technologies, in particular, are set to enable 7-9% of market growth by the end of this year.
Moving forward, an awareness of how automotive retail needs to change and how to implement those changes on the ground will be crucial. Business Intelligence (BI) tools can help by analysing performance and considering evolving consumer expectations. But, what exactly is the future of automotive retail, and how can retailers adapt to stay ahead of the curve?
Suggested reading: If you want to learn more about the challenges the automotive industry faces, take a look at our blog — 3 Challenges Impacting the Automotive Industry in 2021
Trend #1: The impact of technology
Technological innovation and the automotive industry have always been a match made in heaven, and the need to rebound post-pandemic has dramatically accelerated that pairing. Electric mobility is set to continue growing off the back of increasing environmental concerns. In the UK alone, the government recently increased spending on EV charging points to £10 million.2 These efforts have come alongside the launch of more affordable EVs to provide choice to consumers who were previously unable to access these options, and have significantly upped the pressure to turn talk of autonomous vehicles into a reality industry-wide moving forward.
Strategies to help
Understanding not only technological advancements, but also how consumers feel about them, is the only way for retailers to engage with evolving trends. Luckily, technological advancements have merged with a growing online landscape to create an age of big data where such information is there for the taking. By simplifying data analytics in line with KPIs and wider business focuses, BI implementations that take technology-driven insights into account are poised to provide a unique perspective on the automotive industry’s future, whilst also making it possible to recognise both strong and weak areas of technological implementation allowing for important improvements to be made.
Trend #2: Increases in online sales
Predictions have been made about the ‘death of the in-person dealership’ since the internet’s launch in the early 1990s, and with more and more vehicle sales taking place online, that prediction seems closer than ever to coming true. Enforced closures of in-person showrooms left countless retailers facing the reality of online sales or no sales at all, while lower overheads, in general, led to a growing trend in online-only retailers that are even now driving an age where online presence continues to be a prerequisite of success.
Strategies to help
Online retail might have become the new buzzword in recent times, but studies have proven that 70% of buyers continue to see physical dealerships as a major sales touchpoint.3 This means that, despite the strength and popularity of online retail, an omnichannel approach, rather than going completely digital, is likely to be most effective going forward. Retailers facing this moment of change, therefore, need to consider how best to merge online and in-person capabilities to complement each other rather than cause unwanted complexity. BI solutions that merge data sources to produce valuable insights and transferable goals are the best way to make that happen, providing simplified reporting capabilities and ensuring teams are better able to continue operating as a cohesive whole.
Trend #3: Consolidation of dealer networks
With dealership numbers more than halving between 1976 and 2016, the showroom was in slow decline long before COVID-19, and the pandemic has seen consolidation across the sector accelerated in a major way. In the franchise sector especially, consolidation of the top ten dealer groups, including Vauxhall, BMW, and Volkswagen, makes network reductions of 10-20% likely by 2023.4 Alongside soaring online sales, this heralds a future that looks set to revolve around the most lucrative outlets in a franchise, and the continued consolidation that furthers their profitability.
Strategies to help
To avoid the negatives that come with consolidation, it’s essential to understand where money-making power lies, and how to consolidate processes around that strength to ultimately turn this potential pitfall into a competitive advantage. In this sense, information is very much power, and action-oriented BI systems that facilitate franchise-wide data analysis and goal setting are best for ensuring an in-depth understanding of where profitability is at its highest, and where struggles lie with the help of key focuses that include:
- Consolidated, trackable KPIs
- Visible action planning
- Franchise-wide performance scorecards
- Automatic score calculations
- Reporting tools
Within an automotive-specific context, these can accelerate dealer network consolidation by helping to identify sites with the best performance to allow increased focus in order to maximise returns, whilst closing down sites performing below expectations.
Trend #4: New revenue streams
Digitisation is just one of the ways that the automotive retail model has shifted, with calls for convenient affordability also making it imperative that retailers facilitate entirely new streams of revenue. Service-based models like Transport-as-a-Service (TaaS), are especially pushing private ownership aside and driving dealerships towards Netflix-style Car-as-a-Service (CaaS) models that offer month-by-month car lease contracts. Further innovative revenue outlets also centralise ease, and include cutting-edge solutions like Carvana’s first fully-automated vending machine, which has already seen the company spending just 10% of what a standard dealership would while selling three times the amount of vehicles, and highlights just how lucrative innovative revenue could be to the entire industry in the future.5
Strategies to help
Successfully breaking into often expensive new revenue streams relies on a company’s ability to understand profitability and remain realistic about investment. Questions need to be asked about potential returns, longevity, and market sway. By collecting quality data across consumer sets, and utilising BI software that tracks behaviours and preferences that are able to address these pain points, it’s easier for retailers to not only distinguish trends from fads, but to also set trackable goals that contextualise and justify spending in these areas.
Trend #5: Environmental regulations
Declining emissions during lockdown restrictions have furthered a growing environmental focus that has been gaining traction since the conception of EVs and the fallout of environmental failures. For automotive retailers especially, a failure to adhere to or foresee environmental regulations leaves the doors open for reputational damage that impacts sales and creates higher price points. Success in the face of these challenges relies not only on the facilitation of affordable EVs, but also on the furthering of industry-defining environmental initiatives including:
- Car shares
- Recycling campaigns
- Reassessment of end-of-life disposal
- Sustainable research and development
Strategies to help
Sustainability strategies should be implemented at every stage of the sales cycle to address environmental concerns, and BI systems that make it easier to respond to changes in demand and regulation can make that happen. BI tools that allow for impact measurement and sustainability reporting are especially fundamental for driving change off the back of incoming insights. By focusing on non-financial KPIs within these dashboards, retailers can also ensure that they’re able to assess activities and relationships, considering how they fit within existing environmental objectives, and also how they can adapt to an ever-changing environmental landscape.
Remain competitive with data-driven insights
Continuing to compete in post-COVID automotive retail is dependent on a dealership’s ability to identify areas for success and improvement. Readily available data is the key to unlocking this advancement and is very much there for the taking as automotive technology, and wider switches to online sales, see the industry joining the big data drive. BI tools that turn that data into actionable outcomes, and enable the improvement of relevant KPIs as a result, are a key factor in both meeting the market where it is, and adapting to the challenges that will continue evolving as the industry moves ever-closer to autonomous vehicles and adaptive revenue streams.
Our business intelligence software is helping automotive retailers position themselves as leaders within the industry, through a range of action-oriented focuses that make it possible to assess strengths, weaknesses, and potential areas for improvement in an ever-shifting sales landscape. Centralised insights, collaborative action-planning, and KPI dashboards stand to bring the future of automotive retail directly to your dealership’s door, both now and as we move into a future that remains uncertain.
Suggested reading: If you want to read more about the application of BI in the automotive industry, check out our blog — The Value of Business Intelligence for Automotive Retail in 2021