Traditional dealerships are no longer the only option consumers have when it comes to car buying. Disruptive business models from Amazon, Carvana and others are transforming the automotive industry and posing a risk to local dealers.
To compete with the latest innovative business models, it’s critical to turn your employees into your main source of competitive advantage. Since today’s car buyers complete most of their research online, they’ve likely already made a decision before walking into your dealership – and the only thing standing between your customers and their new vehicle is your people.
Below, we’ve outlined several emerging disruptive business models in retail automotive – and how you can evolve your people strategy to remain profitable in such a competitive market.
Disruptive Business Models in Retail Automotive
Amazon Online Car Sales
Amazon has been experimenting with an expansion into online car sales.The e-commerce giant has a track record of dominating nearly every vertical it expands into since starting out as an online bookseller, so it’s likely to see success with automotive as well.
News broke in June that Amazon is recruiting car sales executives in Europe and may soon start selling vehicles in the UK. Amazon has already tested online car sales in Italy, with the availability of three Fiat models. Customers have their choice of four preset packages and can pick up the vehicle from a dealership within two weeks of purchase – ultimately eliminating the need for the customer to interact with sales staff at the dealership.
To adapt to the digital retailing shift, some automotive brands, including BMW and Ford have tested moving steps of the purchasing path online – such as configurations and financing. Since today’s car buyers demand a digital-first experience – and complete much of their research before even setting foot in a dealership – it’s critical for all dealerships to have a strong online presence that gets customers excited to buy a car from their brand.
Carvana Car Vending Machines
When Carvana first launched, one of its main objectives was to deliver vehicles directly to consumers. Rather than dreading a sales pitch in a dealership, customers can get excited about the purchase experience of just buying the car directly. Carvana customers have the option to buy cars online and either pick them up from vending machines in select markets or have the vehicles delivered to them directly – meaning car buyers who opt for Carvana avoid the dealership experience completely.
The growth of online retailing doesn’t mean all car buyers will turn to Amazon, Carvana, or other other options that eliminate dealership interactions all together. A recent study found 70% of consumers still prefer to visit car dealerships to test drive cars, see the vehicles in person and learn more about available features. But this shift does mean your dealership needs to offer a top-notch customer experience or risk losing business to competing dealerships or disruptors like Amazon and Carvana.
AutoNation & Waymo Self-Driving Cars
AutoNation, the largest new vehicle retailer in the U.S., has partnered with Waymo, Google’s self-driving car affiliate. Through the partnership, AutoNation dealerships will support vehicle repair and maintenance for Waymo’s self-driving Chrysler Pacifica cars. While wide adoption of driverless cars could potentially reduce traffic fatalities by up to 90 percent – due to most traffic incidents being caused by human error – the vehicles will need to be regularly serviced to meet safety standards. AutoNation will ensure Waymo self-driving cars across the country receive the service and maintenance needed to make the cars as safe as possible.
What does the emergence of self-driving cars means for dealers? Some experts are predicting far fewer Americans will own cars by mid-century and instead rely on hailing driverless cars through ride-sharing services such as Uber and Lyft. Waymo recently announced plans to start its own driverless car ride-sharing service, and Waymo has forged a partnership with Lyft, meaning such options will likely become a reality in the coming years. But many consumers will stick to buying cars from dealerships for a number of reasons – including the need to drive frequently and hesitation to trust driverless cars.
Vehicle Subscription Services
Beyond buying or leasing vehicles, some car dealerships have started offering customers a monthly subscription option. Vehicle subscriptions package are a no commitment option for car ownership, with a simple monthly fee that includes insurance. While luxury vehicle subscriptions can cost thousands of dollars per month, other dealerships are offering more mainstream vehicles at an affordable cost. The subscription model delivers vehicles on demand and also means customers can have flexibility with the type of vehicle they drive. If a customer only needs a sedan most of the time, but needs a larger vehicle for a trip, for example, this is possible through some subscription services. Cadillac and Ford are just a few examples of automotive brands that now offer subscription options in select markets.
Evolve Your Dealership People Strategy to Focus on Customer Experience
To compete with disruptive business models in retail automotive, you need to do everything possible to ensure your people are a source of competitive advantage. Amazon and Carvana won’t have the resources to offer the post-purchase customer experience, such as helping customers understand all the technology features in the vehicle, or creating a relationship with the customer each time they come back to service their vehicle – but your dealership will. And when it comes to driverless cars and subscription services, these options simply won’t be a fit for some consumers, meaning they’ll still visit traditional dealerships seeking the great customer experience they’ve become accustomed to. Below are several tips to evolve your people strategy and stay competitive in today’s crowded retail automotive market.
Add Product Expert Roles
Consumers complete significant research before walking into a dealership, meaning cars are now purchased rather than sold – and the experience turns more into fulfillment rather than selling. During selection, the test drive, and even after the sale is complete, dealerships should provide customers with the hands-on training they need to fully understand all technology in the car. With more technology in vehicles, there comes a need to help customers post-purchase so they know how to make the most of all core features.
To help customers get up to speed with technology, a few OEMs have created the role of product expert, which is customer service-focused similar to what you’d find in an Apple Store. Product experts can help car buyers configure their phones with their vehicles, program the garage door opener, set up voice commands, and more, rather than focusing on sales and negotiation as dealership employees have done in the past. BMW is one automotive brand that has recognized this shift from sales to fulfillment and experience by hiring product specialists, otherwise known as BMW Geniuses. In addition to helping customers fully understand technology, product experts have an opportunity to build rapport with customers without facing sales pressure, and customers with value their knowledge and recommendations.
Move Away from Commission-Based Pay Plans
Given the shift from sales to fulfillment, one of the key ways to evolve your people strategy is by adjusting your dealership pay plans. A decreased focus on sales means commission-based pay plans are no longer working. Take it from AutoNation, which recently rolled out a new pay plan offering sales people a base salary plus bonus, rather than the traditional commission-based structure. Not only will this help AutoNation – and any other dealerships who make the switch – attract retain employees, but it will empower employees to focus more on fulfillment and customer experience, rather than trying to make higher commissions through sales.
Invest in Your E-Commerce Presence
In addition to reworking pay plans, your dealership should also invest in an enhanced online presence to capture car buyers when they’re researching online. Many dealerships are hiring e-commerce coordinators, who are responsible for analyzing the dealership’s digital advertising, and online analytics. Hiring an e-commerce coordinator role offers a variety of benefits, including saving dealership leaders time, improving digital marketing, and measuring and improving online reputation to attract more customers. Since car buyer research starts online, your dealership needs to have a strong digital presence to stand out from other dealerships and other disruptive businesses in the industry.
Making the decision to buy a car is a significant investment for any consumer and walking into a traditional dealership likely won’t stop anytime soon – even given the latest disruptive business models. But to stay competitive, dealers need to focus on the customer experience and evolve their people strategy to meet the needs of today’s car buyers.
For more information on making your employees a source of competitive advantage as the automotive industry continues to evolve, download our eBook, “Planning for People in Retail Automotive.”