Q: As consolidation in automotive retail continues at a record pace, what’s the most important thing smaller auto groups and independents need to consider to not only survive, but thrive?
Haig: The forward-thinking retailers we know are focused on giving the customers what they want: a huge selection, a fair price, and a convenient way to buy. It all starts online now as the pandemic accelerated the shift towards online shopping. A world-class online experience is essential for consumers of all ages, but particularly the upcoming generation. We encourage dealers to compare their digital offerings, starting with their websites along with their consumer propositions with what buyers are offered at CarMax, Carvana and publicly traded retailers.
My kids are in their 20s and have grown up accustomed to buying almost everything they want online. They want to do what is known to them - tap some buttons on their phones or laptops for all their needs. The idea of going into a store and negotiating with a stranger is not going to happen. They have a hard time even talking to strangers in person! So, what can dealers do to satisfy this next generation of customers? A couple of areas where dealers can develop out new processes and technologies are:
Sales - Just about every customer wants to choose from a big selection of vehicles, pay a fair and transparent price, and be treated well in the process. Since the average dealer owns just two stores today, they will need to add many more franchises to offer customers a large selection of vehicles. Also, the buying process, either online or in the showroom, will need to be simple and transparent, so one-price is increasingly likely for sales.
Service - Customers want to trust their technician and have the process be as convenient as possible. A growing number of customers will expect pick-up and delivery, which can also be good for the dealer since these ROs are often much more profitable than when customers are waiting. In addition, dealers who embrace leveraging digital and online tools to allow customers to schedule, see service stats, and pay online will create additional stickiness.
Retailers that offer a big selection and frictionless commerce will future-proof their dealerships. Those that don’t will be fine so long as inventory remains in short supply. But when retailers have to compete for customers again, those who haven’t expanded and evolved are likely to see their existing customers gradually defect to larger dealer groups and have a hard time attracting new customers. The good news is that there is still plenty of time for small retailers to increase their competitive strengths. For all the talk about consolidation, the Top 10 Groups still have less than 10 percent market share.