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Smart mobility pushes dealerships to reinvent themselves

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Profound changes are transforming mobility, both as a product – towards self-drive vehicles – and as a service – towards  mobility on demand. As ownership gives way to usage as the dominant paradigm, dealerships will have to reinvent themselves to survive, says L'Atelier, a BNP Paribas Group think tank. 

By 2025, two-thirds of the world's population will live in cities. This will have consequences for urban mobility, and more specifically for the problems associated with it. In the U.S., 30% of all urban traffic consists of cars looking for a parking space – and spewing out 102 tons of carbon per minute while doing so. American drivers spend a solid 50 hours per year stuck in traffic, a problem shared, to a lesser degree, by motorists throughout the world. Add the rising cost of automotive transport, and you have a host of push factors transforming mobility towards a model characterised by multimodality, on-demand mobility, car-pooling and car-sharing, and autonomous driving.

Purchasing processes
But, as L'Atelier points out, this transformation will also have dramatic, if at present still largely overlooked, consequences for the purchasing processes associated with mobility. 

In other words: dealerships will be hit by massive change. One could even ask whether we will still need actual dealerships in the future, due to the rise of online vehicle purchasing. 

Already it is forecast that the number of physical dealerships will decline dramatically, from 18,000 to 16,500 in the U.S. between now and 2025. A more pessimistic prediction says there will only be 5,000 dealerships left in the U.S. by 2027.

Chances of survival
That scenario would effectively see an end to the purchasing model as we know it today. Even if such a worst-case scenario does not come to pass, dealerships must work to innovate if they want to increase their chances of survival. And there is a notable uptick in collaborative ventures between dealer groups and tech companies, focusing on anything from the integration of SaaS and IoT solutions, commercial partnerships, acquisitions and investments. 

One example is Rapid Recon, present at the recent NADA 2017 conference in New Orleans, which offers dealers a purposely designed dashboards that allows them to better track and manage the cleanups and repairs on used vehicles being prepared for remarketing. Another is Promoboxxx, permitting dealerships to optimise the updatesof the digital marketing by their brands. A third one, also present at NADA 2017, is Euclid Analytics, providing dealers with actionable data on in-store visists and customer engagement. 

Online alternatives
Optimising operations of the physical dealership obviously is a reaction against the increasing success of online alternatives – the 'traditional' U.S. classifieds site cars.com, around since 1998, has been joined by recent market entrants like Carvana or Beepi. By deploying a digital presence of their own, physical dealerships hope to capitalise on the fact that they have one foot each in both the online and offline worlds. 

Even so, L'Atelier posits, physical dealerships may not survive the arrival of the self-driving vehicle – even if, as predicts expert Glenn Mercer in his study Dealership of Tomorrow, only 10% of vehicles will be totally autonomous. The relationship between driver and vehicle will change, says Mercer: driving pleasure nor engine performance will be selling points anymore. He predicts dealerships will end up selling services rather than vehicles. 

Semi-digital shopfronts
Physical dealerships will therefore transform, slowly but surely, into semi-digital shopfronts, perhaps in shopping centres, with the vehicles themselves no longer the core of the marketing message. 

What would that message then be? Imagine a traditional manufacturer offering innovative mobility services within an intelligent urban fabric, with sensors, connected objects, etc. That would be the main selling point, and the challenge would be to establish a process of buying, renting and/or using that is as fluid as the multimodal reality of future mobility. 

The showroom of the future would therefore be much more personalised, a bit like an Apple Store today, geared at offering a whole range of customisable service and maintenance offers. Dealerships could also forge a role for themselves as charging spaces for electric vehicles, or storage spaces for shared and autonomous vehicles. 

Not as disruptive
But, as Mercer points out, the immediate future may not prove to be as disruptive as some predictions set out. Although direct sales from manufacturer to end user are set to increase, particularly in the luxury vehicle segment, they are not likely to exceed 10% - at least in the U.S. And for all the talk of the disruptive business models of Uber and Lyft, only 2% of San Franciscans user their services or similar on a daily basis – and 60% have never even once downloaded a single on-demand mobility service app. Move away from urban centres, and the presence of those innovative products and services falls away to practically zero. 

So, dealers have a grace period to prepare for the future – but that future will arrive. The two main avenues to explore: focus on strengths, such as brand image and closeness to the customer; and widen the range of products and services offered to compensate for the weaknesses they have, compared to existing or future competition by online business models. 

Image: Sergey Rodovnichenko, CC BY-SA 2.0

Monday, February 27, 2017 - 16:30Frank JacobsSmart MobilityEurope
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