With dealers increasingly selling cars and finance online, the race is on for full omnichannel adoption to suit consumers, according to Grant Thornton and Cox Automotive. Chris Lemmon writes.
Automotive dealers, like many other businesses in the UK, are facing a period of unprecedented market volatility.
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The ongoing Brexit saga and its effect on consumer confidence, the faltering in the diesel market, the rising popularity of electric vehicles and the birth of next-generation technologies have all affected the automotive industry in different ways.
Industries are beginning to recognise the importance of digital channels to maximise profitability in the modern world, with online shopping beginning to dominate sales across various industries.
The automotive industry has been slow on the integration of digital channels, but moves are starting to be made as falling car sales have prompted dealers to assess their offerings.
Cox Automotive’s 2019 Insight Report, in collaboration with Grant Thornton, explores the issues faced by dealers and their reactive strategies. The study found that just one in five UK dealers currently have a full online sales transaction option. However it also revealed a growing appetite for digital channels, with 60% of dealers expecting to offer online transaction capabilities within the next two years.
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By GlobalDataPhilip Nothard, customer insight and strategy director at Cox Automotive, says: “The role of the dealer is still crucial, but we know that consumers want to interact with the automotive retailer in a variety of ways – notably via a range of digital platforms.
“Our analysis clearly shows it is not just a case of replicating the retail experience via the internet. Those dealers that are leading the retail evolution are embracing technology to improve the customer experience and bring more flexibility into the car buying process.”
The report points to an unprecedented set of external variables affecting dealers, each having an unsettling effect in the new car market. As a result, Cox Automotive has observed major players refocusing their strategies on other markets, such as used cars, aftersales and new services relating to the emerging cars-as-a-service trend.
A Deeper Understanding
To achieve maximum investment and profitability in the used car market, the report suggests that dealers will need a deeper analytical understanding of the trends affecting the industry.
“Dealers need to continue to embrace inventory and data analysis alongside their own market understanding to ensure they optimise working capital and achieve the best stock profile for used cars,” the report reads.
The report also found that more than 90% of car dealers expect to see some decline in the number of UK dealerships over the next five years, with six in 10 respondents predicting a fall of 10% or more.
Since the global recession, Cox Automotive found that there has been an increase in the level of consolidation in the automotive retail market. This is particularly true among franchised dealers looking to increase profitability through efficiency improvements, cost savings and economies of scale.
Nothard adds: “We asked dealers for their opinion on the future of car retail outlets in the next five years, and the response was consistent with the consolidation trend.
“None of the respondents anticipated a rise in the number of UK dealer locations; the vast majority (94%) expected some contraction, with 43% predicting a reduction of 10-15% – far more conservative than some of the recent headlines on shifting industry trends.”
“What’s clear is that consolidation is a method of improving efficiency. The number of dealerships may reduce, but what will emerge are stronger businesses that are better suited to the market.”
The report concludes that it is essential for dealers to evolve with the needs of the modern consumer, focusing on digital services. “Consumers want to interact with the automotive retail sector in a variety of ways – notably via a wide range of digital platforms,” the report reads.
“Our analysis clearly shows it is not simply a case of replicating the retail experience via the internet; those dealers that are leading the retail evolution are embracing technology to improve the customer experience and bring more flexibility into the car buying process.
“The number of dealerships might reduce but what will emerge are more efficient businesses which are better suited to the market.”
