On the edge of change

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Consumer preferences are changing, and our business models must match

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Over the past few decades, shock waves have hit our beloved industry that drives or promises to drive change. It seems to me that we are, once again, on the edge.

Back in 1998 to 2000, industry disruption was predicted, as outsiders to our industry professed our demise. That disruption did not materialize.

For well over a decade, the consumer has been driving change at an escalating rate. Consumers globally have changed their purchasing patterns from predominantly a bricks and mortar model to an overwhelming acceptance of an online model.

Today’s online retail possibilities are like the Home Shopping Network on steroids. The online shopping consumer is heavily influenced by new technologies and retailer acceptance.

Those influences naturally spill over to automotive retailing. It’s unavoidable.

One obvious observation is that 99 per cent of the chatter surrounds how the consumer vehicle acquisition demands are changing. This goes way beyond the technology gains that benefit consumers in general.

On the one hand, it’s the residual impact from using technology in the consumers’ everyday lives that is driving an insatiable desire for more. On the other, it’s the evolving demands for vehicle access.

Though it may seem obvious, I’d like to point out that auto retailing encompasses a whole range of goods and services.

Most of the chatter to date has been surrounding vehicle acquisition, and very little of it has been on the life of the vehicle. That does not mean that change won’t come regarding the goods and services required over the life of the vehicle — it’s just not as developed yet.

Consumer demands have the potential to reshape that business as well.

Vehicle acquisition in the past has largely been an ownership model.Various forms of financing were available to meet consumers’ driving and financing needs from cash payments, to short-term loans, to vehicle leasing and longer-term loans, all designed to satisfy an ownership desire.

For infrequent occasional transportation needs, there were taxis and daily rental vehicles at a higher per use cost than ownership with no short or long term commitment.

Today we are in the midst of an evolution in how consumers acquire transportation. For some, flexible access to kilometers wins over vehicle ownership. This is a very real shift in consumer preference.

Services such as ZipCar, Uber, Lyft, RideSharing.com, Kangaride, Carpool, Share Your Ride and others offer consumers in need of short-term access to a vehicle.

We are also seeing bicycle rentals, electric scooters and other forms of consumer mobility gaining consumer acceptance as many municipalities develop frameworks for human powered transportation to safely coexist with vehicle traffic.

In the short-term, ride-sharing, car-sharing and mobility providers serve as disruptive forces for traditional forms of temporary and public transportation.

Much is being said about autonomous driving as newer vehicles become equipped with features and capabilities to reduce human error. Also much is being said about vehicle electrification and  the possible evolution of our car park away from internal combustion engine dominance.

These two developments are leading the charge for driverless car experiments and trials as governments and brands and others deal with passenger safety and personal property issues.

We do live in interesting times. One thing in the future is absolutely certain: tomorrow will be very different than today.

Some people believe that vehicle retailers will see an increase in business going forward as vehicles are put into service 24 hours rather than two a day.

This will drive increased wear and tear, vehicle service and reduce the time interval between new vehicle acquisitions.

Others believe that vehicle retailers will see fewer customers and decreased business going forward as fewer vehicles will be needed. This group asks the question: where will the demand for all those additional available kilometers come from?

Assumptions are being made all over the place. At the foundation is that consumers will freely put their vehicle to use by others.

I am not sure, at least in the short-term, that a large number of private vehicle owners will jump at that opportunity.

As with all change, reality when it materializes, will be very different from early theories. Consumer behaviour will ultimately drive true, sustainable change.

In the meantime, barring any external global forces, we will still sell slightly below or slightly above 1.9 million new vehicles this year through today’s Canadian franchised dealer network.

In addition, new vehicle retailers will sell around one million used vehicles and provide vehicle servicing and maintenance to between 30 to 40 per cent of the 24.5 million light vehicles on the road across Canada.

I can accept that as consumer preference changes, vehicle acquisition and vehicle servicing will also change over time. So will the response from franchised automotive retailers.

The Canadian vehicle retailer network is made up of entrepreneurs and risk takers who have proven over the years that they are survivors.

Hopefully the appetite exists for vehicle retailers and the brands they represent to work together to develop brand specific competitive advantages.

Our business model will need to continue to adapt in order to satisfy the desires and demands of the pool of well informed consumers.

Over the past decade, auto retailers have steadily adapted to new technologies, business processes and employment practices aimed at meeting or exceeding consumer demand.

Constantly adapting, if not already, will become a core competency for automotive retailers as we tackle the business opportunities of the future.

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Canadian auto dealer