It’s time to change our model of auto retailing – really!

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You can’t open any automotive blog, trade journal or website without reading something about we need to change the way we buy and sell cars.

I think it’s time to stop dancing around at the edges of the status quo and start to think about some fundamental changes. There are a few things i’ve seen and read over the past few weeks that suggest to me that changes are coming and that we need to adjust to them. I also believe that, even though the auto retail model (both sales and service) will change fundamentally in the coming years, the in-person experience will remain at the core.

Let’s look at the three cornerstones of an in-person experience.

FACILITIES: WHAT DOES THE FUTURE LOOK LIKE?

The issue of facilities is often contentious for both dealers and OEMs. There is no doubt in my mind that customers want a clean, contemporary, comfortable and friendly environment for both the purchase and service experiences.

But how do we define that? Is it a high-end luxury experience that mimics a five star hotel, or is it an environment that may not be as “fancy” but meets all the requirements of cleanliness, amenities and efficiency? One that makes the customer feel that “this is an well-run business that’s focused on the task of providing a transparent and pleasant purchase or service experience,” not on trying to impress me?

In a recent column, I wrote about a visit to a brand new high-end dealership in Toronto and remarked on some of the thoughtful features of the facility. The “dual-zone” customer waiting lounge in particular impressed me, where there seemed to be two zones – one where the bustle of the dealership was evident and another that was much quieter and more conducive to working. That may not have been intentional, but it seemed to work.

A couple of weeks ago, I visited two more new dealerships in Toronto. These are sell and service volume brands (Honda and Toyota). They are literally right next door to each other and highly visible from the 401. I was intrigued. Two fiercely competing brands, same corporate colours and virtually identical exterior designs. I took a drive around the back and sides and even the access doors for staff and deliveries are in similar positions. Inside, the layouts are also very similar with lots natural light and sightlines that really give a transparent and contemporary feel.

This started me thinking. Instead of the traditionally contrasting luxury vs. non-luxury models of a dealership, is there a different concept, where dealerships become much more simple and “miinimalistic,” focused on transparency and function, but with a highly contemporary and technology feel? Perhaps this is what customers of the future will prefer – an environment that is high-tech and efficient and that suggest single-minded focus and efficiency, almost like an Apple or Microsoft store. Why should dealerships spend many millions on huge elaborate structures when simplicity, efficiency and transparency are really what customers want – both luxury and non-luxury?

Will the customers of the future, regardless of what they drive, want opulence or efficiency and transparency? My bet is on the latter.

GETTING INTO THE STEP ON THE SALES AND SERVICE PROCESSES

Will all sales be made online in the future? Probably not.

In a recent report published by consulting firm Accenture, the company pointed to the myth that millennials do not like to shop in “brick and mortar” stores as opposed to online. Their data showed that millennials indeed do like to shop in stores as well as online for most things. However, the whole experience is still a bit like “two solitudes” – where the on-line and in-store experiences are often not aligned at all, either in sales or in service.

When I read Todd Philips’ recent article in Canadian auto dealer on the new Rockar Hyundai mall outlet in the UK, it reminded me of a meeting I had in Sweden with a Kia dealer principal at KC Motors, a group with three stores, two near Stockholm and one in Malmo. (Kia, by the way is now the #3 brand in Sweden after Volvo and VW!)

The dealership had also just opened a small outlet in a shopping mall in the Stockholm area. The dealer indicates that the system is working very well. While staff at the mall outlet can close deals, this particular dealership uses the mall outlet as a way to reach out to a much wider pool of prospective customers. While this seems to be the way we are headed, it’s clear that we are very much in a transition period. The new process will likely evolve as dealers who try this (where it’s feasible), will work to find the optimal process mix.

Of course, all the legacy agreements and regulations will have to evolve as well. We can sit back and say that this won’t happen here, but once consumers experience a different approach, the tide will not be turned back. One of the most interesting things I noticed in the new Honda and Toyota dealerships that I visited was the absence of digital tools to help salespeople and service advisors engage with customers.

Yes, there was a sense of transparency and efficiency, but I believe they are missing an opportunity to go further. The facilities say all the right things, but the processes do not seem to have changed. Indeed, the salesperson I talked to in one store engaged me because he was “waiting for his boss to finalize a deal” with a customer he was already serving. Not that much has changed! And not a salesperson in sight! The third leg of the retail experience is People.

Going back to what I learned from the Kia dealer near Stockholm was that, along with the location and process change come some challenges, the main one being the type of person hired to work in the outlet: “it’s unlike anything I’ve seen in terms of how important it is to have the right staff” says the dealer principal. So the ideal employee is not the typical salesperson but more someone with the right skills to establish a relationship with the prospect and then hand off to a salesperson in the dealership.

In a fairly low-key market, one person in the mall outlet creates “15 quality leads each day” for the dealership. The key role of the salesperson is “to turn customers from shoppers to serious buyers.” Perhaps not that different on the surface, but if you look at Rockar Hyundai’s website, you’ll see the words “not a salesperson in sight” – a clear signal to prospective customers that they can expect a different experience.

The implication here is that, as the model of retailing changes, so should the people who interact with customers. There are a host of new digital tools that dealers can use to enhance their ability to manage the sales and service processes. But most of these are largely dealer-facing and don’t necessarily change the customer experience significantly. The success of integrated service lane technology solutions in driving dealer profitability and customer satisfaction indicates that customers also welcome changes in their service experience. But we still have a long way to go.

When customers experience new and more transparent technologies, but then have to go through the same processes as in the past, there is a disconnect. Facilities that promise a new and fresh experience from the outside, but deliver the old familiar experience inside, are missing a big opportunity.

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