The Motivation for ‘Voluntary Evolution’ in Automotive Retail
In this paper, TCS explores some of the emerging models of monetization that necessitate a reconsideration of OEM-dealer relationships. Responsive Dealerships’—a new term that we use to represent agile dealerships that adapt very rapidly to the ‘segment of one’ concept—are emerging and collaborating closely with OEMs to cope with the new rules of customer engagement. There is a real threat today of disintermediation of the nearly century-old model of the dealership bridging the OEM to the buyer. Digital technologies can almost entirely virtualize the buying process. However, they also provide dealerships with an opportunity to expand their reach deeper into customer heartlands, and reduce spending on large real-estate investments.
Digital Disruption in the Automotive Retail Industry—the Shifting Frontiers of Competition
There have been five defining moments in the history of the automotive retail industry.
- Wave 1: The Growing Power of Dealerships
During the early stages of industry growth, SBSO dealerships gradually grew into multi-brand and multi-outlet models, facilitated by deregulation in the European market for automotive franchises. Interestingly, this is still an emerging, though accelerating, trend in emerging economies.
- Wave 2: ‘Lean Dealerships’
‘Lean principles’—traditionally restricted to the manufacturing industry—entered the customer management space (especially in service operations) as firms started to eliminate bottlenecks in capacity to derive higher returns on assets.
- Wave 3: Global Dealerships
As regulatory norms were eased in many countries, several ‘dealership groups’ started evolving. Many of them began expanding globally, sighting opportunities in not just leveraging the OEM relationship but also in taking their advanced customer management processes and systems to newer markets such as Europe, the Middle East, and Asia Pacific.
- Wave 4: Dealership Consolidation
Traditional family-owned dealerships were unable to withstand the climate of sudden economic changes and the competition offered by global dealerships. This cleared the ground for a phase of consolidation.
- Wave 5: Digital Dealerships
As the differentiation among players started narrowing, the search was on for a new source of competitive advantage. Emerging technologies provided the impetus for a new wave—the digital wave. The current wave of digital disruption-led consumerization is a result of the impact of converging technologies like Big Data, cloud computing, mobility, and social media, which have enabled automotive retail enterprises to explore new business models and differentiation opportunities.
Digital Re-imagination of Automotive Retail
The digital five forces of social media, mobility, Big Data and analytics, cloud, and artificial intelligence technologies are poised to have a significant impact on every area of automotive retail. Every single customer touch point can potentially benefit from these technologies. To highlight the impact of digital technologies on dealerships, this paper focuses on six different dimensions of the dealership business— business models, business processes, products and services, customer segments and experiences, alternate channels, and the OEM and dealer workplaces.
The OEM-Dealer Relationship: Crossing the Digital Divide
‘Automotive retail’ is no more confined to the boundaries of the dealer or distributor’s territory, brands and product range, or set of customers in an assigned geography. The traditional business silos of dealers, OEMs, and service providers will need to disappear in the near future, as customer centricity becomes more important than ever before. Customers expect uniform, continuous, and contextual experiences irrespective of the dealerships they work with or the channels they connect through. This has changed the dynamics of the OEM-dealer relationship, coupled with the impact of product innovations and digital technologies.
Technology at the Center of the Transformation
The digital revolution is riding on the developments in digital and information technology. The coming together of customer experience and user experience, the ability of participants across the automotive retail value chain to provide services leveraging the cloud, and the amalgamation of business insights with business intelligence technologies are illustrative of the strong interdependencies between dealers and OEMs. The key to success is a seamless flow of information between OEMs and dealer systems, the underlying infrastructure, the interface protocol, and the scalability of all of these.
The Way Forward: Aligning Digital Strategy to Business Strategy
There is no unique digital strategy recommendation that will fit all OEMs or dealers. We propose a model for automotive business management with a hierarchy of interactions that drive good customer experience management. OEMs are responding to the environmental stimuli by taking a more direct approach to driving the customer experience and leveraging the digital five forces. However, dealers have the most interactions with customers, and it is critical for OEMs and dealers to work jointly to improve that experience. OEMs will have to take the lead in setting up common digital brand standards, processes, and functions like customer contact centers and CRM processes, while dealers will have to invest on individual devices, training the work force, and sharing information with OEMs.In conclusion, it’s safe to assume that the future of auto retail belongs to the customer.