IN ITS latest Mobility 2030 report in the UK focusing on automotive retailing in Europe, global consulting firm KPMG has detailed five steps to futureproof a car retail business – and win new business.

STEP ONE: For organisations at the beginning of the journey, their focus should be on understanding the impact of disruptive changes and conduct test-and-learning from small-scale experiments.

“OEMs and dealers may be tempted to wait for others to make the first move, due to a lack of proven options or enlightened management causing ‘action paralysis’, but these delays represent a significant risk,” the report said.

“Instead, organisations should distil the key leading indicators of disruption and monitor these triggers for associated actions.

“For OEMs, this could be dealer (customer) satisfaction metrics or online traffic as an indicator to trial an integrated online-offline channel, whilst for dealers this may be customers who have configured their vehicle or agreed their finance and insurance (F&I) online before visiting the showroom.”

STEP TWO: The more proactive approach is to commit resources to small-scale experiments – such as those examples given above – to test new retail ideas as the first step to providing platforms for future growth (see Step 5).

KPMG said that as an example, both OEMs and dealers might consider trialling online channels in a specific territory, whilst an OEM might also experiment with a city store concept in certain large urban areas, in turn looking for a dealer or third-party agent to operate that initiative.

“Customers are still identified by their vehicle ID which is a product rather than a customer-centric approach,” the firm said.

“We suggest that to build great customer experiences:

• OEMs, dealer groups and other third-party partners will need to work together to ensure seamless, integrated online-to-offline journeys to make it easy for customers.
• Digital customer platforms must be developed, likely by OEMs or white-labelled by third parties, to integrate customer touchpoints and for access to new mobility services.
• The industry should move from a vehicle ID to a customer ID basis, to better understand a customers’ needs and preferences and to be able to address them; this could be combined with an OEM-run membership scheme to boost touchpoints, access new services (eg, subscription offers) and incentivise and reward behaviours.
• Customer segments that generate value over a longer relationship should be targeted by OEMs and dealers, rather than engaging in price wars with those who often switch brands.
• Focus on communicating messages and values that increasingly resonate with customers such as monthly cost, impact on the environment, accessibility and convenience.
• Underpin the experience, for example, with a fit-for-purpose CRM system, dealer management system (DMS), tailored marketing and lead generation activities.”

STEP THREE: KPMG said that a lot of the commentary about future automotive retail focuses on the demise of the traditional dealer.

“Whilst we agree that there will be some further dealer consolidation, we also believe that dealers will continue to play a key role in future automotive retail, not least because 72 per cent of European consumers still prefer to buy their vehicle at a physical retail outlet,” it said.

“Instead, our view is that the role of OEM dealer partners will change dramatically. The entire sales cycle is currently delivered under one roof.

“This means that the dealer isn’t perfectly set up to execute brilliantly on any specific stage of the customer experience journey, or to deliver against any concrete customer need (eg, education, inspiration, purchase, access to mobility, F&I, SMR, etc).

“Indeed, 77 per cent of European executives believe physical retail outlets must undergo transformation into service factories, used-car hubs or focus on an ID-management approach, in order to be successful in the future.

“Our view is that OEMs could generate additional value from the vehicle assets they manufacture. In future, OEMs must consider whether to keep some of their vehicles on their books for longer – which carries capital risks, for example – and how to best use data generated by connected cars to track the longer-term usage of vehicles.

“OEMs will need to design new business models to generate value from the vehicle beyond its first and second life, perhaps through car-sharing or vehicle subscription models.

“If OEMs don’t do this, others will find a way to capture this value. Our view is that modelling for scale in the future automotive retail model is heavily dependent on the role of the OEM finance captive.

“Not only will captives remain important for their current role, but they will be increasingly key for the development of new financing propositions (eg, for subscriptions), to support dealers through broader network transition and to enable OEMs to pivot to mobility services and feet ownership.”

STEP FOUR: OEMs need to demonstrate the value to consumers giving away their data – for something in exchange – and to ensure the right cyber and data security protocols are in place to maintain trust.

“The capturing, storing and analysing of connected car data would enable retail players to better understand customers’ driving behaviours, vehicle usage and preferences, in order to better target and tailor offers,” KPMG said.

“Moreover, analysis of customer data could be used to better understand consumer behaviours, including in new retail trials and concepts.

“All of this will require data sharing and aggregation activities across the retail ecosystem.

“The question is, do OEMs have the appetite and capabilities to play this role? Our view would be that to generate significant future value, OEMs must have some involvement.”

STEP FIVE: After understanding the nature of potential disruption and designing the appropriate strategic response, KPMG said that the last step will be to grow scale.

“Dealers will continue to play a role in lead generation, however their focus will be on the physical purchase handover and the aftermarket, including servicing and spare parts,” it said.

“New city stores and pop-up stores in high footfall urban areas will focus on the brand awareness, marketing and communication roles earlier on in the customer journey, whilst also generating leads for the dealer network and selling new mobility services.

“The online channel will also play a brand awareness and lead generation role, but we also expect to see new-car sales truly shifting online in future. In our executive survey, 80 per cent of executives expect this.

“Online also has a key role to play in the sale of new mobility services, and as the platform for OEM-led membership and loyalty schemes.

“Lastly, we see third parties as playing a role in building awareness and supporting leads, as well as providing vehicle services (eg, service maintenance and repairs) and supporting the OEMs and dealers across the broader spectrum of automotive retail activities.”

By Neil Dowling