Dealerships, Management Workshop, News , ,

THE contemporary retail motor industry is giving dealers a lot to think about. We are not short of people outlining the challenges dealers face with plenty of questions now being raised about the future of dealerships.

But in the midst of the transformation we see unfolding,  forward-thinking dealers are seeing opportunities not just to survive but to thrive – and help revolutionise the automotive industry to their benefit along the way.

One of the bigger disruptions has been the emergence of car subscriptions. 

This has been driven not only by changing consumer habits toward traditional car ownership, but also by external market factors such as those twin industry storms of inflated used car prices and ongoing supply chain issues for automakers.

This is driving a trend for buyers to question the viability of car ownership or leasing when replacement cars are getting harder to find, people are waiting months for the cars they want and cars are costing used as much as they cost when new.   

The market is confused, which is always a good time for innovation. So getting access to a replacement car via subscription is increasingly more viable.  

This opens the doors for dealers to develop a new profit centre to their business and take advantage of adding subscription operations to their business portfolio using a technology platform to manage the relationship with the subscribers.

Michael Higgins

Platforms such as Loopit are now making it possible for car dealerships to offer subscription-as-a-service, so drivers can head to their local dealer to not only buy or lease but alternatively to subscribe. 

And dealers have a head start. Research from Loopit suggests that 84 per cent of consumers that would consider car subscription would prefer to subscribe through their local dealership rather than subscribing directly from an OEM or other subscription provider. 

With subscriptions, customers don’t need to buy or lease on traditional terms anymore. They can sign up to a subscription service like Motopool, HelloCars or Simplr for access to cars. Manufacturers including Tesla, BMW, and Lexus have explored subscription services themselves. 

One misconception is that car subscriptions will come at the expense of new car sales, but really this is largely not the case.

Rather, car subscription is another product available to dealerships that will allow them to serve entirely new market segments, typically from customers who would otherwise not be in the position to purchase a car.  These can include those visiting from overseas or others not looking to tie up funds in a new car. 

It is more accurate to say that subscription fills a void between rental and ownership and, in the context of a dealership, can often provide an alternative path to purchase, especially as new car wait times continue to balloon.

Loopit’s software currently powers the majority of car subscription providers across Australia and New Zealand, and its dealership customers have experienced growing interest in recent years. The network has seen a 320 per cent increase in new car subscriptions over the past six months compared to the preceding corresponding period. 

So rather than a disruption, dealers should embrace car subscription as an innovation because adding subscription-as-a-service to a dealership’s business activities will allow dealers to flourish and keep up with these shifts in the market.

In a few years, a car dealership without a subscription business will be like a real estate agency without a rent roll. 

Most real estate agencies operate with both sales and property management departments. But the rent roll is where a real estate agency derives its real value as a business. 

Real estate agencies earn a constant weekly income from all the properties on their rent roll. While selling a home may earn a bigger commission, once it’s sold there is no ongoing benefit for the agency. 

Given this, real estate agencies focus on keeping hundreds of rental properties on their books while only having a few properties on the market to sell at any given time. Rent rolls are also saleable, so they provide even more value to the business.

Dealerships should look at heading toward a similar structure with both car subscription and car sales forming two equally important departments of the business. 

Car subscription provides dealerships with a recurring weekly revenue stream and offers customers another alternative to traditional car ownership. The model benefits both parties. 

Not only are car subscription programs introducing a lucrative recurring revenue channel, but when utilised correctly within the dealership ecosystem it can create a compounding effect on overall revenue. 

More savvy operators have already begun to understand the true value of subscription in the dealership ecosystem as a means to generate used car inventory, to create new opportunities for sales and finance, and to increase customer retention and loyalty – among other benefits.

The car subscription movement has also rapidly gained momentum in the wake of the COVID-19 pandemic, with more people working from home, driving less and turning toward e-commerce rather than shopping in-store – or in a showroom.

Earlier this year, Europe’s largest carmaker, Volkswagen Group announced a $A4.6 billion acquisition of global rental giant Europcar in a bid to accelerate new solutions such as car subscription that complement car ownership. 

The company is the latest brand to endorse the subscription model, highlighting the massive market opportunity it presents for the automotive industry.  

In fact traditional car dealers who are investing in subscription technology and infrastructure are keeping some big players awake at night. 

UK-based digital used-car marketplace Cazoo recently cited increased investment in subscription platforms by dealers as one of the key potential issues the rapidly expanding business faced as it continued to drive growth across Europe. 

Looking ahead, used car pricing will start to normalise and subside as supply side issues resolve themselves. 

This will in turn lead to more automotive businesses adopting subscription as a future-facing viable business model. 

Subscription will start to take significant market share from traditional finance/leasing as the preferred ownership model for businesses due to the flexibility of the model and price points.


Michael Higgins is the managing director and co-founder at Loopit.co, an Australian subscription software business that gives car dealerships the tools to manage their own subscription service.

By Michael Higgins

Manheim
Manheim
Gumtree
Manheim
DealerCell
AdTorque Edge
Gumtree
MotorOne
PitcherPartners
Schmick