5 Ways Omnichannel is destroying the auto “retail store” 

Chris Petersen, Ph.D.  | Sep 17, 2016 

Consumer behavior is disrupting every facet and category of retail 

Image Credit: Vichaya Kiatying-Angsulee

In the United States, the ultimate retail store was the car dealership. It was in fact the only place you could go buy a new car a few years ago. Car dealers staged huge fall events to entice customers to come to the “lot” to look at the new models, as well as promote sales of last year’s close-outs. This was a very successful store retail model until the customers went rogue and took control of their shopping experience. Consumers today can research, review, and purchase cars from anywhere, and arrange delivery from any location. Your unparalleled access to information, and freedom of choice of how to engage is totally disrupting the car retailing of the past. From Amazon to Tesla, omnichannel is changing everything about how we shop and buy cars in the US.

Why this is important: Omnichannel is driven by changing consumer behavior patterns, and how they disrupt every facet of traditional retailing. Woe be it to stores that don’t realize that omnichannel is the new normal, even for car purchases.

Consumers have moved beyond the traditional car store (dealership)

Automobiles is the biggest merchandise item that we purchase for private use. Substantial prices for new or used warrants a lot of consumer scrutiny when buying a vehicle. In order facilitate consumers shopping and purchase, car manufacturers funded dealerships who built large lots so customers could come and see many styles and various options. Two decades ago, a car dealership (store) was the only place you could go see and purchase a car. Today, it is hard to imagine that the only consumer information for cars used to be the glossy brochures and paint chips only available at car dealerships.

Fast forward to the present. We can now go online and see ALL of the car styles and options available. We can read umpteen reviews on best models, as well as the “lemons” we should avoid purchasing. And even more importantly, we can go online to get the very best estimates of what consumers are paying for automobiles in our area. No more guessing if we are getting a good deal or getting hosed by the salesman.

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5 Examples of how omnichannel is transforming car buying

The ability to interact with car dealers online is not new. Some enlightened dealers posted inventory on websites a decade ago. What is new is the rapid transformation of converging systems and sources that will completely transform the consumer ability to change and define their customer journey in planning and purchasing a vehicle.

1. Kelly Blue Book & CarFax = Treasure trove of intelligence
   Whether consumers are shopping for a new or used car, there is now unprecedented intelligence available at your fingertips on your smartphone. Sources, like Kelly Blue Book, enable you to carefully assess “street” prices by model, option, year and condition. Sources like CarFax can provide valuable intelligence if a used car has been a wreck or flood that could be unseen damage.
   Many car dealers are lamenting how a majority of customers on their lots ultimately pulled out their smartphone to do their own research … even while the salesmen are standing there! If consumers can do their own research and know more than the salesman standing there, what is the purpose of the “auto retail store”?
2. CarGurus– Unprecedented price comparatives
   Purchasing a car is a major investment! We don’t want to pay more than we need to. And, haggling with the traditional car salesman is about as much fun as going to the dentist.
   There are many sites that consumers can now use to check comparative pricing, as well as get localized trends of what friends are paying in their area for a specific model, and even a specific color. One of the best sites in the US is CarGurus.com. It has an incredibly simple interface. Literally within seconds, a consumer can check comparative prices on almost any vehicle, new or used, in any market. Why go to the dealer lot to check car prices, or availability?
3. CarMax – Hybrid of Stores + Virtual Online Selection
   What if the “car store” was reinvented as a hybrid model such that there was a merger of physical stores with online? And, what if there was one price on each model, no haggling?
   CarMax is actually a great example of the omnichannel transformation from a traditional dealer store, to a hybrid model merging physical and virtual inventory. Instead of going to the “lot” to view available models, you first sit down with a “consultant” who interviews your needs and preferred choices. The consultant then reviews what was available locally and every option available at any CarMax across the entire country! Why go to the local car dealer when they will only show the inventory they own on their lot?
4. Tesla – The transformation of experience to a 1 car showroom
   While CarMax represents consumer centric model of how retail can blend the physical with virtual inventory, there are other signs that the “car store” is transforming to a more customer focused on experience. Most of Tesla’s stores have but just one car on the showroom floor.
   Like Apple, Tesla sells very few models. They do a terrific job of selling their brand and value propositions through all the online and social media. Tesla does realize that consumers may want to see and touch a product in person, so ONE is available for inspection. Imagine the inventory and store operating cost savings of only showing one car versus the huge lot of cars at a traditional dealer!
5. Amazon – The clear signs of omnichannel auto disruption
   Amazon is not in the car business … or is it? Take a look at the ad that appeared in my email for … Amazon Vehicles!
   
   My immediate reaction, why wouldn’t Amazon be in the car business! This is a clear sign that they can already compete with the likes of Kelly Blue Book, CarGurus and even CarMax. And, with all their emerging logistics capabilities, why not cars?
   Amazon has already piloted bringing a test drive vehicle to a consumer’s home in a couple of markets. This test is just one model of car in a local market, but you can bet that the consumer driven Amazon culture will find ways to scale with manufacturers seeking the ability to go direct to consumers, bypassing stores entirely.

Those that survive will be those that adapt to the omnichannel consumer

Whether it be selling cars, furniture, or groceries, the local retailer must be able to provide consumers with value beyond price. Local car “stores” selling on hand assortment at a price are doomed, at least in terms of growth.

More than ever before, the winning strategies for local stores are:

• People – who are knowledgeable and know how to engage customers
• Personalization in solutions and helping customers to buy
• Customer first service and follow up

Yes, there are those local car dealers who “get it” and are adapting. Check online, you will now see that there are now local dealers who will deliver a car to you and complete all the paperwork at home, without ever setting foot on a car lot. This is the kind of personalized customer sales service that will ultimately bring you back to the dealership to get your car serviced, something profitable that the internet does not do.

With all the predictions of Uber self-driving taxis by 2020, we may never need to purchase another car at all. But, that’s an omnichannel disruption story for another day!