Tough Times Ahead for the Auto Industry.

Just another trend? Or is it structural?  What should dealerships do?

It’s no secret car sales have been off for a while and they don’t appear to be getting any better. Some say it’s because of those consistent rising prices. Just consider all those expensive high-tech infotainment systems and safety features. Some say it’s the bad weather, others say the trade tariffs. Most like to think it’s just another temporary downward trend that will ramp up by next Spring.

But what if it’s more than any of the above?

What if it’s “car peak” —  that hypothetical state that suggests private car sales have peaked and will now be falling in a sustained manner over the long term?  That’s right, fall and perhaps never return to what they’ve been.

It a timely question.

The equivalent of car peaks has occurred across other markets, why not cars? It’s unlikely that retail executives at Sears, Payless or Brookstone gave much notice when Amazon came on the scene two decades ago. Today these companies are all but bankrupt. Not that their demise is entirely due to Amazon, but clearly eCommerce has been more than just a trend. It caused a structural disruption of massive proportions that will continue to revolutionize the marketplace for years to come.

To be clear, the rapid tech evolution over the past quarter century that has spawned enterprise resource planning, digital marketing, analytics and countless applications isn’t new to the automotive industry. The shift to a mixed online-brick-and-mortar auto sales and service ecosystem has been well established for quite a while.

An Auto Ecosystem in Transition

What is currently occurring in the automotive sector is actually more complex than one big disruptive Amazon play. Those heretofore mentioned factors like higher vehicle prices and trade tariffs are just starters. In automotive you have so many additional factors that can impact sales that it’s almost impossible to pin any single one down. Add bank credit, rising gas prices, rising auto insurance costs, road tolls, public and private parking, seasonal and economic cycles, increased ride sharing, the emergence of used-vehicle leasing subscription services, ride hailing plays like the Ubers and Lyfts, and soon self-driving cars; and the pressure on the industry becomes pretty evident. But it doesn’t stop there.

Couple these factors with the idea that we are now living in a world where we have too little time, too many choices and immediate access to all too many things, and you can see real challenges ahead.

Selling while Sinking in Quicksand.

Any experienced sales professional knows that a sale is comprised of removing buyer objections.  But the way the world is going, removing basic friction just won’t cut it.

Today it’s about removing real and perceived obstacles.  The more obstacles you can remove between the buyer and the product or service, the greater will be your propensity to win.

The most obvious obstacles are (i) lack of time (ii) lack of transparency and access, and (iii) silly and wasteful “people processes.”

The most obvious solutions….

One Contact, One Price.

Anyone whose bought a car knows that it’s one long and painful process. And it just doesn’t have to be. Running a buyer through a sales guy, a sales manager,  a finance guy and God knows who else over a three to four hour process is looking increasingly premillennial.  Haggling over price is, too.

Fact, the average buyer today has essentially online researched to death what he or she needs and wants and what it costs at various dealerships.  If the buyer is already in your dealership, your best bet is to simply make it as easy and painless as possible to close the deal.

Mind you, seen from the dealership perspective, the customer purchase cycle is the dealership sales cycle.  And there are benefits to streamlining this costly and time consuming process from both parties.

Transparency and Convenience

Chances are the dealership can further short cut the process by providing the buyer with informative and transparent online purchasing tools that he or she can access and on their mobile phones before arriving to the dealership. Again, saving both buyer and seller time and money.

Next Generation Auto Sales

Imagine, buyers able to research any car online, complete 98 percent of the transaction from their mobile phones, and have their cars delivered to their doors within a few hours.  To this sound outlandish? Check out Carvana.

Seems like a win-win for everybody.

Conclusion

The adoption of greater convenience, transparency, one price and one contact car shopping is accelerating. It is likely that any one or combination of these new methods and tactics will enable a dealership to retain or win extra market share.

At the same time, it may be that dealers will need to broaden their offerings to customers to include innovative new deals and relationships, including cars-as-a-service subscriptions, car delivery and pick up, you name it.

Whether the present auto sales slowdown is a trend or structural, these disruptive processes are on their way.  The sooner the dealerships can get ahead of them… the better.

William Berenson,
Partner, Campaign Precision