the consumer revolution
and the auto retailing future.
The COVID-19 pandemic ensured 2020 would be no typical year for automakers and their U.S. retailers. Vehicle manufacturers shut down assembly plants both to protect workers from the pandemic and because parts shortages made production impossible.
State-wide lockdowns in hot spots forced dealerships to close too, initially putting a full stop to vehicle sales in some regions. Nationwide, light-vehicle deliveries bottomed out quickly, as volume was cut nearly in half to an annualized rate of just 8.7 million in April – a 50-year low.
market trends.
Despite the modest second half rebound, the industry continued to face challenges. As the fourth quarter dawned, inventory remained spotty, down by a million units from the start of the year, leaving retailers with less to work with. Worse yet, popular models such as pickup trucks and SUVs – in demand even more so as the pandemic took hold – were extremely hard to come by. On the plus side, manufacturers held firm on vehicle introductions, pushing through 18 new or redesigned car and truck debuts in August-September to give the market a much-needed shot in the arm.
OEMs laid on cash incentives and attractive financing offers to slow the slide, as dealers adjusted to lockdowns by focusing on online sales, moving inventory already in stock and adopting curbside delivery practices to get new vehicles into consumers’ hands.
It was costly – with incentive outlays rising 25% over a year earlier – but it worked. Sales began to rebound as the year progressed, and forecasts for entire 2020 light-vehicle sales were bumped up to 13.9 million units as the year entered its final quarter.
in the pipeline.
Dealers did their part, as conversion rates rose in second-half 2020, despite restricted operations at some showrooms. Retailers were particularly successful in turning SUV shoppers into buyers during the September rebound, but sales success rates were high for pickups as well. By November, a Wards Intelligence/LMC Automotive forecast called for end-of-the-year demand to pace close to where the year had started.
noticable conversion.
Not all trends taking hold or accelerated in 2020 are viewed as temporary. More and more consumers, who flocked to online buying for groceries and ordering take-out in the pandemic’s early days, also used the Internet to negotiate new-vehicle purchase deals or to line up financing. General Motors reported 750 of its dealers signed up for its Shop Click Drive e-commerce tool in the early days of the virus, almost overnight hiking coverage to 85% of its retail network.
how prepared are automobile dealers for the digital age?
Not all dealers are equally prepared for this shift. In general, larger operations – those selling more than 80 new vehicles per month, more so than smaller dealers, have succeeded in making the jump to digital. However, few retailers – large or small – believe most of their customer base will continue to want to do all their new-vehicle shopping from within the showroom three years from now.
shift preparation.
The advantages of Internet shopping for consumers are obvious – more control over the process, greater convenience and less time to complete a deal. But there also are gains to be had for retailers too. Dealers surveyed say the move to digital will allow them to reach a broader audience and expand their sales territory. They also see an opportunity to reduce operating costs, increase exposure to their buyer base and maximize the throughput of their sales team.
the benefits of going digital.
The trend to digital also will impact how new-vehicle showrooms look and function. Dealers expect their stores to shrink in size and feature new digital tools that enable shoppers to virtually build and experience the vehicle they want, explore pricing and check on-hand inventory. They also believe at-home services, including sales consultations, test drives and pick-up and delivery of vehicles for maintenance and service, will be needed to meet changing customer demands.
showrooms of the future.
most valuable digital tools.
Service is another area where technology could have a huge impact. Fixed Operations represent a key profit center for dealers – and a critical pain point for consumers. National Automobile Dealer Assn. data shows 12.9% of dealer sales comes from Fixed Operations, and there could be opportunities to increase the overall stake if dealers can find ways – including use of new digital tools, connectivity and data monitoring – to make servicing vehicles faster and more convenient for customers.
One potential point of OEM-retailer contention involves software updates. Today, most occur in a service bay at the dealership, but automakers are moving toward over-the-air updating that could cut dealers out of the loop. That means they’ll have fewer opportunities to interact with customers and sell them on new products and services – or potentially convince them to trade in their existing model on a new one.
fixed operations.
For now, dealers appear mostly ambivalent to the threat of being excluded from the business of OTA software updates and on-demand services, but they shouldn’t be. Estimates are the shift in the way automakers offer feature upgrades post-purchase could be worth an extra $180 billion to the industry annually by 2022, and dealers would do well to get a piece of that action.
Automakers believe retailers ultimately will benefit from this new software-driven environment, because they likely will be needed to walk customers through how the new feature they’ve downloaded for their car works. And at least some OEMs are reevaluating their current strategies, considering ways to involve dealers more in the process of selling and servicing software-driven options to serve their customers better, but the future direction is far from certain.
Predictive maintenance may provide a clearer revenue path for dealers in the near term. With greater connectivity will come better access to – and more – vehicle data. How this is collected, used and controlled are key factors in whether a dealership’s Fixed Operations department can be cost-optimized, provide better service to customers and act as a lead generator for new sales.
However, dealers by and large remain uncertain about what data they need, how they should receive it and whether they will be able to monetize it in the end. In addition to feedback on vehicle operations, a high percentage of dealers surveyed are eager to have access to driver-performance data, suggesting they see information on how the owner operates the vehicle as an opportunity to anticipate vehicle maintenance requirements and to sell additional products and services.
anticipating owners needs.
Automakers believe retailers ultimately will benefit from this new software-driven environment, because they likely will be needed to walk customers through how the new feature they’ve downloaded for their car works. And at least some OEMs are reevaluating their current strategies, considering ways to involve dealers more in the process of selling and servicing software-driven options to serve their customers better, but the future direction is far from certain.
The ability to collect data – particularly on driver performance and vehicle use – raises concerns related to privacy. But dealers largely agree on who should have access to the data and who should own it. Customers, dealers and automakers should be able to see the data, but it should belong to the customer, most dealers agree. Forty percent say dealers and automakers also should have an ownership stake.
privacy concerns.
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additional resources.
Higher profit margins are forecasted as Internet sales increase staff throughput, lessen the need for maintaining large and expensive facilities...
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The digital age has altered consumer buying habits dramatically, a trend accelerated and solidified as a result of COVID-19.
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30%
25%
20%
15%
10%
5%
0%
January
February
March
April
May
June
July
August
September
October
Average Transaction Prices
Average Incentives
100
90
80
70
60
50
40
30
20
10
0
40%
35%
30%
25%
20%
15%
10%
5%
0%
Car
Crossover
Pickup
SUV
Shopper Conversion
September 2020
Shopper Conversion
What percentage of your monthly vehicle sales do you consider digital sales (initiated via Internet, email)
More Than 80 New Vehicles
0 to 80 New Vehicles
What percentage of your monthly vehicle sales do you expect to be digital sales in three years (initiated via Internet, email)?
More Than 80 New Vehicles
0 to 80 New Vehicles
40%
33%
58%
48%
U.S. Light Vehicle Sales Rebounding Faster vs. Previous Recession (millions)
“This is an inflection point, a strategic shift, and it’s not going back,”
How prepared is your dealership for the shift to digital, contactless sales?
Digital sales already a core part of my dealership’s business strategy
My dealership is still in the planning stages on digital, but I am confident we will find the right balance between virtual and physical sales as buying habits evolve
My dealership is not moving fast enough to embrace digital, contactless sales trends
There’s no need to prepare; consumers will still want to come to dealer showrooms to buy their next vehicles
49%
31%
15%
4%
0 to 80 New Vehicles
More Than 80 New Vehicles
What are the biggest advantages to moving sales to digital? (Limited to three choices)
Broader territory –
potential to
sell anywhere
50%
40%
30%
20%
10%
0
Broader territory – potential to sell anywhere
41%
Reduced operating costs
39%
Increased customer exposure to a
variety of products, services
39%
More throughput for sales team
27%
Reduce size, investment in
physical showrooms
17%
There are no advantages to
moving sales to digital
6%
Reduction in inventory
5%
Incentives and Transaction Prices
- Year/Year Change
35
30
25
20
15
10
5
0
Virtual reality sales tools
What digital products or capabilities would be most valuable to your dealership?
Artificial intelligence
sales tools
Contactless, self-service check-in
for service operations
Vehicle to
dealer connectivity
Digital banking
Augmented-reality aids for
service technicians
Blockchain technology for secure financial transactions
I don’t know; we haven’t begun to evaluate
I don’t know; the technology is too complicated
for me
27%
24%
31%
19%
18%
21%
12%
12%
13%
8%
6%
10%
7%
9%
4%
5%
5%
6%
4%
4%
3%
14%
18%
8%
4%
8%
3%
4%
From the perspective of your dealership, what is the best way for the industry to handle vehicle software upgrades?
Software upgrades can be offered directly by the OEM and installed over the air
Software upgrades should be offered through and installed by dealers
Software upgrades should be offered through dealers, but over-the-air installation is OK
Software upgrades can be offered directly by the OEM but installed by dealers
Automakers also are moving toward offering vehicleowners on-demand features, such as the chance to purchase a short-term subscription to heated seats for the winter months or a week-long rental of adaptive cruise control ahead of a planned road trip. Today, OEMs tend to pack their software-driven features into vehicles as standard in higher trim-level models. But how these proliferating – and increasingly complicated options – are demonstrated, sold and serviced in the future remains up for debate.
28%
26%
26%
19%
Real-time data stream of vehicle malfunctions
20%
Real-time data of key system performance and malfunctions, plus owner driving performance metrics
19%
Downloadable data on all key system performance and malfunctions
18%
Downloadable data of key system performance and malfunctions, plus owner driving performance metrics
15%
Real-time data stream of all key system performance and malfunctions
14%
Downloadable data on vehicle
malfunctions is enough
9%
Other
3%
Although dealers believe there’s value in obtaining performance data, 69% of those surveyed characterize the revenue opportunity as moderate and 15% say having that data won’t be a game changer.
What data would help you service vehicles better?
Downloadable data on how owners interact with infotainment and services apps
2%
Real-time data on how owners interact
with infotainment and services apps
1%
Significant amounts of data are collected onboard the vehicle about its operation and the people in it. Who should have access to and ownership of that data?
(Limited to three choices) – Ownership
(Forecast)
(Forecast)
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Note: Gray signifies economic recession years
18
16
14
12
10
8
6
4
2
0
Customer
Ownership - Automaker
Dealer
App/
Component Supplier
Connectivity Supplier
Other
76%
18%
3%
3%
retail chain AutoNation CEO Mike Jackson told the The New York Times, and dealers responding to a Wards Intelligence/Ally survey agree, forecasting digital sales to account for more than half their volume in three years, up from just over a third today.
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15%
Low. There will be some opportunity, but not a game changer.
Moderate. There are gains to be made as we get better vehicle data in real time.
69%
High. This is a significant part of our business strategy going forward.
16%
How do you rate the revenue opportunity with predictive maintenance?
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*
*
* Strong Conversion, Demand for Pickups Pushing Growth
*
*
* The Upsides and Downside of Over-the-Air Software story
Online Sales
84%
44%
42%
4%
4%
1%
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All Respondents
0 to 80 new vehicles
More than 80 new vehicles
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Digital Retailing, Automobile Dealers and the Path Ahead
Making this shift in a significant way will require a variety of new tools and skills, retailers believe. Contactless check-in, vehicle-to-dealer connectivity and digital banking will be important, but emerging technologies such as virtual reality – favored heavily by those surveyed at larger dealerships – and artificial intelligence top the list of wants. The list of possibilities is daunting for some dealers – particularly smaller operations, who admit they are not far along in evaluating what advanced-technology tools will help them compete in this new digital-sales environment.
fast chat.
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U.S. Sales Roaring Back From Pandemic Doldrums
Light-Vehicle Demand Rebounding in U.S.
Strong Conversion, Demand for Pickups Pushing Growth
How Digital Sales Will Reshape Automobile Sales/Service/Showrooms
Content Articles
Resource Articles
Source: Wards Intelligence & Ally. The Consumer Revolution and the Auto Retailing Future
Source: Wards Intelligence & Ally. The Consumer Revolution and the Auto Retailing Future
Source: Wards Intelligence & Ally. The Consumer Revolution and the Auto Retailing Future
Source: Wards Intelligence & Ally. The Consumer Revolution and the Auto Retailing Future
Source: Wards Intelligence & Ally. The Consumer Revolution and the Auto Retailing Future
Source: Wards Intelligence & Ally. The Consumer Revolution and the Auto Retailing Future
Source: Wards Intelligence & Ally. The Consumer Revolution and the Auto Retailing Future
Source: Wards Intelligence & Ally. The Consumer Revolution and the Auto Retailing Future
Source: Wards Intelligence & Ally. The Consumer Revolution and the Auto Retailing Future
Source: Wards Intelligence & Ally. The Consumer Revolution and the Auto Retailing Future
Source: Wards Intelligence & Ally. The Consumer Revolution and the Auto Retailing Future
Source: Wards Intelligence & Ally. The Consumer Revolution and the Auto Retailing Future
Source: Wards Intelligence & Ally. The Consumer Revolution and the Auto Retailing Future
Source: Wards Intelligence & Ally. The Consumer Revolution and the Auto Retailing Future
Source: Wards Intelligence & Ally. The Consumer Revolution and the Auto Retailing Future
Source: Wards Intelligence & Ally. The Consumer Revolution and the Auto Retailing Future