The automotive industry is undergoing tremendous disruption, with advances in connectivity, autonomy and electrification leading original equipment manufacturers, dealers and consumers alike to realign to new market paradigms.
This unprecedented period of change has ushered in new opportunities in the customer-focused domains of the automotive industry – namely automotive retail. The modern consumer is living in an era with engaging digital retail experiences and demands a better customer experience, with streamlined sales, marketing and financing seamlessly integrated for enhanced shopping capabilities – and buying a car is no exception.
Thus enters the Agency Sales Model, an evolution in automotive retail that can further digitize the vehicle purchasing process and transform how manufacturers bring cars to market.
What Is the North America Agency Model?
Research shows 57% of U.S. consumers prefer to shop online, with 54% citing direct home delivery as a good reason to buy an item online. But despite this growing desire to adopt a fully digital customer experience, many automotive consumers still need a dealership experience, especially for questions during the sales process and after-sales service.
The pre-pandemic production-to-sales pipeline for automotive retail in the U.S. has a history of challenges – including inventory that’s out of line with market demand, complex incentives, haggling and price competition between local dealerships, to name a few.
In contrast, the Agency Sales Model allows customers to order a vehicle directly from an auto manufacturer. This approach to retail is focused on a “build-to-order” one-price model and brand experience, eliminating the need to haggle in a dealership setting. Also key to this process is that the manufacturer manages new-vehicle inventory orders and has more influence over the vehicles in-market while the dealer performs the vehicle delivery and service.
Under the Agency Model, customers experience a streamlined purchase, finance and delivery experience. At the same time, dealers can sell, deliver and service vehicles, reducing the cost of financing stock and minimizing the risk of aging inventory.
This model also provides a more transparent customer experience, allowing manufacturers to drive and enhance the digital customer experience journey while enabling dealers to focus on customer service and developing stronger local customer relationships.
Digitizing the Automotive Customer Experience
What makes all this possible? Similar to other industries that have experienced similar trajectories, the expansion of digital channels will provide automotive customers with more ways to engage with manufacturers and alter their buying experience. Technology such as augmented reality (AR), cloud computing, 3D visuals and virtual reality (VR) can allow consumers to truly build their dream vehicle any time on any device – at a great price.
Bringing these digital capabilities into reality is a process that is already underway. New innovative technology provides an engaging platform to support direct sales and the Agency Model approach with dealerships as the sales distribution point. Additionally, several prominent manufacturers are already proving the digitized customer experience truly delivers on its promise, with many seamlessly integrating this technology into their stack of offerings.
This technology can provide shoppers 360-degree views of any vehicle, including trim levels, colors, upholsteries, tire sizes and accessories. For example, the platform can display the look of car seats for those searching for a child-friendly vehicle, providing a complete view of what that car will look like from concept to reality.
A Future-Proofed Model for Automotive Retail
While this model has seen recent success in Europe, where more company-owned dealerships are in the market, many might question how bringing this new buying experience to the North American market will fare, given our U.S. dealer franchise model.
The reality is that customers are already there – waiting to meet automotive manufacturers and dealers for a 360-degree digital experience.
Manufacturers are already beginning to leverage this North American Agency Model and deliver a seamless customer journey that provides a “win-win-win” for the manufacturer, dealership partners and consumers.
This technology is also future-friendly, where customers can:
- View inventory from anywhere with an internet connection.
- Connect with the bank to set up financing.
- Use their mobile phone, tablet, or AR/VR or Metaverse headset to operate.
- Transfer information seamlessly across devices.
The potential for this buying and selling experience is limitless. New digital shopping experiences like this are designed to meet the needs of the new electric-vehicle consumer and will likely continue to take shape across industries.
Customer experience must be a value-add that enhances the business, not something that consumes time and creates challenges. By pairing the Agency Model with an improved shopping experience, the result is a combination of efficiency, consistency and mutual benefit for all parties involved.
An enhanced automotive retail experience powered by next-generation digital shopping tools is the key to improved customer satisfaction, dealer profitability and customer adoption of the technology-rich vehicles that await us in the future.
Mathew Desmond (pictured, above left) is Automotive Industry Solutions Architect for Capgemini Americas. Eva Poppe (pictured, left) is Chief Growth Officer for ZeroLight.