What do Burger King’s Impossible Whopper and new automotive mobility trends have in common?
Quite a bit.
It’s been said threats are often opportunities in disguise. There have never been more threats to dealers. But could some of these threats be a good thing? Yes.
I smile when I read about the recent success that Burger King has enjoyed with its rollout of the Impossible Whopper, a plant-based alternative to beef.
I can only imagine what internal debates occurred at Burger King. One side must have worried about the increasing popularity of meatless burgers and its effect on traditional hamburger sales, while the opposing camp might have said, “Wait a minute? Who better to sell plant-based burgers than Burger King?”
As it turns out, that group won big. Even better, they leveraged the existing franchise infrastructure for success. They left tradition at the door and the profits walked in.
A similar scenario now is being debated within OEM boardrooms and dealerships. These discussions involve whether (or how) to participate in new transportation trends such as on-demand vehicle rentals, carsharing, gig-economy commercial rentals and eventually autonomous fleets.
Surely, one side of the table is saying: “What are we going to do when people start buying fewer cars?”
From the other side: “Wait a minute? Who better to serve the new trends in transportation than the existing dealer body?”
My experience is showing that opportunities exist for dealers who recognize the potential hidden inside the threat of new mobility trends.
Electric vehicles, ridesharing, subscription, commercial and on-demand rentals are all growth opportunities that the existing dealer infrastructure can serve.
Better yet, every dealer department benefits from the incremental revenue opportunities new mobility solutions offer: Parts, service, new and used sales finance and aftersales. The entire dealer ecosystem is fed.
We have seen some non-dealer companies cut back or entirely withdraw from new transportation ventures. Why? The disrupters were trying to recreate an infrastructure that dealers already own. Building one from scratch is expensive and time-consuming. Never mind having to create a new brand.
Dealers have the necessary brand, people, real estate, inventory, service facilities and financial resources.
Today’s dealers are not only the best prospects for the new mobility game, they own the stadium.
Still here are some concerns holding dealers back from jumping in:
Depreciation, vehicle utilization, insurance, excess miles, vehicle tracking and administration. I’ll address each.
Depreciation is like gravity; it can kill you or you can make it work for you.
Fact is, depreciation is an expense and it must be covered by revenue. No different than rent.
Depreciation risk is further mitigated by strategic utilization. Dealers now can partner with companies that offer marketplace and/or digital platforms to expose vehicle inventory for on-demand rental or subscription customers.
Software offers data to minimize depreciation exposure via suggested times and mileage milestones to onboard and remove vehicles from service.
Utilization is important for a profitable return on a vehicle asset. Again, companies exist that partner with dealers to share a dealer’s available inventory with the right audience.
Mobility applications are turning a dealer’s idle, aged or purpose-allocated inventory into incremental revenue streams. Retired loaners and rental fleets are natural for mobility programs such as Uber and Lyft.
Many of their drivers need to rent a car to work, at least initially. Rent-to-own programs are an opportunity for them and dealers.
Insurance solutions that were prohibitively expensive or otherwise non-existent now are available for mobility services, thanks to improved telematics technology and driver-vetting services.
Miles mean money. As a former dealer, I had to change my religion regarding vehicle mileage. Mileage used to be the measure of a vehicle’s value. Now it’s revenue. After 40 years of retail, I finally grasped the concept that increased vehicle consumption means more revenue opportunities.
It has been proven to me that a sitting vehicle depreciates at a similar rate to one being driven. This will be more significant as EVs become mainstream (EV battery warranties are already time-based, not mileage based.) Furthermore, high-mileage drivers traditionally change vehicles more often and need more frequent service. Yes, miles mean money.
Vehicle tracking and administrative tools are now widely available. They reduce efforts and resources to monitor vehicle utilization and location. These tools also allow for the strategic management of vehicles.
A dealer’s resistance to new opportunities that were once problematic is understandable. Dealers often don’t have the risk tolerance for negative cash-flow that start-up companies may endure until they figure things out.
But dealers can leverage the knowledge and technology that others have already invested in.
Burger King is still selling a lot of all-beef Whoppers and dealers will be selling vehicles for a long time to come. But Burger King realized it could incrementally profit from new trends and is in the best position to do so. So can progressive dealers. As writer William Gibson said, “The future’s already here. It’s just not evenly distributed.” (Brian Allan, left)
Brian Allan is senior vice president-Strategic Partnerships For HyreCar Inc. a digital company that facilitates the rending of vehicles to Uber and Lyft drivers in need of vehicles.