Is car retailing dead?

Last week Vauxhall put its head above the parapet to end the contracts of all 300+ of its UK dealerships. (Here’s the news piece in the Daily Telegraph). This sent shockwaves through an industry already reeling from falling new car sales. The future is very uncertain. A recent KPMG report predicts that 50% of car dealerships will disappear by 2025.

Does Vauxhall’s move signal the start of an avalanche of dealership closures?

The amazing thing is that companies have been selling cars the same way for the last 80 years. The industry has become complacent and lacks innovation. Which makes it ripe for disruption. When did you or your friends last have an easy and pleasurable car purchasing experience? We’ve all got more horror stories to tell than we have amazing tips to share. (There was only one time in my life that I got an incredible customer experience at a dealership. I was so bowled over I bought the salesman a present!)

It isn’t game over for the 5,000 UK car retailers, but the industry needs to change radically. At the moment car retailers are in the wrong place, with the wrong processes and the wrong people. There is a mismatch between on one hand how we buy, drive and own, and on the other, how retailers sell cars to us.

We see five ways in which car retailers can change to survive and thrive. And it’s all about seeing the world through the customer’s eyes.

1. Separate transaction from interaction

At moment the car showroom is a place where people sell cars to customers. Car retailers can take this stressful element away. Instead, they can morph into experience centres where customers can try out vehicles. Professional, non-commissioned employees will be on hand to help customers. Their job is to educate and entertain customers; not sell to them. Separating transaction from interaction enables a transformation from car retailer to mobility hub.

2. Become a mobility hub

So the new purpose of the experience centre is to help customers achieve their mobility needs. This means the venue can widen its remit. The customer can pick up a temporary vehicle for the weekend, try out an electric bicycle, or sign up to a car club. They could get advice on the best Mobility as a Service operator to use. (MaaS). The customer chooses from a menu of transport options such as public transport, ride/car/taxi/bike sharing or lease, and so on. It’s a bit like a mobile phone provider who bundles broadband and landlines. Here’s a bit more info from the MaaS Alliance. Give the customer the option of buying or renting. Short term, medium or long term.

3. Start to service on the go

It’s all about taking the hassle out of maintenance and servicing. The current model is clunky and time consuming. The service garage doesn’t need to a part of the showroom building. Again, it is about rethinking the real estate. Instead, carry out simple jobs as a mobile service at the customer’s home. For more complex jobs, collect the vehicle, and provide a test drive replacement. Then return it back once ready. It’s all about making the customer’s journey as seamless and smooth as possible.

Our CX Lab co founder, Tim Routledge, has ten years of scientific investigation into car retail. He’s combined neuroscience with biometric monitoring to identify moments in the customer journey that confound expectations. We call these Tripping Points, as explained in our short video. Dozens of research experiments have helped Tim understand drivers of behaviour in both customers and employees. And by identifying Tripping Points, Tim has been able to make customer journeys far smoother and more bump free. This helped Honda achieve a 30% uplift on sales based on these techniques.

4. Provide a branded experience

At the moment most car dealerships are very similar. They follow a product led strategy, relying on the actual product for differentiation. But it is more future proof to differentiate in every single aspect of the overall experience of the brand. From the smell, the colours, the music, to the food and drink, and of course the employees and how they act. Think of the differences between Lush and Kiehls, or between Hollister and The Gap. Also consider what venue works best. It doesn’t have to be a big unit on the edge of town surrounded by cars. Companies like Rockar already occupy venues in shopping centres like Westfield in Stratford. Their car store sits side by side with high street stores.

5. Change the experience to change the experience

If the current car dealerships wish to transform, they have to start with their employees. How you are on the inside is how you are on the outside. The employee’s experience must change so that employees can delight customers. It’s all about thinking afresh about the type of people you want to recruit. Metrobank is a great example. They wanted to provide a far better standard of customer service than other banks. So Metrobank looked for people with lots of customer service experience from outside the banking sector. It’s simple to train the technical knowledge. But its far harder to train the attitude needed to give awesome customer service. It doesn’t just stop at recruitment. The whole employee experience journey has to change. For example if companies reward employees for selling lots of cars, their behaviour will focus on selling. Different reward methods are needed to support employees in their mission to educate and entertain customers. (For more on employee experience read our previous blog post).

Summing up….

The key for the car retailing industry is to stay relevant to customers. In fact, the secret is to become obsessed by customers. Product is important but it is not enough. A physical venue can only compete with online sales if it engages with customers. There must be an emotional connection. From a customer’s perspective: