Auto retailing: How long can the traditional franchised network set-up be sustained?

In our previous blog The Future of Automotive Retail: the 5 most important things automotive brands should do, we discussed how the industry is changing and the five main ways in which brands can rethink the buying and car ownership experience. Customers’ buying habits and expectations have evolved over the years along with the internet. Most industries and sectors have responded to this by refocusing their efforts to put their customers at the heart of their offerings. Conversely, the automotive retailing industry has continued to invest in the linear processes of franchised networks.

McKinsey’s 2020 report on the automotive industry points out that, “five years ago, customers visited dealers an average of five times before purchasing a car; now they enter the showroom well-informed, giving the dealer one chance to turn the browser into a buyer”.

Dealerships operate on a business-centric model rather than a customer-centric one. They tend to be located outside town centres and operate typical ‘business’ hours – when many of their customers are also at work. Apart from giving the opportunity to physically see and drive a vehicle, they are no longer an essential part of the buying journey. Customers can research online and no longer feel obliged to accept aftersales care from a dealer either.

The customer experience will be the driver that gets people into dealerships and keeps them relevant. As contact between a customer and the dealership is reduced there are fewer opportunities to connect through the ownership cycle. For dealerships to survive, every point of contact will need to be carefully managed to offer an excellent customer experience.

This will not only enhance the chances of a sale at the beginning of a customer’s car ownership journey, but it will also increase the opportunities to retain customers going forwards and to create advocates.

In the next blog in this series exploring the future of the automotive sector, we will look at how the purchase and ownership experience needs to shift from being transactional to relationship driven.

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