The Future of the Automotive Retail Industry

Dealers are operating in an increasingly disrupted environment, necessitating a review of their own operating model, the identification and unlocking of operational efficiencies, and the discovery of new ways to operate in a digital, omnichannel environment. We have worked with dealer groups, individual dealerships, and OEMs over the last five years to study the impact of disruptions on automotive retail and the traditional dealer model; this article summarizes our perspective on the space and its likely evolution.

 

Retailing is changing fast for many car dealers—and their bottom lines. Average dealership operating profits plunged from 8.9 percent in 2015 to 1.7 percent in the first half of 2018, while gross profits fell from 3.3 percent to 2.4 percent over the same period. Dealership sentiment is also shifting from optimism to pessimism based on the most recent industry research.

 

Importance of the Automotive Retail Industry

 

All companies and activities involved in the production of motor vehicles, including most components such as engines and bodies, but excluding tires, batteries, and fuel. 

 

The primary products of the industry are passenger automobiles and light trucks, which include pickups, vans, and sport utility vehicles. Commercial vehicles (such as delivery trucks and large transport trucks known as semis) are important to the industry, but they are secondary. Modern automotive vehicle design is covered in the articles automobile, truck, bus, and motorcycle; automotive engines are covered in the articles gasoline engine and diesel engine.

 

Transportation, the history of the rise of the automobile discusses the development of the automobile. The history of the automobile industry, though brief in comparison to that of many other industries, is of particular interest because of its impact on history since the twentieth century. 

 

Despite the fact that the automobile was invented in Europe in the late 1800s, the United States completely dominated the world industry for the first half of the twentieth century due to the invention of mass production techniques. The situation changed dramatically in the second half of the twentieth century, as Western European countries and Japan became major producers and exporters.

 

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What is the Automotive Retail Industry?

 

The automotive industry is racing into a new world of mobility and sustainability, and technology is critical to assisting automakers in accomplishing both.

 

The automotive industry is still dealing with pandemic-related supply chain and shipping disruptions, as well as ongoing part and semi-conductor shortages. Despite these lingering disruptions, both internal and external pressures are driving the industry towards the next normal, which includes advanced mobility and more sustainable practices.

 

The automotive retail industry is divided into two types of businesses that sell replacement automotive parts and accessories to consumers and businesses. To sell a diverse range of new and used vehicles via the internet and networks of regional or national franchised dealerships, dealers must review their operating model, identify and unlock operational efficiencies, and discover new ways to operate in a digital, omnichannel environment. 

 

Many retail companies have worked with dealer groups, individual dealerships, and original equipment manufacturers (OEMs) to study the impact of disruptions on automotive retail and the traditional dealer model. The market's constant change is boosting the retail sector and is expected to further augment the global automotive retail market.

 

The retail automobile industry is the largest retail industry in the United States. However, it faces the same challenges as other human interaction-driven retail industries: as they move into a digital future, it must offer digitized, customer-first experiences that seamlessly blend with its in-store experiences.

 

Following the emergence of the Covid-19 pandemic last year, the retail auto industry was forced to adopt digital-first strategies and transform its culture. The pandemic accelerated online buyer behavior patterns that had been developing for over a decade, forcing them to adapt to selling during social distancing and mandatory lockdowns. To compete in the digital world, smart auto retailers must make significant changes to their legacy sales strategies.

 

What is the Retail Industry?

 

Small businesses and chain stores sell products directly to individual consumers in the retail industry. These companies are divided into "hard" and "soft" retailers based on their signature products. Retailers are also classified by industry experts as department stores, discount stores, and niche businesses. 

 

Seasonal and holiday sales are typically used to boost annual profits in the retail industry. Because of the rise of electronic commerce and growing concerns about product quality, this industry could undergo significant change in the twenty-first century.

 

Retailers who sell hard products concentrate on long-lasting items made of plastic, metal, and wood. Locally owned sporting goods stores to retailers selling refrigerators and ovens are examples of hardline retailers. Due to consumer interest in hands-on testing, this retail segment frequently relies on brick-and-mortar stores to sell its products. 

 

Another type of retailer is "soft" retailers, which sell items made of cloth, leather, and other soft materials. Shoe stores and clothing stores that employ salespeople to assist customers with product fit, color, and style are examples of soft retailers. The sale of merchandise from a single point of purchase directly to a customer who intends to use that product is referred to as retail. A single point of purchase could be a physical retail store, an online shopping website, or a catalog.

 

The goal of the retail is to attract customers through product displays and marketing. Inventory must be maintained, shelves must be kept stocked, and payments must be collected. Retailers, on the other hand, are more than just places to buy merchandise; they provide manufacturers with an outlet so that they can focus on developing their products.

 

Despite a bleak economic forecast, the retail industry remains a significant part of the American economy. Retail is the method by which producers of goods and services deliver their products to consumers. Retailers frequently obtain their products directly from the manufacturer. That is when a commodity transforms into a finished product.

 

Retailers can also purchase products from a wholesaler or distributor, who acts as a middleman. The wholesaler brings together products from all over the world. It repackages them to make marketing and distribution easier. Retailers are the final link in the supply chain before the goods arrive in your shopping cart.

 

Also Read | 8 Advantages of IoT in the Retail Industry

 

Future of the Automotive Retail Industry

 

While the majority of automotive consumers conduct their research online, many still prefer the convenience and human element of in-person experiences, particularly from retailers with both physical and online locations. Instead of operating in separate lanes, online-only automotive retailers can collaborate with physical manufacturers, suppliers, and service providers to provide a "bricks and clicks" experience.

 

An auto parts retailer providing targeted website content to engage buyers but then connecting them to in-person centers for test drives and purchase completions is an example of this in action. In this case, both the retailer and the physical center benefit from tapping into each other's networks and providing buyers with a seamless experience.

 

In 2020, automotive retail spending will exceed $1.2 trillion, with specialty parts accounting for $47.9 billion of that total. Furthermore, the number of "do it for me" (DIFM) customers is rapidly outnumbering "do it yourself" (DIY) purchasers. To reach this growing demographic, retailers must develop a frictionless omnichannel strategy.

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Future of the Automotive Retail Industry 

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1. Digital retailing is evolving:

 

As vehicle supply recovers, dealerships will have more inventory available. More vehicles on the road provide consumers with more options, which may lead to increased competition. Dealerships must concentrate on what distinguishes them in their market. This could include emphasizing an online sales tool, the ability to customize a vehicle, or an omnichannel sales process. 

 

Omnichannel refers to technology and processes that aim to provide consumers with a seamless buying experience whether they shop online, in-store, or both. Consumers, according to survey after survey, want a quick, easy, and convenient car-buying experience. Expect the online transaction process to improve.

 

2. An emphasis on data security:

 

The Federal Trade Commission has extended by six months the deadline for financial institutions, including auto dealerships, to comply with the revised Safeguards Rule, which outlines how financial institutions, including auto dealerships, must protect consumers' data. 

 

Nonetheless, compliance experts have urged dealerships not to put off taking the necessary steps to meet the rule's requirements. As data breaches and ransomware attacks become more common, tightening security is not only a regulatory requirement but also a good business practice.

 

3. Impact of the economy on the used-car market:

 

Franchised dealerships and publicly traded online used-car retailers will both face low consumer confidence at the start of the year. If inflation and higher interest rates continue to push consumers to postpone large purchases such as automobiles, dealers and those companies stand to lose money. In 2023, dealers and online players Carvana Co., Vroom Inc., and Shift Technologies Inc. will prioritize stabilizing profit per vehicle sold over expanding growth plans.

 

Buyers will be in control of the auto parts industry in the future. As more competitors enter the market, it will be critical for your company to provide value at all stages of the customer journey.

 

An improved supply chain, compelling user experiences, new technology, and a seamless online-to-offline transition will aid in connecting consumer intent with purchasing action. Retailers will be able to shape the automotive landscape to their advantage by putting customer engagement and digital technology at the forefront.

 

Conclusion:

 

The pandemic galvanized car dealers into quickly transitioning all business processes to a remote format. New sales systems, workflow automation solutions, big data, and cloud technologies enabled car dealers to reduce the average number of employees while increasing profits. Without a doubt, the recent increase in the level of digitization of customer interaction has made a significant contribution to this! The trend toward digitalization of automotive retail has been building for a long time, and the pandemic provided a steady push.

 

According to Deloitte's Global Automotive Consumer Study in 2021, people make buying decisions and contact car dealers mostly online, despite the fact that nearly 70% of Americans still prefer buying cars offline. Before visiting an offline car dealership, the customer selects the appropriate model online, reads dealership reviews, and checks the car's history using online services.

 

The digitization of these services enables buyers to obtain comprehensive information about the condition of the vehicle as well as detailed information about each vehicle online. This compels dealers to maintain high levels of service efficiency, automate internal processes, reduce paperwork, and simplify financing procedures. This is how it is done.

 

At the same time, implementing automotive retail trends should undoubtedly be done with the least amount of security risk and expense in mind. Remote communication channels, electronic document transmission, and digital customer relationships are used by car dealers and DMSs.

 

However, ensuring a high level of security, customized functionality for each service, and dependability will necessitate additional financial investment on the part of automotive retailers. Simultaneously, a properly aligned digital development strategy will enable future returns and cost savings, as well as a competitive advantage.