Dealers are making money but this isn’t the time for standing still
Amidst all the chaos in the world today, quite surprisingly, the atmosphere at most Canadian car dealers is one of calm.
Despite the prolonged and continuing supply chain disruptions, Canadian car dealers are taking a measured approach which has remarkably and quite fortunately spread to most of their customers. Staff also seem calm, as do dealer principals.
The order books are full, so too are the service bays. Business is clipping right along with strong financial performance propped up by exceptional customer loyalty. The question that no one has the answer to is “how long will this last?”
Of greater concern is the behind-the-scenes battle for data. Direct access to customers and their data throughout history have been the domain of car dealers. Customer data has been the lifeblood of dealerships. However, two significant catalysts are making big waves in the quest to monetize on future data capture. First, the move to online direct to consumer sales by some brands. Secondly, data from the connected car.
We all read and hear about various brand decisions to go direct to consumer. Some brands are beginning to say they will not sell certain vehicles through authorized dealerships but rather are seeking new business arrangements.
New brands are emerging to facilitate this shift. On the surface, there are two wild cards at play here. Firstly, will the vehicle customer, en masse, shift their buying preference to online?
The implied assumption is that if an OEM provides that choice, all potential consumers will avail themselves solely of that option. Secondly, all vehicles, regardless of propulsion, will require local brand representation to service customers throughout the driving life of their vehicles.
Once the new vehicle purchase transaction is completed, no matter how, the OEM has always had the ability to create customer data at the time of vehicle warranty registration.
Leaving the potential evolving business relationship to another article, the attraction to OEMs is only made possible by comprehensive data capture.
They can certainly access and manage the data from connected vehicles, since it would be quite conceivable that this function will be built in at the vehicle assembly stage. The mass consumer movement to online automotive retail is another matter altogether. Customers seem to enjoy the online-offline nature of omni-channel. They like the control and being able to shift back and forth as they desire during their purchase journey.
Once the new vehicle purchase transaction is completed, no matter how, the OEM has always had the ability to create customer data at the time of vehicle warranty registration.
Keeping that data population current has historically been the challenge since customers and vehicles have the propensity to move around. Therefore, logic would say that OEMs need to have access to service customer, vehicle performance and driver behaviour data to be able to fully monitor the situation. This is not an easy task.
So, what could be ahead?
For decades, the Dealer Management System “DMS” has been the cornerstone of dealership data capture. Some OEMs have in the past mandated that all their authorized dealerships use the same DMS to simplify the data exchange between dealerships and OEMs.
In recent years, for a variety of reasons, some OEMs have expanded their list of authorized DMS providers, choosing to focus on the process of data exchange rather than the DMS itself. In this way, dealerships then had the choice to choose one of the OEM’s authorized DMS providers that best fit their organization. The advent of dealership consolidation also made single-source DMS by OEMs very difficult and costly for consolidators.
Moving forward with the importance and possible monetization of start-to-finish data capture, OEMs have no real option other than to get into the DMS game and exert some control over the retail side of the business. This will not be met with open arms by authorized dealerships, unless a mutually beneficial and cooperative approach is adopted.
Consolidators, in many ways, are already doing this at the retail level, however accessing the data from connected cars becomes a new challenge.
“Customer-centric” has been a term used to describe organizations that put the customer at the centre of what they do, and the only focus of procedures and processes is aimed at providing exceptional customer experience.
The pandemic created a new customer, and as a result, dealerships led the entire industry by responding quickly. The resulting supply chain issues then seemed to come out of nowhere to present new challenges to all vehicle brands. When combined with the change in economic indicators like inflation and interest rates, the business of moving forward will be challenging. Add in the climate change initiatives led by vehicle electrification and government mandates, and the future will be extremely challenging. Many balls are in the air for traditional vehicle distribution that must somehow all join forces to create the opportunities of the future.
Although dealers seem calm on the outside, many dealers are not so calm on the inside. I believe this is behind the surge in dealership M&A activity. With the uncertainties of the future, some dealers have been heading towards the sidelines to capitalize on the rewards for their years of hard work. No one can blame them for looking after their families. Fortunately, there are still many buyers that believe in a strong future, and see these current times as full of attractive opportunities.
Automotive retail has always been exciting, and once it gets into your blood, you are hooked forever.
I believe the future of retailing will be as exciting as it has been in the past. Although there are currently many moving parts and pieces, these will be ironed out over time to create the next generation of auto retailing.
Dealers are true entrepreneurs and have always adapted. Customers need their vehicles; this will not change. So, is today the calm before the storm? I don’t think so. I think today is the calm before future opportunities arrive.
