Industry trade

How Auto Retailers Can Embrace Digital Disruption

Disturbance usually begins with the idea that things can be better. A look through history will show that much of the technology and innovation that has changed the world began with this belief.

But, to realize this potential, industries must harness new advances and adapt to change. If they don’t, the disruptions can have a negative impact until a market corrects itself. Organizations can avoid this by embracing technology and innovation, and learning how to use them to their advantage.

Before 2020, no more than 2% of annual car sales were made online. It jumped over 30% during the shutdowns and continued with rising expectations. Several car manufacturers have announced their intention to sell certain models only online. Others have said they intend for digital sales to account for up to 50% of their business.

While current state legislation keeps dealers at the table, digital disruption is coming and dealers have yet to adapt. Once technological disruption begins, it is inevitable. However, the Internet and other innovations can provide opportunities, with the potential to reduce costs, improve margins and reach. Dealers should grasp the power and potential this can create for them.

Automotive retail is fortunate to be one of the last retail industries to see internet and innovation disruption. Music, television, fashion/apparel, electronics, home goods and service retailing have undergone the digital transformation. Unlike those categories, auto retail may look to its past as digital disruption proliferates.

For example, the legacy music industry initially struggled to keep innovation at bay and lost huge opportunities, sales, and market share. Apparel/fashion brands that haven’t embraced the technology are either struggling or gone. Legacy car dealerships should not suffer the same fate.

While many dealerships choose to sell or consolidate, they have the opportunity to adapt and use innovation. The first step is to understand the likely future of auto retail and how it can help dealers make decisions and adapt to change.

For example, dealership as distribution center is a likely scenario, where consumers can pick up new and used vehicles after purchase or receive them by delivery service. Or, dealers can choose to continue selling directly to consumers by building a strong position as a digital retail or hybrid business. There’s also the option of taking both approaches, where they serve as distribution centers for automakers while still selling their own inventory directly. To stay in the game, dealers need to consider these options and start planning today.

There’s a lot to be gained from learning how other retail industries are using technology in customer experience beyond online sales. Retail giant Nordstrom is offering customers the option of buying in-store, or they can shop online and receive their order by pickup or delivery. Streamlined inventory is often found in the brand’s physical stores, as well as cafes, restaurants, and tailoring departments. Value-added channels also have potential for car dealerships. A host of offline stores offer self-checkout or other perks.

Apple customers buy directly from the seller who supports them, without having to wait at checkout. Purchases that involve contracts provide documents in digital form. This reduces time and effort during the purchasing process, and records can be stored electronically to save space and resources.

Automotive retail should learn from these approaches and think about how it can implement similar innovations.

What dealers can do today to exploit the future is gain a solid understanding of what lies ahead and the options available at every stage. Although this changes often, keeping a steady pulse can help dealers stay savvy, flexible and ready. It can be as simple as regularly reading industry trades and watching others in the market. Attending trade shows and other events, and nurturing professional networks, can also provide eyes and ears. They should also look to partners and innovation platforms that can deliver rapid, turnkey insights and breakthroughs. From there, dealers can better develop a plan and approach to succeed in the new world ahead.

Nathan Hecht (photo, top left) is founder and CEO of Rodo.coman online marketplace that connects car dealers and consumers for the purchase, sale or lease of new and used vehicles.