The future of the auto dealership

The Future of the auto dealershipIf the automotive power shift I described in the previous post does occur, how does that change the nature of the auto dealer in the near future? Here’s how I see this playing out.

There will be two avenues to the purchase of a new vehicle. One is an online process that allows the consumer to either select a vehicle in the dealer’s inventory or the dealer’s network which is viewable online, or to custom build a car themselves, with their own set of colors, options, and features. The second process is offline, where a customer walks into a dealership and chooses from something in-stock or available through the dealer’s network.

I see this happen every day. A customer, either online or in the showroom, wants something different, odd, or just something we don’t have on the lot. It has to be located, or in some rare cases, special ordered. In fact, a lot of our new car sales require us to locate a vehicle from another dealer. And, the customer may go through 3-5 different configurations based on price and availability. The customer wants what they want assuming they can afford it.

At this point, the salesman becomes a coach. The salesman helps the customer understand the options, find what they are looking for, and get a price for the vehicle. They walk the customer through consideration of other vehicles, particularly if price or availability becomes an issue.

The reality is that the customer is going to buy. The question becomes from whom do they buy? The one who coaches them the best has a better shot than someone who just wants to close a deal.

Here’s where the online buyer changes everything. I think many (maybe even most) will want to configure their vehicle the way they want it and create variations of that vehicle based on price and availability. For instance, can it be located or does it have to be custom ordered from the factory?

Then they will want to handle financing similar to Lending Tree. The buyer just fills out a form and (hopefully) multiple lenders try to earn their business. They select the car, select the lender, submit the order, and wait to have the dealer deliver it, or if they feel up to it, they may actually drive down to the lot and pick it up.

If a trade is in play, the customer and dealer agree to price contingent on the condition of the vehicle, and that gets inserted into the deal, the financing and the delivery.

I see deals all the time where the customer never sees the vehicle until either they show up to sign the papers or our dealership delivers it. It’s becoming more common than you might think. We’ve delivered vehicles to Texas, Arkansas, Florida, Tennessee, and Georgia where the owner never physically sees the vehicle until it arrives at their home.

With this, the dealer transitions to a distributor with some inventory and a used car buy-back location. If they were were smart, they might house an insurance company as well. They also facilitate financing (possibly) with multiple lenders.

The salesmen, again, become coaches and facilitators.

But the big winner in all this is the service department. That’s where the real profit is and will be.

What do you think of this?