Automotive sales to undergo digital revolution

Sept. 14, 2015
Auto dealerships and OEMs will increasingly turn to digital car showrooms to reduce costs and increase sales. New types of stores and online showrooms like Audi City, BMW Brand and the new MINI Pop-Up stores represent the future of auto retailing, according to Frost & Sullivan.

Auto dealerships and OEMs will increasingly turn to digital car showrooms to reduce costs and increase sales. According to new research from Frost & Sullivan, new types of stores and online showrooms like Audi City, BMW Brand and the new MINI Pop-Up stores represent the future of auto retailing.

Frost & Sullivan's "Executive Outlook of the Future of Automotive Retail" found that investments in digitization worth $500 million to $5 billion are expected from multiple vehicle OEMs and dealer groups in Europe and North America in 2016, and that 20 percent to 30 percent of the conventional dealership space will be allocated for digital technology. Digital spending is expected to account for roughly 70 percent of marketing and advertising budgets of dealers and OEMs.

Parts and service, likewise, will include more digital and online components. "Sales of parts are increasingly going online, with most sellers across different markets adopting an eCommerce platform for selling them," says Frost & Sullivan aftermarket senior research analyst Anuj Monga. "OEMs are partnering with existing online retailers, or in some cases even selling their parts directly. The independent aftermarket retailers are increasingly upgrading their websites, including payment gateways and providing value-added fulfillment options."

According to Monga, telematics is another key enabler in the evolution of parts, and service retail and different market participants are developing systems that connect with the car remotely and help with in-vehicle sales.

Luxury brands are leading the way in digital retailing. Audi, Jaguar Land Rover and Nissan have already digitally revamped existing showrooms for retail and after-sales purposes in Europe. Domestically, OEMs like Lexus and General Motors/Cadillac are approaching digitization primarily in existing showrooms and encouraging their sales forces to apply digital methods.

By incorporating digital technology into traditional retail processes, automakers and dealers can provide an immersive experience for customers. The primary obstacle to this is the cost of modernizing store elements and investing in digital technology and background infrastructure.

Marketing of these new capabilities will also be a key part of making them successful.

"OEMs and dealers will partner up to pilot digital stores and to measure lots of KPIs – footfalls, likes, dislikes, level of engagements, demographics, brand awareness, customer age, lead response time, and vehicle configurability satisfaction," says Frost & Sullivan Automotive & Transportation Team Leader Neelam Barua. "This will lead OEMs and dealers to decide on furthering the new digital initiatives in their traditional retail process."

There are some limits to how far this can go. In the U.S., OEMs can't sell cars directly to consumers via the Internet or pop-up stores, as Tesla found out when it challenged this model. (Tesla is able to operate in a limited fashion in some regions.)

In Europe, things may play out differently. "The expiration of the EU's block exemption regulations is seen as an opportunity to restructure dealership networks, eliminate underperforming dealers, and cease multi-brand retailing," Barua says. "Restructuring will include digitization of showrooms in strategic locations to capitalize on the halo effect of digital showrooms."

According to Frost & Sullivan, this multi-channel retailing strategy that incorporates digital approaches is in part a response to the shrinking of the dealerships network that took place over the past few decades and the declining number of car buyers that visit showrooms. While sales are increasing, modern customers are much more price sensitive and much less loyal to a particular brand or dealer.

"The challenge for automotive OEMs is not only to devise a new sales strategy, which could bring down the total cost of the vehicle, but also to maintain the same customer loyalty level as before," Barua says. "To achieve these ends, OEMs will introduce multiple touch points to the car purchase process by 2016."

According to Barua, 50 percent to 60 percent of sales leads will originate from digital channels by 2016; beyond 2020, digitization will "enable lead conversion ratio improvements of more than 80 percent."

Subscribe to Aftermarket Business World and receive articles like this every month….absolutely free. Click here.

Sponsored Recommendations

Access Carside OEM Repair Data with MOTOR TruSpeed

Now available on all Autel MaxiSYS Ultra Series tools, MOTOR TruSpeed Repair delivers expanded OEM service and repair data within days of being published by

ADAS Case Study: From 10 Calibrations a Month to Over 10 A Day

Originally published by Vehicle Service Pros, March 26, 2024

Autel MaxiTPMS TS900: 3-in-1 TPMS Tablet

Originally published by Tire Review, April 4, 2024

Ask The Expert: The Basics & Benefits of Bringing ADAS Calibrations In-house

Originally published by Vehicle Service Pros, March 26, 2024

Voice Your Opinion!

To join the conversation, and become an exclusive member of Vehicle Service Pros, create an account today!