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The old adage which says that the “customer is king” is taking on new significance in the 21st century as product-based marketing is being replaced by an information-led market where savvy consumers demand flexible, personalised, customer-centric service.
The retail automotive industry, in which most players are still stuck in the 20th century, has the most to lose if it doesn’t change its product-orientated ways, according to Deloitte.
The indications of what is to come for the retail auto industry is covered in a Deloitte report: “The future of auto retailing: Preparing for the evolving mobility ecosystem”, which indicates major challenges are ahead for the global and local car retail business, says Karthi Pillay, Africa automotive leader at Deloitte.
“The surest sign of things to come is embodied in a research finding which indicates that, when it comes to making car purchasing decisions, Generation Y (drivers born during the 1980s and 1990s) value the customer experience three times as much as vehicle design. Retailers therefore need to redouble their efforts to create memorable and painless customer experiences to retain customers and appeal to new ones.”
Pillay points out that the implications are that:
* The product-orientated approach still prevalent in car retailing operations has to change and will ultimately have to go;
* Dealer showrooms filled with stockpiled vehicles on display could become things of the past; and
* The model using commission-incentivised sales people in showrooms being responsible for maximising the bottom line will be challenged.
Consumers today do not make allowances for the way that different industries deliver services.
“Adding to the challenge facing the auto retailer is a changing perception regarding car ownership. Although South Africans still favour cars above the limited public transport services available, there is no doubt that car sharing and services such as Uber will increasingly attract people away from car ownership. The emphasis will be on convenience, rather than ownership, especially in urban areas where traffic congestion is an everyday reality.”
In South Africa, one of the signs of things to come was the launch of Locomute, a car-sharing scheme designed to bring flexibility to the car rental industry, and aimed at users who need a car for short trips or even one-way trips. Using an app, renters can reserve a car, find the one parked nearest to them in a public area and receive a code which enables them to open the vehicle. At the end of the trip, a user locks the vehicle. The app takes note of where the vehicle is parked and it can then be rehired.
What makes the service different is that the user only pays for the time the car is used. The costs of fuel, insurance and parking are all included within the hire fee.
A perfect solution for people who need a car to do business in the city, the service enables a user to use other modes of transport and shift to a car only when it is needed.
With the number of changes in the retail automotive market increasing steadily through technological advances in the digital space and more empowered customers, the onus is on retail dealerships to innovate, introduce new business models and engage customers – ultimately introducing new retail models and a distribution channel to a sales operation that has remained unchanged for decades.
“We foresee a move towards an omni-channel retail positioning where customers can interact through an integrated seamless shopping experience,” Pillay says. “They will be able to shop for a car, buy and take ownership of a vehicle regardless of how they interact with a dealership.”
An example is a motor vehicle dealership in London which has only a few models on display. Instead, customers interact with large digital screens to explore different models and design their perfect car.
As part of this process, original equipment manufacturers (OEMs) and dealers will have to work closely together and share customer and sales data to deliver an omni-channel experience.
According to the Deloitte Digital Divide study, automotive is now the third most digitally influenced purchase, coming in behind electronics and home furnishing.
“Car retailers, like other retailers, must realise that the sale of their product is not simply a ‘once-off’ transaction. They need to track customers as they travel through the different channels and enable the consumer to use physical dealerships as a supplement to increasing digitisation of the car retail space,” says Pillay.
By utilising online research, dealers as well as OEMs can access a wealth of information about car purchasing, servicing and customer habits.
“Growing expectations from car purchasers dictate that an omni-channel approach is seen not as a project, but as a permanent paradigm shift to make dealerships more agile to customer needs and moving firmly to a customer-centric approach that will totally reshape dealer operations.”
“There is no doubt that long-term market forces will change the industry. Those who adapt early will undoubtedly be winners in attracting and maintaining sales and developing customer loyalty,” says Pillay.