The most overused word in business today is ‘disruption’ and it’s not only coming from all directions, but being applied to all forms of business, whether it’s the competition between bricks and mortar retailers, and online merchants; or in the case of the automotive industry, how the traditional dealership model is destined to die – probably a slow and agonizing death, with the loss of many jobs.
Just recently some of Australia’s most prominent owners of new car franchises have sold out, offering the rationale that sales of traditional passenger cars are declining, and as such the profit potential which they can realize through their dealership investments are suffering comparable decline.
This has been highlighted in Australia by GM Holden’s troubles, as it tries to reframe the Holden model structure and remain competitive. Some prominent Holden dealers have recently either shut down, or sold out.
Now that Groupe PSA has acquired Opel-Vauxhall from GM, comes news that the French company is looking to re-enter the American market after an absence of three decades, but it will employ ‘disruptive techniques’ to sell and support new cars.
|Infiniti 'store front' in a shopping mall|
A longtime, highly experienced American auto entrepreneur, working with PSA, has proposed quite revolutionary ideas, such as pushing the sale process to purely online.
Then, just having ‘store fronts’ so that customers can be hands-on with the cars; also, promoting the idea of ‘super service centres’ owned and operated not by the marque, but by independent operators who would service all makes of vehicles.
Then, the entrepreneur suggests a company like Amazon could warehouse, and deliver spare parts to the service centres.
All this completely bypasses the traditional car dealership model.
Quite frankly, if I was an ageing owner of multi franchises in America, I think now’s the time to ‘get out’. Sell to someone who thinks they can make money, then move to Florida and retire.
I recently became aware of a covert Ford Motor Company project which is studying eventually not having any traditional Ford dealers, but rather ‘viewing centres’ where you can experience the car; after which you would complete the purchase contract online direct with Ford, and the car would be delivered by either an independently-run ‘all makes’ service centre, or maybe through the viewing centres.
Another twist is that all prices would be fixed, no negotiation. The staff at the viewing centre are just there to facilitate you viewing the car; deciding on make/model/options, then assisting with completing the deal online.
|Americans will say goodbye to Fiesta, C-Max, Fusion and Taurus|
Coming from Ford, this concept should not surprise anyone today.
This is the company which just announced it is killing off ALL its passenger car lines in America, except for Focus and Mustang, and will redirect its investment into new model SUVs and trucks.
|Sole survivors - Focus and Mustang in the USA|
NOTE: If I was an Australian Ford dealer I wouldn’t be surprised if Ford Australia makes the same move.
However, this proposal means that car dealers could operate multiple, small store fronts as ‘viewing centres’; and maybe use their existing service workshops as ‘all makes’ service operations.
Choice of vehicle types is changing so rapidly, that the dealers with big investments in bricks and mortar dealerships are struggling to have the right vehicles in stock, and then they face losing money stocking cars that buyers don’t want.
In the traditional dealership model, sales has never been a profit centre. Profits come from finance, used cars, service, and investing in customer retention.
Interestingly, I have discussed these future concepts with a number of traditional automotive writers, consumers and car dealers. The auto writers do not seem to be very aware of how quickly things are going to change.
The consumers I’ve talked to show mild interest, and in Australia, that’s because online buying of big-ticket items like cars, has not yet penetrated the community quite like it has in the USA.
The dealers I’ve talked to stare at me with open mouths, creased brows and frowns, as they realize they are in a business going the way of dinosaurs and the dodo.
No, it may not happen overnight, but then I look at the shock Ford created throughout the US auto industry, literally overnight, when it made its announcement about killing off most of its passenger cars.
In timing terms, it’s as simple as making the decision, announcing it, and then executing the strategy. You could think that’s disloyal to dealers who have supported your brand through thick and thin, but hey, it’s business!
Car manufacturers have much more invested in selling cars than dealers, and they’re not that worried about small businesses, which now need to prove their agility to deal with ‘disruption’– it’s coming down the pike – FAST!