February 14, 2014 00:00 By The Nation 3,969 Viewed
By 2020, "60-70% of new car sales likely to be generated through websites, mobile sites, social media or apps"
The disruptive influence of connectivity is changing the way business is conducted even in traditional industries such as automobiles.
High real-estate costs, expensive resources and the need for innovation to stay afloat have compelled many automotive dealerships to shrink store space by about 20 per cent and resort to digitisation for interactivity with the customer, according to the latest analysis by Frost & Sullivan.
As bricks and mortar give way to a “bricks and clicks” sales model, European original equipment manufacturers (OEMs) are pushing for standalone digital formats, while North America seems to prefer digitisation within existing franchise models.
A new analysis by Frost & Sullivan titled “The Advent of Digital Retailing and its Impact on Car Dealership Structures” finds that global carmakers are desperate to innovate and adopt a new retail model for the next generation of young car buyers, the so-called Generation Y, a generation that engages through collaborative consumption and targeted digital marketing campaigns.
Frost & Sullivan expects that by 2020, 60-70 per cent of new car sales leads are likely to be generated by a digital platform, be it websites, mobile sites, social media or apps.
Automotive major Audi is at the frontline of this change in retail network. Its digital showroom Audi City, in an upscale shopping zone in London, presents the entire line-up of 40 models virtually. It encourages visitors to configure their dream cars on multi-touch tables, investigating all the possible options by themselves.
“The halo effect of the digital showroom in the heart of the city is expected to drive sales to ‘outer’ stores and potentially affect dealership network set-ups, both in terms of size and total number of traditional dealerships,” said Frost & Sullivan director of Growth Consulting Automotive & Transportation Julia Saini.
Car companies are also using fashion merchandising and combining lifestyle elements into retailing globally.
Intersect by Lexus, Tokyo, and L’Atelier Renault, Paris, conduct special events and exhibitions for new product launches, offering a strong automotive brand experience through lifestyle-related concepts of art, fashion, music, design, food and technology.
The advent of digitisation in car retailing has led to the development of new and additional performance indicators. It has seen the introduction of innovative sales strategies, and both cost reductions and additions in upfront investments.
New key performance indicators such as brand awareness, digital engagement of customers, customer age, lead response time, and vehicle configurability satisfaction will be of increasing importance in future digital retail formats.
“Better quality leads and easier follow-ups through integrated social media strategy define the success of digital showrooms,” noted Saini. “By 2016, automakers are expected to open more than 100 digital showroom/lifestyle stores globally, specifically aimed at enhancing both the retail and brand experience with limited on-floor physical inventory.”
With European and North American OEMs expected to invest between US$500 million (Bt16.2 billion) and $5 billion in updating store technology, training staff and digitally integrating various aspects of the car retailing process, soft digitisation technologies such as digital tools, signage and kiosks are anticipated to grow strongly in the short term.