The Growing Gap Between Automakers And Dealers
There is no doubt that in just a few short years, the auto industry has made remarkable advances in areas like connectivity, autonomous driving, robotics, and electric vehicles. For such large, traditional companies to embrace
the challenges of developing and implementing so many new technologies so quickly (and to largely succeed) is a true testament to the ambition and creativity that permeates automotive.
But in the rush to build smarter cars, we may have lost sight of the critical role that the dealer plays in the success of the automotive industry. 100 years later, dealers remain the very linchpin of the automotive industry. As important as they are, we have to ask if they are being left behind by the IT revolution.
The Gap Is Becoming An Abyss
It was just a few short years ago that the interior of vehicles was called a cabin and now it is often referred to as the cockpit. And it only takes one look inside a new vehicle to confirm that cockpit is now the more appropriate term. Touchscreens, infotainment centers, and multiple sensors are now featured prominently in even moderately priced vehicles. This is a direct result of the importance that manufacturers have assigned to product development and the $100 billion spent globally on automotive R&D.
Now, contrast the almost overnight transformation of the automobile with the lack of change that has happened in the retail experience. Is the typical dealership evolving as fast as the vehicles that it sells? What about the software systems utilized by dealers to sell and service those vehicles? How much have the dealer’s systems really evolved in the past 5 years?
What The Widening Gap Means
Producing ever more sophisticated vehicles with greatly enhanced data capabilities is a double-edged sword. On the one hand, vehicles with advanced capabilities like connectivity and autonomy are exactly what consumers want. On the other, having these sophisticated vehicles in a showroom that does not have the technology to support an efficient and enjoyable buying experience only amplifies the disconnect between manufacturing and sales.
Car buyers are expecting the same “frictionless buying experience” from dealerships that they enjoy at Starbucks, Amazon, and Blue Apron. Yet, the average time in a dealership for a new vehicle purchase is still about 3 hours. The F&I process alone, which is a very profitable center for most dealers, takes 1 hour. The result is that only 66% of Millennials and 67% of Gen-X buyers are satisfied with the dealer experience. Ouch! Outdated systems with weak integration is a big culprit here.
The last few years has brought a lot of speculation and hand wringing concerning the possibility of a large tech company either building their own vehicles or purchasing an existing automaker. With the notable exception of Tesla, this has not happened, but the possibility still exists.
Putting speculation aside, the real, as in actually happening now, threat is coming from the “unbundling” of the automotive industry. Rather than a large IT company plunging into the auto business, we have over 1000 companies chipping away at some of the most profitable parts of the industry. This has the potential to cause “death by a 1000 cuts” and urgently needs to be addressed. Better software and better integration with marketing, CRM, manufacturing and Business Intelligence (BI) would go a long way to blunting the impact of these potential competitors.
After years of watching the best and the brightest shun manufacturing companies and opt instead for Silicon Valley and similar destinations, automakers are now starting to see success in attracting quality IT talent.
Unfortunately, dealers have not had the same level of success. Many dealers are struggling to find quality team members, especially younger employees. With millennials now enjoying an improved job market, dealers are competing against other employers that offer a more modern and stimulating workplace. Outdated and clunky dealer systems, combined with inefficient sales and marketing strategies reduce the appeal of working in a dealership and make attracting good talent more difficult.
Why The Gap?
Most of the gap between the leap that auto manufacturing has recently made and the current state of dealer software systems and processes can be traced back to the “last mile” problem. Originally used to describe the difficulty that telecom companies have in extending their services to all of their customers, in automotive it describes the difficulty of upgrading and integrating multiple dealer systems that are used across 1000’s of dealers in over a 100 countries. Automakers can certainly develop new interfaces, including ones that could enhance the sales experience or improve BI, but quickly and efficiently integrating them has often been a daunting task.
Closing The Gap
As the technology within the automobile advances at breakneck speed, the gap between the vehicle technology and the retail technology will quickly widen. There’s still time to close this gap, but time is running out. While car buyers still prefer to purchase vehicles from dealers, their patience for inflexible and cumbersome dealer interactions is wearing thin. Poor integration also prevents valuable real time data from reaching the corporate BI and analytics initiatives necessary for future growth.
We can address this serious challenge by using the same approach that OEMs have successfully used to quickly transform from a purely manufacturing model to a hybrid manufacturing-data model.
- Recognize that the challenge is real, urgent, and not going away
- Make a commitment to conquer this challenge
- See this as both a challenge and an opportunity
- Attract top tier talent and utilize the best technology to solve the “last mile” problem
- Dedicate the required financial resources to dealer system integration
- See it through!
"The time of the ten-year projects is finally over. IT projects will in the future have a term of two to three years.”