Industry Evolution: Ridesharing, Autonomous Vehicles, and Subscription Services
An Industry in Evolution
By now, your head may be spinning from all the news about the changes in the industry. Carvana’s 3,300+ ads make it clear that they believe the dealer can be excluded from the car buying experience. The five major campaigns include “The New Way to Buy a Car,” “Don’t Play the Game: Stan,” “Anything for Love,” and “Don’t Play the Game: Mitch.” If you or your customers are anything like me, you may like the new options for purchasing a car, but you still want some TLC (tender loving care). TLC is where dealers show their value.
When I buy a new car, my salesperson explains to me the mechanics of my car as well as how the features work. S/He shows me how to operate the technology, explains the safety features, schedules my first oil change, and sends me on my way with his/her contact information. A couple of weeks later, s/he calls me to see how I am doing. I don’t know about you, but vending machines cannot provide the same experience. Dealers offer a product and a service that help maintain a lifestyle. You keep the soccer moms going. You get dads to the golf course. You make sure the kids make it to school and the parents make it to work. You also support our communities by providing jobs to college grads, high school grads, and those who prefer helping people over consuming endless books. You give to many causes that help children and families. You should be proud of all the great work you do!
The best thing to do in times of structural change is to know your customers, know your brands, know your capabilities, and decide what you want to do. You own your destiny. You may recall that when the TV came into the scene, it was predicted that the radio would disappear. When the internet came, the TV was supposed to disappear. Network television changed when cable appeared. When satellite was born, cable tv was supposed to die. However, now they coexist. Each serves a specific purpose and we use all of them. We have gone from animals as transport, to horse and buggy, to crank cars, stick-shift transmissions, automatic transmissions, smart navigations systems, sophisticated safety features, now to clean fuel and autonomous vehicles. As vehicles and purchasing options evolve, the purchasing process changes too. Customers can buy in-person, online, and from a car vending machine. The truth is that these vehicles, purchase options, and mobility methods will coexist just like the radio, TV, and internet coexist. What is important is how we capitalize on these changes. Some of these changes can be opportunities to reach new segments in different ways. We cannot be all things to all people, but we can do very well meeting the needs of a specific group of people.
What about ridesharing? Ridesharing is a trend that is growing. It is in direct competition with taxis not vehicle sales. There is some impact to the industry, but the truth is that people still prefer car ownership. Ridesharing is a new way to move around but it is not the ownership killer. Ridesharing is not practical for the soccer mom, the dad that is coaching, or the person that requires mobility for themselves and their things.
What about autonomous vehicles? Autonomous vehicles are becoming more main stream. However, they are not a proven technology that can replace the driver. A challenge with autonomous vehicles is that they rely on an integrated network to function. Right now, the space is open and there is a lot of experimentation. As these vehicles grow in popularity so will the demands on a network system that is local and national. There are many things to work out. Who maintains the system? Who protects it from viruses and hacks? Who updates the code? Who keeps communication flowing? Computer networks that facilitate autonomous driving can become congested. We need a robust infrastructure to ensure that autonomous vehicles can function; we are not there yet. Audi is airing a commercial that is future-looking and takes a jab at autonomous vehicles. The ad shows the value of driving a car versus riding a car. Here’s the link.
What about subscription services? Subscriptions services may be an opportunity if it aligns to your business model. Subscription services target the upper middle class who understand the true cost of ownership, want one payment per month, like the ability to drive different cars, and who have clean driving records. Subscription services provide new-to-3-year old vehicles, include maintenance, insurance, and the use of a vehicle for a predetermined number of miles. The concern is that the service diminishes brand loyalty; the other side is that it may promote dealer loyalty. Think about it. Someone that subscribes to your dealer program can get different cars from your fleet. Just like your repeat car buyers, you can have loyal subscribers. Subscribers and buyers could represent two different customer segments. The subscription model is still in its infancy. There are things to figure out like depreciation, residual values, fleet management, concierge services, and insurance. However, there may be an opportunity to service a customer who is willing to pay to drive a different vehicle every month.
Finally, we’ve already discussed online shopping and car vending. I don’t believe they will replace the dealership. People like to shop and they want to work with people. When there is something that they do not understand about their car, they want to call someone. People do not want to be on hold waiting on a call queue for hours. People also want the test drive experience. They want to touch and feel the car they are buying; pictures are great and so are videos, but they do not replace the sense of touch and smell that come with a new car. People want the experience of sitting in a new vehicle.
It is a time of change, so let’s own it. We cannot let the competition or technology define our business. If you attended the NADA Show in Las Vegas or the Digital Dealer Conference in Orlando, you heard this message loud and clear.
Follow us on Twitter, Facebook, and Google+, and connect with us on LinkedIn for more industry insights.