- Source: MINI Australia

The Dealership Of The Future

2w ago


Worldwide, selling a car is a ridiculously competitive industry. It's so competitive that once every 2-3 years on average it sends a manufacturer out of business. This manufacturer has normally been sent out of business because the process they use to sell a car is incompatible with how a buyer presumes to buy a car in the 21st century, or because their pricing is noncompetitive to the remainder of the market. But I wanted to focus on how we buy cars today and how we're going to buy cars tomorrow. I wanted to focus on this specifically because it's going to change exponentially. It already is changing in some cities worldwide.

This has all come about because I was sitting in a meeting yesterday about an unnamed car brand which, in Australia anyway, I believe is at the forefront of these advances. In Australia the automotive industry's current focus is what most in business refer to as a customer contact plan. To the average buyer this is basically how many times they're contacted in the years after purchase (via email, text message, phone call and mail) and how we as manufacturers and dealers talk to them. It's actually become a ridiculously scientific and complicated process. It's also something that every single person has a different opinion on. I know this because I've seen multiple study results into the same thing which show something totally different.

Last year mini australia were the first manufacturer in australia to sell a limited edition car purely online.

To that point though my belief is that these "contact plans" may be the fad of the day. But it isn't the future of buying a car. Oh no, there are some ridiculously exciting initiatives going on in the world to change how we buy a car. Last year MINI Australia were the first car manufacturer in Australia to sell a limited edition car purely online. Crazier still the car sold out in about a week. You're probably thinking right now "yes Marcus, but I bought a pair of ASOS jeans online last night. Tell me something new". And yes, I will get to that. But buying a car online is far more complicated than your average purchase. It also requires a high amount of cooperation between a dealership and the brand they represent.

With that said I found that example from MINI Australia interesting. And there have been, indeed, a few manufacturers to sell vehicles online. Tesla, for example, have successfully done so in the US and are now attempting to roll out full trials in an attempt to remove physical dealerships and do deliveries from stocking points which won't cost them an arm and a leg to either own or rent.

Let's dwell on Tesla for a minute as well. Because Elon Musk's buying process is exponentially different, in Australia, to any other seller. Musk and Tesla in Australia believe, quite psychologically as well, that they can change the mindset behind a car purchase. Car purchases at the moment are perceived to be the second most important purchase of your life after a house, business or property. This normally makes it quite a big deal and a long process. Current research pins the car buying process at around 4-6 months. But a buyer will only ever visit a dealership 1.2 times before purchasing a car.

I don't necessarily know how that works. I suppose that these "research companies" are counting a stare at a dealership from the street. But anyway the point is most people visit a dealership once. Tesla, however, delved further into why this is. Why are people only visiting one dealership then buying a car? Well one reason was ease of information (people were able to hop in their phone and without talking to a sales representative just get any information they needed). But the other reason they found was that most people perceived a dealership visit to be extremely daunting.

Source: Tesla Chadstone

So Tesla set out to solve this problem. And they did this by positioning themselves with faster and easy to purchase brands. Their strategy in Australia is to put "dealerships" in shopping centre's like Chadstone (Melbourne) or a Westfield store which act as a shopfront sitting alongside your typical Gucci or Saint Laurent store. And use their dealerships as delivery points. This allowed them to employ less staff, costed less in overheads from rent and essentially have one dealership per city in Australia. The next step they've proposed is removing the dealership altogether and deliver the car to your doorstep, which I think is astounding customer service.

Other brands have understood that most car buyers nowadays want more choice and have less disposable income (money they can spend on cars). In New York for example there has been a large uplift in exclusive "car clubs". These clubs require you to pay a membership per year (quite an exponential one) but give you access to a near endless supply of classic and modern prestige and sports vehicles. These clubs are making so much money that the Classic Car Club Manhattan actually bought an endorsement in USA network's Suits during season 3 (at the ratings that show was doing in early days an endorsement would've costed somewhere between $2-3 million USD).

Source: Classic Car Club Manhattan

Manufacturers though have caught onto this as well and started looking into new ways to sell car leasing and car sharing products. BMW are trialing a program in Seattle, Portland and Brooklyn named ReachNow. Which encompasses their sub-brand MINI as well. Essentially that program requires members to pay a monthly subscriber fee, much alike to for example Netflix, and gives them access to a fleet of 3 series. X1. i3. MINI Coopers and MINI Clubmans. BMW have also hailed the program as a success with 50,000 subscribers in the first two years. Considering the pricing structure I find that an astounding number and especially for anyone looking to drive a BMW. BMW have also rolled out a sister program named DriveNow in Europe in the same vein. That program was trialed in Munich and since has been rolled out to multiple cities including San Francisco in the US.

This prompted a whole slather of manufacturer programs that support car sharing. Ford in Australia for example have flipped that idea on it's head and offered it as an added feature to new car contracts. That program is called the Ford 2nd Car Program. It means when you purchase a new Ford vehicle, you can actually switch it for another Ford vehicle on range for a short period of time during the first 2 years of purchase. Better still it only costs about $500AUD to enrol (depending on the car you purchased you do also need to pay a weekly fee for that vehicle, but it is admittedly a hell of a lot less than renting a car). I'll give you an example to uncomplicate that one. I've purchased a new Mustang, but five months in a bunch of my friends want to go camping in the remote wilderness. If I've purchased Ford 2nd Car, I book a brand new Ranger Wildtrak at no cost (because I bought a Mustang) apart from the $500AUD enrollment fee I paid when I bought the car, and I go camping with my friends (returning the car at the end of the trip).

I mean being able to drive a Lamborghini for about $700 a month is near affordable to anyone.

Anyway, I have an opinion about all of this for what it's worth. There are a bunch of other wide-reaching initiatives in showroom. Like BMW's virtual builder (where you can build a 3D model of the car you want to purchase in showroom) and Carsales' push to take deposits online for used vehicles. And they're all ridiculously exciting. My opinion is with the change in ride sharing and the world's move to both electric and autonomous driving vehicles, we're going to see many more car sharing or car club initiatives being popular.

I mean being able to drive a Lamborghini for about $700 a month (month by month subscription) is near affordable to anyone. And with mega-cities becoming a prevalent issue in regards to traffic, infrastructure and time efficiency I see much less customers purchasing cars as a necessity in the future. Which I believe is a good thing, because a car will become a product of joy. It'll become something that you purchase because you want to, not because you need to. Better still if you do join a car club it means you don't need to store it but you can still feel the same thrill from a vehicle that you always did. Cars were meant to be enjoyed. And whilst my entire job is based around a car dealership at the moment, I can't wait to see how my typical customer enjoys a car next.