Disruption is more than just a business buzzword; it is a legitimate strategy that is affecting every established business model, and it’s coming for new car retailing.
‘Disruptive innovation’ is a term in the field of business administration referring to an innovation that creates a new market and value network and eventually disrupts an existing market and value network, displacing established market leading firms, products and alliances.
ING is promoting its new car buyer service, which is a prime example of an attempt at disruption. ING customers are receiving emails telling them:
“With ING’s car buyer service, you can access your own new car expert who does the talking for you.
“Just tell them what you’re looking for. They’ll then find the new car that meets your specifications from a network of over 500 Dealers. Plus they can do all the negotiating for you. And you’ll save time and hassle too – your car can even be delivered to your door when it’s ready.
“Find out more and get an online, indicative quote in under 60 seconds.”
They are trying to get between the Dealer and the consumer. What’s next? Eliminating the Dealer altogether?
A survey conducted in 2017 by KPMG found that 50 percent of executives believe battery electric vehicles to be the number one key trend, followed by connectivity and digitalisation.
A recent example of disruption was the announcement by classified advertising portal Carsales that it would move into direct vehicle sales through an online platform to be launched in the first half of this year. According to media reports this will allow buyers of new and used cars to complete almost all the steps to secure a vehicle and completely leapfrog a visit to a Dealer-financed showroom and could, in many cases, include home delivery.
We can expect to see the emergence of channels that allow the ‘purchase journey’ and complete transaction to be performed online. Disruption will have enormous implications across the automotive retail sector and some are predicting that the transition from human-driven, internal combustion (ICE) vehicles to autonomous electric vehicles will lead to a new business model named ‘transport-as-a-service’ (TaaS), which means that far fewer cars will be needed.
Existing platform providers such as Uber and Lyft will be joined by other fleets of electric autonomous vehicles, with higher vehicle utilisation rates obviating the need to purchase a motor vehicle.
Consumer demand for small cars and SUVs, together with a continued demand for light commercials, have driven Australia’s new car retail market to a record sales result in 2017 according to data released by the motor industry’s official statistical service, VFACTS. The industry posted a record December result to reach a 12-month total of 1,189,116, an increase of 0.9 per cent over 2016. Australians bought 465,646 SUVs during 2017, for a 39.2 percent share of the total market, compared with 450,012 passenger cars, with a 37.8 percent share.
2017 was the first full year in which sales of SUVs outstripped those of passenger vehicles. Overall it would appear from VFACTS that business conditions (measured by sales volumes) for OEMs and Dealers are good and the Australian market is close to saturation, with vehicle ownership around 713 per 1000 head of population.
An underlying concern is that the pressure to maintain volumes further squeezes a Dealer’s thin margin and reduces overall profitability.
With the likes of Carsales and ING attempting to disrupt the dealership model, Dealers will need to think on their feet to stay ahead of the game.