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SPARKS Auto News 2018

Industry Disruption: What's Affecting Auto Retail

AICPA Auto Dealership Conference Highlights

SPARKS Newsletter
December 6, 2018

Michael J. Arcure, CPA

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Industry Disruption: What's Affecting Auto Retail

Members of the Automotive Dealerships Practice professional team attended the 2018 AICPA Auto Dealership conference, which focused on current trends in auto dealership accounting and auditing, tax planning, and business management solutions. One of this year’s takeaways include a look at the future of auto retail.

by Michael Arcure, CPA and Automotive Dealership Practice

New sales channels are evolving in auto retail in the hopes of driving customer loyalty and in order to adapt to changing customer behavior and expectations. Time and convenience are continuing to drive the retail buying experience across industries and pushing more consumers online. In auto retail, the customer experience is shifting from a transactional experience inside the dealership to a customer-centric experience away from the dealership. As a result, new industry disruptors, like boutique online auto stores and dealership kiosks, are starting to impact dealership sales.

Three different car buying experiences disrupting the auto retail industry

  1. CarSaver: Walmart now has an online kiosk, provided by CarSaver, a partner that makes auto buying services available to Walmart customers. The kiosk is conveniently located across from checkout lines at Walmart, giving customers the ability to shop new and used cars. Using, customers can compare brands, get prices on leases and financing, and check out promotional deals. Once they identify a car of their choice they are connected through an “express manager” to a participating local certified dealership, who arranges for them to test drive or pick up their vehicle if they decided to purchase on the spot.
  2. Carvana: The site offers a process to purchase, sell/trade, and finance a car without ever contacting a dealership because it is done 100% through the Carvana website. When the customer picks the car of their choice, Carvana delivers the car to the customer or the customer can pick up the car from one of the Company’s car ‘vending’ machines. Carvana also has a 7-Day Money Back Guarantee, allowing customers to test drive a car for 7 days and return if not satisfied.
  3. Vehicle Subscription Service: Vehicle subscription services are becoming more and more popular and are offered directly through a manufacturer or through a third-party. Car manufacturers (including, among others, BMW, VOLVO, Cadillac, Jaguar Land Rover, Lexus, Porsche, and Mercedes-Benz) are now offering a service where a customer pays a recurring fee for the right to use one or more vehicle models from a line up made by the manufacturer. Third-party subscription services aren't directly backed and managed by a vehicle manufacturer. Most offer used, or off-lease vehicles, and prices vary pretty widely as does the level of bundling.

To draw customers back into the dealership, owners need to implement their own customer-centric approach – one that allows their customers to stay engaged and feel in control. The challenge is to offer more flexible and easily-accessible solutions that meet consumer expectations. Dealers need to find a way to link the manufacturer, the dealer, and the car in a way that is seamless and that makes consumers feel that they are in control.

Ways that dealerships can stay connected to their customers

  • Test-Drives: Dealers could allow visitors to their website to schedule test drives online, for a time and place that is convenient to them, instead of dragging them into the showroom for the hard sell. They can also extend the test drive to an hour or two, instead of the 15 minutes that is normally allowed.
  • Personal Shopper: Offer up a car shopping consultant. This person can guide customers to a car option that is best suited to their lifestyle, while answering questions about how specific options actually benefit them.
  • Virtual Purchase Assistant: Similar to above, use an online virtual customer advisor (with a catchy name) that helps customers answer a lifestyle questionnaire, providing a car options report that fits their lifestyle needs.
  • Online sales: Give customers the ability to conduct the entire transaction online, from choosing a car to financing options and insurance.
  • Build your own: Introduce virtual showrooms, with immersive digital experiences, that allow customers to configure their own unique combination of options.
  • Vehicle subscription service: As mentioned above, the dealership can provide a vehicle subscription service, which gives the car owner variable options for long-term car ownership.
  • Waiting-room kiosks: The car service experience provides many opportunities to hook the customer. Dealership waiting areas can have kiosks, with all of the varied options to build a car, connect to a virtual assistant, take another car for a test drive, etc.

Although face-to-face interactions and one-on-one relationship building is still the most effective way to sell cars, you still need to be able to get customers in the door. Dealers are facing a trend that is keeping potential customers out of the dealerships, and should try to implement new strategies with the needs of the customer in mind.

Speak to a professional advisor to see what options might work for you.