Automotive & The Amazon Effect”: Ride The Wave or Get Buried”

Surviving the Tsunami

In previous posts, we’ve covered some of the challenges that automotive is facing. These included; changing consumer tsunami175.pngexpectations, the need for better data to improve operational efficiencies and to enhance the consumer experience, as well as changes regarding the connected car/mobility paradigm shift.

To be sure, the industry has begun to address some of these challenges. In effect, it has gone from the unaware state to the aware state to the action state (at least in some instances). The question now is; is automotive moving fast enough?  Keep reading and then decide for yourself.


The Amazon Effect

On the surface, the Amazon Effect is a disruptive effect that is currently impacting brick and mortar retailers, other online merchants and shipping and fulfillment companies. It is forcing many businesses to quickly adapt and others to close up shop. Diving deeper, it’s also directly and indirectly impacting many other industries.

Using automotive as an example, we have Amazon Vehicles and now Amazon auto parts.

In the former, Amazon is currently offering a portal for car buyers to conduct comprehensive research of available vehicles, similar to what is seen on other online sites. However, this may only be the first step. Amazon’s release of this portal caused a significant drop in the value of TrueCar. Draw whatever conclusions you like.

In the latter example, Amazon is also interested in selling the parts and accessories needed to maintain vehicles. Having recently closed deals with Robert Bosch, Federal-Mogul, Dorman Products and Cardone Industries, Amazon is taking direct aim at brick and mortar auto parts stores. Yes, that obviously will impact companies like Autozone and O’Reilly, but don’t auto dealers derive significant revenue from parts sales as well? While Amazon is not currently offering OEM branded parts, there is bound to be some knock on effect.

If we look at Amazon’s success in disrupting other brick and mortar retailers (and yes, the car dealer is a brick and mortar business, albeit a specialized one), these recent developments should be giving the entire industry reasons to be looking over its shoulder.

What We Can Learn

Let’s first ask, how did we get here? How did Amazon grow so large so quickly, and make inroads into so many areas of the economy, including ours?  

The success of Amazon and the resulting “Amazon Effect” has been the result of Amazon’s relentless investment in technology. Specifically, maximizing the use of data power to transform the consumer experience, improve their supply chain efficiencies, drive advanced Business Intelligence/Analytics and radically streamline their fulfillment and delivery process.

Amazon understands that data is the new currency. And just like traditional currency, it does not believe in wasting it. Amazon is leveraging the flow of vast amounts of data that it generates every second in the same way that financial institutions leverage the flow of money to create more wealth.

Contrast this with how automotive sees data. For decades, dealing with data was seen as an expense, a “necessary evil”. Only the bare minimum was invested in connecting the dealer with the OEM. IT budgets were under constant pressure and there was very little sense of urgency to develop and deploy new dealer interfaces.

For example, these new system interfaces could have:

  • Improved the customer experience
  • Gathered and analyzed information to develop new products and services
  • Made dealers more profitable and resilient

Just think about how much data has been “dumped” over the past decade because its value was not recognized. How much is still being dumped everyday due to the lack of sophisticated system interfaces and real time integrations?


How We Can Fight Back

While much of the automotive industry is trying to learn to swim faster, what’s really needed is a much faster boat. At the current rate of change, the industry is just not moving fast enough and risks getting overwhelmed in many areas.

While there are many causes including the inertial drag effect that all large corporations face, and the fact that challenges are appearing from all directions simultaneously, there is one core inadequacy that is exacerbating an already difficult situation.

That is the inability to rapidly, efficiently and seamlessly connect the customer with the dealer and the dealer with the OEM. This is sometimes called the “last mile problem”. Automotive must get much closer to its customers and do it quickly. We can no longer afford to have retail integrations move at the current glacial pace. We must rapidly build and deploy sophisticated real time interfaces that will seamlessly connect your retail locations with your corporate systems. And it must happen rapidly. As in now. No more excuses.

These Interfaces Will:

  • Allow you to know your customers better than they know themselves
  • Seamlessly offer flexible mobility options
  • Radically improve the consumer experience
  • Re-energize aftersales
  • Help sell sophisticated Connected Car options and lucrative data plans
  • Offer expanded customer loyalty programs
  • Stimulate innovation through the collection of Big Data
  • Transform your supply chain by allowing the consumer to become part of it (Think about that one for a minute)

It’s Not Always About The $

There is a common and dangerous misconception that Amazon is all about lower prices and that that means gloom and doom for everyone. But that is not the case. Yes, Amazon’s investment in supply chain, fulfillment and business intelligence does give them economic efficiencies.

But Amazon does not always offer the lowest price. Have you ever paid more for a product on Amazon (or didn’t price compare) just because it was more convenient, or you knew that Amazon offered a friendly return policy? Yes, Amazon does offer competitive prices, but their main value proposition is a Frictionless Buying Experience. Do you offer that? If not, when will you?

One last thought. While this post was primarily about Amazon, it really applies to the challenges that automotive is facing from all non-traditional competitors. If Amazon were to disappear tomorrow, there would still be other tsunamis headed our way and the industry must get its act together, and quickly.

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