Reflecting on NADA’s commissioned report Dealership of Tomorrow 2.0

I recently “re-”stumbled across Glenn Mercer’s Dealership of Tomorrow 2.0 report that was launched at NADA at the beginning of 2020.  The scope of the report was to make predictions about the changing automotive retail environment through the late 2020s, and it was written right before Covid19 started to have its major impact on the global economy.   I thought it would be interesting to re-read a well researched report and reconsider the predictions regarding the future outlook of the dealer landscape with the new perspectives brought upon us by Covid19, and in particular, reconsider any predictions that impact data integration in auto retail.  

The observations in this blog regarding how Covid19 impacted the original set of well-researched predictions are simply that, our observations.

Summary of original prediction from Dealership of Tomorrow 2.0

Covid19 impact on prediction

Impact on data integration

Customers will be increasingly more comfortable online, but, as the offline experience continues to improve, an equilibrium between online and brick and mortar will exist.  The report cites trends by some companies who started exclusively online later opening some physical stores, such as Warby Parker and Bonobos.

At least in the short term, the consumer experience has shifted to a predominantly all-online buying process, whereby the journey not only starts online, but results in delivery to the home driveway.  While this change was greatly accelerated by the virus, it will likely shift somewhat back to in-store.

In an update Mercer published this month (Oct 2020), he predicts the future will remain omni-channel to accommodate the ever diverse customer (“aka ‘interact with the customer however he or she wants’”).

Prior to Covid19, there was already a proliferation of third party applications supporting digital retailing.  The increased shift (accelerated and now fully across the shop-buy-deliver spectrum) will likely promote even more players, and more data integration points to support the online consumer experience.

Customers will “probably [be] more open to different ownership models”, implying a shift to growing comfort with subscription or shared car/vehicle services

In his October update, Mercer shared revised consumer outlook on shared services via an IBM survey analysis suggesting consumers are generally less comfortable sharing vehicles in a pandemic (germs).

These services are not likely to fully go away, and will likely adjust to a new equilibrium taking up more non-passenger delivery services (food, retail, etc.)

Some dealers may further diversify their business models to plug into the fleet and on-demand needs of the still-growing shared services industry.   Dealers may need to integrate to more systems/apps to support or fully optimize the business model diversification.

Customers will be insistent on more and more convenience.  The online shift has consumers adjusting to a much broader, “instant” marketplace where they expect the same AI and/or data-driven personalization to deliver a consistent, connected experience across their entire buying – service journey that they had previously grown accustomed to with perhaps only a handful of online vendors (Amazon, UberEats, etc.).  Mercer acknowledged the digital shift in the original report as real, but slow.

The greatly accelerated shift to digital has made the statement about the consumer’s online expectations for convenience more true now than ever.

A consistent, connected consumer buying journey requires smooth, real-time data connectivity across all providers on the customer journey.  Authorized data must flow freely and easily across the spectrum.

Service profits will remain or increase in importance as pressure continues from squeezed or fragile profits in new car sales and competition from independent aftermarket repair shops.   Efforts to improve dealers’ competitive position include streamlining appointment, service-writing processes, and the servicing process writ large.  Dealers hold a competitive advantage in servicing more complex, connected cars.

Mercer’s original report suggested dealers will need to get “closer to the customer” to succeed in increasing service profits.  We think the almost forced investments dealers have had to make to shift to digital retailing (bolstered CRM, remote employee apps/tools, etc.) due to Covid19 will equip them to make the same/similar changes to ensure more convenient, streamlined experiences in the service department.

Providing more touchless and virtual services is a MUST.

It’s likely that nascent or new third party software/application vendors who support this or other streamlined processes will emerge, and there will be more integration points to the DMS and service-writing systems.  Servicing connected cars will further reinforce the need to exchange more data through dealership service systems.

Conclusion

One of my favorite commentaries in the report was one Mercer made as a strictly personal opinion in the conclusion: 

“The American new-car franchised dealership system is about 125 years old.  For some, this means it is time to reinvent such an elderly apparatus; for this researcher, the industry’s persistence is an indicator of its ability to adapt to changing circumstances.”

While Mercer was likely considering things like ACES  (the four automotive industry megatrends: autonomy, connectivity, electrification, and shared mobility) and a slow shift to digital as the “changing circumstances,” we still think this a wise statement for the increased changes Covid19 has brought.   The dealership as we’ve known will be forced to change rather dramatically, but it will persist, and it will adapt!