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“Dealerships just don’t seem fit for purpose any more”
The car dealership model hasn’t been fit for purpose for some time now. And with the new normal demanding the rapid digital transformation of every other industry, it’s only a matter of time until we see it here too. But what will replace it? From virtual showrooms to fully-automated coin-operated car vending machines, we take a look.
The traditional car retail model was allowed to exist for so long for want of a better alternative. Now, new technologies are meeting changing needs (particularly among younger drivers) and giving rise to new approaches that are much more customer-centric. Which begs the question, is it time the dealership was traded in for a new model?
“Dealerships just don’t seem fit for purpose any more,” says Nick Chiarelli, the head of trends at Unlimited Group, which counts Ford, Toyota, Lexus, BMW, McClaren, Rolls Royce and Mini (to name a few) among its carmaker clients. In 2019, Chiarelli and his team put out a report that explored the changing ways consumers are accessing mobility solutions and found that half of 18-24 year-olds are put off going to car dealerships because the buying process there takes too long, and because dealers inevitably talk down to them if they don’t know much about cars.
For a generation that has grown up with Uber, Amazon and Apple, the lack of control and flexibility in car retail leaves them alienated. What they want, Chiarelli has found, is for car buying to be more exciting – for it to leverage new technologies, such as VR or AR, for the process to be slicker and easier, and for it to be more transparent and trustworthy. This, he says, can take many forms.
In some cases, it is about making dealerships feel less like a boys-only space, while in others it is about treating cars as any other retail commodity and selling it where customers congregate – so in shopping malls rather than dismal, out-of-town business parks.
“In other cases, it is about making the whole process of accessing a vehicle little more effort than choosing a candy bar from a vending machine.”
The automotive retail model hasn’t materially changed for about a century. Not until eight years ago according to Ryan Keeton. That’s when he co-founded Arizona-based used car retailer Carvana.
Keeton, who is also the company’s chief brand officer, explains: “Consumers had no visibility into pricing, salespeople could tack on any number of bogus fees, financing was done in a back room where the customer had no idea what rate they would get and consumers spent an average of four hours at the dealership.”
Now, with Carvana’s self-service platform, customers can browse more than 15,000 vehicles in high definition and 360 degrees, all from the comfort of their own home. And, “in as little as 10 minutes”, organize finance, purchase and delivery. “No haggling, no salespeople.”
If they’d rather not wait for “as-soon-as-next-day delivery”, customers can head to one of 21 vending machines across the US where they’ll be greeted by a “customer advocate” who’ll hand them an over-sized commemorative coin that, inserted into the slot, brings the machine to life and begins the spectacle of their new car descending. “The eye-catching, all-glass towers have definitely brought brand recognition and affiliation,” says Keeton.
But while Carvana might have had the world’s first fully-automated coin-operated car vending machine back in 2015, it isn’t the only brand looking to make cars as easy to buy as candy bars. In 2018, Alibaba and Ford teamed up for a cat-themed car vending machine in Guangzhou, China. The five-story, unstaffed ’Super Test-Drive Center‘ works with the Tmall app to let customers with a high enough credit score choose a vehicle, arrange a pickup time, put down a deposit and upload a picture of themselves so the machine will recognize them when they show up for a test drive.
Nor is Carvana the only brand pushing auto e-commerce. As Elon Musk said a few years ago, “it’s 2019 and people want to buy things online”. And while Tesla might have backtracked on its plans to shutter its physical stores, a million cars were expected to bought online in 2020 according to Frost & Sullivan (that was before the world came to a standstill, of course, and buying a new car didn’t seem quite as important), with that number expected to jump to 6m by 2025 (although it would be understandable if that now took slightly longer). The market research company says it will soon be the preferred form of vehicle purchasing.
It’s something Cazoo is banking on. Zoopla founder Alex Chesterman’s new company launched in late-2019 after the online-only used car buying platform raised more than £55m of VC backing.
Rockar also goes with the no-salespeople approach. It also allows you to buy a car entirely online. But should you choose to visit one of its stores, you will find it staffed by Rockar ‘Angels’ who can answer any and all of your questions. Crucially though, they don’t receive commission from sales and so remove pressure and classic sales tactics from the conversation.
Before launching Rockar, managing director Martin Sewell says the team carried out some consumer research. “And in the main, consumers dislike the 100-year-old franchise dealer model. They dislike having to deal with commission-based salespeople and having to negotiate a deal, never knowing if they have paid the right price which leads to a lack of transparency and trust.”
Removing salespeople has been a welcomed move, but Rockar hasn’t stopped there. It is also changing the car-buying experience by bringing its digitally-enhanced boutiques to the places people already are, such as shopping malls rather than drafty, out-of-town retail estates. Several car brands have adopted the model, including Hyundai, Mitsubishi and, most recently, Jaguar Land Rover at Westfield Mall in East London. A Rockar ‘store within a store’ for Ford also opened in Next Retail at Manchester’s Arndale center.
Open spaces with no doors, they sit within the shopping journey of mall users and look nothing like a car showroom. “The automotive industry needs to wake up to this”, says Sewell, “as there are many new emerging brands coming to market and following the Rockar model who will win significant market share over the next 10 years.”
For Jaguar Land Rover, Rockar sold a new car through its online and offline platforms every 3h 47m in September 2019. “And the average age of our customers is two generations younger than the traditional dealer networks’ customers, which clearly shows we are attracting new and incremental customers to the brand,” Sewell says. Its average invoice is for £61,000 and it even sold one car for £145,000 – all through a mobile phone.
Rather than shopping centers, Audi took its new concept for salesrooms to city centers – it just didn’t take any cars. Wolf Ingomar Faecks is transport and mobility lead at Publicis Sapient, the digital agency involved in creating Audi City. He says it was “the first digital, portable automobile showroom”.
“With no real cars but every option available, this transformative retail environment lets buyers experience every possible combination of the Audi portfolio like never before, powered by seamless gesture control and life size rendering of vehicles, combined with real-time pricing and availability.”
Tapping into the idea that Gens X, Y and Z are open to VR and AR experiences, and typically less interested in purchasing cars when there are so many mobility services available, he says they saw an opportunity to make car showrooms relevant and of value.
“VR and AR technologies enhance the sales experience, making the consumer far more receptive to receiving information and other communications. Considering this, it’s entirely possible that the physical showroom as we know it will eventually disappear.”
Audi City in London’s Mayfair has since disappeared itself, but Faecks says it helped prove that the fusion of AR and VR with current mobile technology standards can create “showroom experiences ‘on the go’ that can be experienced anywhere”.
Nissan, Toyota and BMW are just some of the other car brands to tap into the idea of the virtual showroom, BMW the first to use AR to superimpose lifelike 3D models of its cars on to customers’ views of the real world through their phones.
Not all car brands are looking for new ways to sell their cars. In fact, some seem to actively avoid selling them, such as Lexus, with its Intersect offering. Unlimited Group’s Chiarelli says it doesn’t feel like a traditional automotive dealership at all. “It has a coffee shop, restaurant, art gallery, meeting and events spaces... all of which, together, provide a host of reasons to visit.”
Opening first in Tokyo in 2013, then Dubai and in New York’s Meatpacking District, Intersect is considered a “luxury brand experience store” rather than a dealership or a traditional retail space, and is a place where guests can engage with Lexus through food, design, art, fashion, culture, film, music and technology.
In New York, the ground floor has a café, retail area and public gallery space that features everything from product concepts to custom exhibitions and installations, while up a glass and steel staircase and over a floating bridge you’ll find a full-service restaurant with a rotating chef-in-residence program, 360-degree cocktail bar and a lounge. The final floor features a private gallery for hosting cultural programs.
While it isn’t the first auto brand to try its hand at lifestyle marketing or the only one to offer branded experience centers (Audi, Cadillac, Mercedes Benz... they’ve all had a go), it may be the first where the experience is never about directly selling cars and more about sensually imprinting the Lexus brand in the minds of its visitors.
