In a bid to mimic other online retail industries, several auto manufacturers have begun to offer services that reduce or eliminate time spent in the dealership. The first mainstream manufacturer to provide at-home services is Hyundai, although other specialty brands already use a similar platform. This is a significant shift in the automotive sales landscape. It could be cause for worry at the retail level.
Home Services Direct from OEMs
Korean automaker Hyundai is introducing The Shopper Assurance Program in about 30 stores in the United States. The program gives car shoppers transparent pricing with incentives and discounts well detailed, reducing the time it takes to negotiate a fair price. Test drives can be scheduled through the Hyundai app or through a participating dealer, and conducted at the shopper’s home, workplace, or another off-site location. Paperwork can be completed in advance online, and a no-obligation 3-day/300-mile money-back guarantee is provided as well.
Other manufacturers have similar programs in place. Lincoln’s At-Home Test Drive program also serves a similar purpose while the Lincoln Service Valet program makes visits to the dealership for maintenance and repairs in person virtually unnecessary. Lexus and Infiniti also offer similar concierge services for test drives, which Kia also offers for only its flagship car, the Cadenza.
Of course, Tesla already sells direct to the public. It’s been met with strong resistance on several fronts, although it seems mainstream automakers may be choosing to join them instead of fighting them.
So far, the Hyundai Shopper Assurance Program just reduces the time spent in the dealership, albeit dramatically. It’s just a small transition to a completely dealership-free transaction, though.
The Impact on the Dealership
Dealerships are sure to find direct-to-consumer sales from the OEM troubling. It challenges the traditional dealer model in many ways including these:
- Commission-based salespeople are no longer required. These sales professionals become antiquated with at-home services, which leaves hundreds of thousands of people searching for new work or trying to become relevant in other dealer positions.
- Customer retention is tenuous. The face-to-face relationships in dealerships is often what drives after-sales service and repeat sales. When a salesperson is no longer necessary, retaining customers after the sale requires increased cost and effort.
- Financing and back-end gross profit are no longer controllable. These areas provide just as much or more income for the dealership as vehicle sales themselves. When customers complete financing before a dealership visit, the back-end sales are at the consumer’s discretion.
Is It What Customers Want?
Studies in recent years by AutoTrader and Kelley Blue Book have revealed that the majority of car buyers aren’t happy with the current model. Survey responses show they want to spend less time in the dealership and appreciate a no-pressure sales environment, as well as off-site test drives. According to Hyundai’s Shopper Assurance Program, that’s precisely what Hyundai is targeting.
It’s already been proven effective in other online retail environments like Amazon and eBay. Nearly every retail industry has a massive online presence that offers sales direct to the consumer without visiting a brick-and-mortar store. If it’s an indication of a consumer’s true desires, it’s compelling for manufacturers to provide sales direct from the OEM to the consumer.
Predicting the End of Dealerships as We Know It
RethinkX is a think tank based in San Francisco with a bold prediction. James Arbib and Tony Seba authored a report that predicts the end of the dealership model. It’s been said previously in a number of studies, however RethinkX predicts it will come much quicker than anyone expected – within seven years.
While their study is based mostly on the swing towards electric car technology and car-sharing trends, it reinforces the premonition of a landscape devoid of the traditional automotive dealership.