Is the Automotive industry ready for digital disruption?

Is the automotive dealership, as we know it today, destined to become the next Blockbuster or Kodak?

The effects of the massive expansion of the digital economy are seen all around us. It’s easy to be complacent by assuming your digital spend increases and BDC lead handling skills are addressing the changes in customer behaviours and the digital economy. There is no doubt that progressive dealerships around the country are becoming more efficient at handling their online inquiries. They manage every detail of the process to ensure that their responses are impactful and under the “magic” 20 minutes. They have appointment setters and phone ninjas that contact nearly 70% of leads, convert 50% of those into appointments and sell to 70% of those. These dealers, like my store, are doing a great job squeezing the last bit of efficiency out of a dying business model. In a few years from now, being an excellent ISM at a dealership might be like being the best blacksmith, film developer or lamplighter.

We are fortunate enough to have not already been swallowed up by the digital disruption. For several industries in the U.S., and all over the world, the change has already come. Davids have wiped out Goliaths from the face of the earth in nearly every sector of business. We all see it happening but most still feel like it won't happen to us - like the auto industry is somehow immune to this sweeping change.

The world's largest taxi company owns no taxi’s - Uber founded in 2009

The world’s largest hotelier owns no real estate - Airbnb founded in 2008

The world’s largest communication company owns no infrastructure - Skype founded 2003

The world’s largest retailer owns no inventory - Alibaba founded 1999

The world's largest media outlet owns no content - Facebook founded 2004

The world's largest movie house owns no cinemas - Netflix founded in 1997

In most cases, industries have not capitulated to just a single disruptor. Netflix certainly was a primary cause of Blockbuster’s demise. But Hulu, YouTube,  Apple TV and Tivo all changed the way we rent/watch movies. Blockbuster simply didn’t see the need for change until it was far too late.

Automotive retailing as we now know it is under assault. Not only are we in a battle, we are in a battle on all fronts. Companies like TrueCar, Costco, Edmunds Price Promise and CarGurus stand between a dealer and its customers by promising better, more trusted pricing information. These companies recognize the distrust buyers have with dealers and are promising to eradicate this distrust while selling our inventory and charging dealers for the privilege.

Carvana, Beepi, Ebay Motors, etc. are reaching more and more customers everyday. Like the price program companies, they promise a better, no dealer car buying experience. They claim to have better technology, lower overhead and no dealership games.

Elon Musk and Tesla not only believe they can build a better car, they believe they can create better distribution. It’s no secret that they’ve met with great early success. They have a long ways to go, but have clearly proven that this is a viable distribution method. The Tesla model is not unlike Apple which pulled out of mass retail stores and choose to control pricing and distribution through Apple stores and a select few retailers.

Last but not least, is the shift in how we own cars. Companies like Uber and Lyft walk a fine line as part of the digital revolution and the new share economy. Uber drivers have overtaken taxi’s in nearly every major market they’ve entered. In major metro markets like New York and San Francisco, Lyft, Uber and public transit are making more and more millennials choose to share a ride then own a car. The recent five-hundred million dollar investment by GM into Lyft is a good sign that they don’t see the trend ending anytime soon.

I don’t see doom and gloom for our industry. However, I do believe we are in the good-old-days. I’ve got my eyes wide open for ways our customers want to buy cars and I’m trying to position our store to sell them that way. I meet with other dealers everyday that act like they’ve seen trends like this come and go. They might be right, they might be wrong.

Charles Darwin said - “It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.”