From sales-based to service-based: the automotive distribution (r)evolution

By now we know that customer expectations have become more sophisticated and that technology can support automotive retailers to meet these changing consumer preferences. We’ve also accepted that we must overcome the status quo to create real progress.

What we might not have fully grasped yet is how our industry has been shifting from being sales-based to being service-based, with the customer experience as our North Star. With this in mind, there are two directions in which dealers can grow their business: by diversifying and expanding their offer.

Diversification can be obtained by focusing on two segments that are getting lots of traction these days: used vehicles and after-sale services. To pursue expansion, it’s necessary to think beyond the traditional automotive boundaries and leverage technology to explore the opportunities related to connectivity and mobility services.?

All in all, there are at least four areas with a high growth potential, which dealers should consider when re-thinking their revenue models.

Optimising stock with a mix of new and used vehicles

While sales of new vehicles are still lagging behind pre-Covid volumes, the used-car market seems to be gathering momentum. One in two automotive customers in Europe declared they would consider a pre-owned model as their next car, which could represent a more savvy choice from a financial perspective (lower price point, minor depreciation rate, lower insurance costs etc). By providing a more varied stock to their clients, dealers can cater for different needs and offer trade-in and ancillary services such as CPOs and maintenance plans. In short, they can aim for better margins and interesting upsell and cross-sell opportunities.

To ensure efficient stock rotation, dealers can leverage advanced technology and AI-based solutions: to the outside, these can be used to create high-quality assets and promotional contents to appeal to the end user; to the inside, they can provide data-driven insights to make better business decisions.

Unlocking the aftermarket potential

If we consider the entire vehicle lifecycle, interesting revenue opportunities can come from after-sale services and regular maintenance, particularly important for BEVs and PHEVs. By leveraging vehicle and client information available in the CRM and the DMS, customers can be targeted with predictive marketing campaigns, which are more relevant and therefore have a higher ROI while allowing better planning and smarter resource allocation for service providers.?

As seen from a social perspective, this can also mean enhanced vehicle safety, lower environmental impact and extended longevity of components.

Living in a connected world

When we think of SDVs, we should consider two main aspects: in-vehicle connectivity, spanning from onboard comfort and safety to infotainment, and the interactions with the surrounding environment for a more satisfying and safer driving experience.?

If basic connectivity is already becoming a commodity (similarly to what happened in the telco industry, for example), automotive players will be able to offer premium service bundles and new services altogether, all with higher profit margins and generating additional customer insights to support strategic planning and execution.

Exploring the mobility of the future

The epitome of a service-based approach is MaaS, Mobility as a Service. While a significant portion of customers will continue to rely on private ownership, there is a growing demand for multimodal transportation services, spanning from rental (both short and long term), shared mobility and micromobility, particularly in urban contexts.?

Intuitively, the focus here will not be on traditional lead generation but on the customer experience, from convenience and ease of use to efficiency.

Definitely exciting times ahead for those who are willing to dare and embrace technology, and artificial intelligence in particular, as their superpower. To do more and better, and to generate incremental value for everybody.