Future of Car Dealerships

Cashier-less stores is where Amazon is heading while Carvana stock price decline shows that there is a demand for online car buying but execution (sales cost included) is also important. Tesla is already selling direct to consumers without dealerships and others may join this trend too. Dealerships have service / parts arm which is beneficial to car buyers after buying a car.? Electric cars are in discussion and there is industry wide inventory problem or a chip shortage. Ford is asking its dealers to invest from $500,000 to $1M+ on EV certifications.

It is certain that dealerships are changing in coming years. Let's realistically analyze ( I am listing 10 points below ) what will be the situation in 5-10 years.? We are not talking about pros and cons of franchise laws here or BEVs.

1) When there is a demand, car makers will sort out inventory issue or chip issue at some point of time.? Money speaks. It does not matter cars will be EV, Hydrogen, Hybrid, ICE or something else. It is a different topic altogether.?Of course cost, resources, environment sustenance, infrastructure will play a role.?

2) Dealerships and car industry saw historic sellers' market where they didn't care for car buyers.?Buyers didn't have a choice. Buyers had to pay above MSRP price in most cases. I personally believe buyers' market will be here soon.?Buyers are the ones paying for your products so their experience will be important. There is no need of competition in seller's market.?Whosoever has an inventory will sell and hence this topic is not needed.?

3) Online selling or buying (even for cars) is here to stay.?It is convenience at the end.? Survey shows some buyers hate going to dealerships to buy a car. In typical car buying, you will need data for financing or trade in or ease and it will be done when many vendors work together. Digital Retailing is a start but it has to go long way.? Some dealers think car purchase is different and it is emotional. Buyers must talk to them and come to dealerships, I think this model will change.?May be, car buyers will need to talk to car concierge or product expert and not necessarily to sales guys. Carvana, Vroom and others showed that cars can be bought online too.

4) Once you buy a car, you also need a support in the name of warranty or service needs so there is a need for a local presence for sure.?That means OEMs or Carvanas of the world will need to partner with local repair shop chain or they need to have their own service options.?Assumption here is millennials will be tech savvy and will be doing multi tasking but they need a great ownership experience too. They may not do what most of us are doing are doing for hours at the dealerships. Buyers may go for car shipping / pick up / delivery option based on cost and all.

5) Amazon and Apple kind of companies are in money making business and they work for share holders and they are known to figure out logistic issues. They may not be in car selling now but it does not mean they will not be there. It's a matter of time when they figure out logistic issues or better way to sell/ buy cars and reinvent the whole car selling operation. ?No one wants to leave money on the table.

6)?Now let's think of car buyers' needs in terms of how they may buy.??

*?For a new car, probably they will see a car somewhere else and buy similar car online or from other place. Typically someone will act as a showroom as we saw same in electronics.

* For a used car, one wants to see it for sure to get a peace of mind in terms of quality.?Finance / lease/ trade in / rebates and all are add on products or services?in my mind. Lenders and OEMs will adjust to the new needs.?

* More hybrid approach with a car driving simulator or peace of mind guarantee (7 days or 30 days or free maintenance for a year) can not be ruled out either.

7) Buyers may demand more respect - Millennials or some buyers may be ignoring some aspects now - may be privacy or constant botheration on their phone/emails by dealers but they won't forgive that for long.?They will buy their ways, at their times and while saving time.??Sellers need to be transparent and willing to support whatever buyers need.?If sellers are wasting their time or want them to come to dealerships or think they will fill up the form online with their personal details without any return, you are making a mistake.

8) Basic Math - You are selling a car so you have a cost of goods (let's say $X) and similarly you have an operational cost (Marketing, Sales, Rent, Utilities, Salaries and all) - let's say it is $Y. You can not make money if your sales cost is lower than your cost of goods + operational cost $X+$Y). If you are marketing and spending $1000 for acquiring a traffic, you better know you get $1000 worth of income somewhere else. This will be very apparent in prices of tomorrow. Dealerships or Carvanas of the world will need to understand this easily.

9) In terms of cost - Buyers will keep looking for a special deal and would like to pay less when possible. That is in their nature.?Yes they may pay extra for peace of mind or additional options as they do now.?OEMs are competing on the car prices with other makers and buyers want the car for less so negotiation is not going away. They look for sales/ coupons now and will look in future too. Sales cost can not be less than dealer's cost though.

10) If the cost of a car is important, how you sell (or cheaper sales price) will continue to play a role.?It means sellers will need to embrace technology and think about selling with automation so there is no brick & mortar dealership related cost or huge sales cost for survival. There were travel agents but that career is now gone.?OEMs will help up to certain extent but remaining profit or margin?needs to come from service/ parts side of business.?Newer dealerships have to be slimmer and smaller as a result. If you are having 25 sales persons on the lot, you may want to think how same number of buyers can be served other ways. Even commission only cost - it is coming from somewhere as we know.?