NAAMSA holds a talkshop on the future of retail

NAAMSA continues to impress as an industry body. They do not muck about and their events are generally slick, to the point and informative.

This one, entitled "The Future of Auto Retailing in South Africa" held in Jhb on the 23rd of August 2024 was no different. NAAMSA have been talking to Accenture around this topic and I can assure you that is not a cheap exercise.

The presentations and discussion panels centred around the advent of what I like to call 'digitalness' and AI and the impact that this is having on the auto retail sector and how it attracts new customers.

There is a lot to unpack - that's just the NAAMSA way but stick with me as I try to construct what I think happened.

One of the interesting takeaways was from LightStone, a large data set analyser that made the prediction that our market of around 500k new vehicles a year is not set for explosive growth. They are predicting only modest growth year on year for the next five.

But we've also had 10 new entrants in the last 24 months and there are more that are known to be coming. Go MG! What this means however is less of the pie for all players. Competition between them all is fast and extremely furious. And heating up. There will be casualties.

The other soundbite to come out is that 68% or so of people would switch brands and would do so pretty much in a snap of the fingers. If it weren't for the dyed in the wool hard core nutters that make up the two sides in the bakkie wars this brand loyalty might be even thinner...

There are two other keywords that emerged. The word "trust" is one that was presented along with focus on the "customer" as the other. It sounds bloody obvious but there is complexity in the apparent simpleness of attracting the right customer to the right product at the right time. The increased competition for the customer's attention remains the eternal challenge - just harder now.

Bear in mind that second hand cars sell three times as many as new cars do. Also the average age of cars on the road is now 14 years which speaks to affordability and saturation levels.

The first session was entitled Digital Transformation in Auto Retail. I have to be honest I was skeptical about it - to my jaded and cynical ear it sounds a bit like an Accenture drummed up term used to generate new consulting business based on froo froo ho hum new age techno mumbo jumbo.

I'm not entirely sure that I'm completely wrong. The truth, as often in the case with these things, lies somewhere in between.

My understanding is that the digital transformation at this point in time revolves around the advent of AI and the impact that will have in bringing the right person to the right product at the right time. There was mention made that AI is already at a stage - and you will need to read this twice - where it can detect within the first sentence of your engaging via voice with it, to a quoted 80% accuracy of just how serious you are about a purchasing decision from the inflections in your voice, your choice of words and so forth.

Remember that this is an entity that has never engaged with you prior. Is that a little scary or is that just super impressive? What gets really exciting is that the wonks who study this stuff like their pay depends on it say that by 2026 mature AI interfaces will be at a stage where they will account for 50% of business at the auto shop floor in Gen 5 or better derivations of AI. In other words the current Gen 2 AI models that are clunky, stupid, slow and can't get out of a loop of their own making will be going away, and rapidly so.

AI will become orders of magnitude more sophisticated in assisting you in a purchasing decision. And yes, this is why you pay Accenture - just consider the implications if you don't know what you don't know!

Research has shown that a significant number of people want AI assisted interfaces. In other words the definite trends towards AI driven interfaces being a customer preferred choice means that in the market that is SA, if you're not offering this you are going to lose sales.

Which got me to wondering.

This 'trust' thing. As good as AI is, it comes down to what trust a customer places in it. If there is no trust no matter what an AI says or does, the customer is lost. Think about it. How many of us trust car sales people to begin with? How many of us would trust an ABC AI selling ABCs products as being impartial and trustworthy?

Also this 'customer' thing. Understanding what drives people to buy a car is tricky - how many of us do research, and how many of us have already decided based on nothing other than a wiring circuit in our brains closing a loop? How are we influenced? Are we influenced? Top Gear? Or Wills on Cars?

It is extra ordinarily complex and that's why you need an Accenture whose job it is to try and plot a path forward to ensuring your product is put into consideration by the customer.

Let's just take a thought experiment quickly here to a possible outcome?

cars.co.za is reporting 150k users a DAY through their site. How much more can that grow? In three days they have reached pretty much every single sale done for a year in the market. What happens for the rest of the 362 days of the year?

It's not that simple of course but you get the point. Online is saturating as it has to - there are only so many people and so much time that are relevant and target. Whoever was going to be online is now online with audience numbers flattening out. The big growth in the space is over and now it is consolidating. As such the revenues generated and transferred from non digital such as print media and TV advertising are also likely not to be growing as fast.

Now that you have the audience what do you do with it that you aren't already doing to increase your take from them?

It got me to thinking. 'Trust' and 'Customer'.

I wonder what happens when one AI is able to give me access to all cars from all manufacturers all at once, with zero vested interest other than getting me into the right car at the right time? It (the AI) will make money no matter which car I buy, it doesn't care from where I buy it.

And if this materialises, he who is master of this AI will rule all the Internet. Great for the consumer, and very great for whoever it is that owns this space. As we have seen time and again, leaders in online spaces tend to be leaders by quite some margin.

I am watching with interest.