Four Trends to Watch For
Change has always been a constant, but it is now happening faster than ever before. The pace of innovation around the world is increasing at an exponential rate. And the impacts of this acceleration will be felt everywhere. This is leading to a world of what we call templosion, in which very large things happen in increasingly compressed amounts of time. Templosion will touch every industry – nobody will be immune to its effects. Because of this, it becomes ever more critical for dealerships to begin thinking about how to position themselves in the future so that they continue to stay relevant, attract a new type of consumer and evolve in a changing environment.
Here are four particular things essential to staying relevant in a changing industry.
The Coming Age of Robotics and Automation
Dealerships will continue to grapple with the many ways fast, decentralized and smart systems will change the work they do, where they do it, how they do it, and for whom they do it. This new wave of evolutionary technology can automate not just manual, but cognitive tasks. Up to 44 percent of jobs may be automated within the next decade (25 percent within the next five years). And more is being leveraged to reshape the dealership experience. At Nissan dealerships in Japan, for instance, over 100 Pepper robots have been deployed to help to put customers at ease when car shopping or returning to dealers for service. The robotic greeters have the ability to recognize people, read emotions, explain features of Nissan vehicles, and offer games for kids.
Virtual reality (VR) is quickly going mainstream, and is starting to completely reinvent the consumer shopping experience. We see several marketplace examples of this already:
- Ford: Ford is using VR to test out its cars. They no longer have to build physical models or prototypes of vehicles. VR allows them to approve or change designs earlier. It also allows Ford’s engineers to collaborate on a single car without having to travel.
- Cadillac: Cadillac plans to convert some of its dealerships into all-VR showrooms. The goal is to enhance the customer experience while also decreasing some of the $2.75B U.S. dealers spend annually on interest to keep new vehicles on their lots. An estimated 3.9 million vehicles suffer from “lot rot.”
The key will be to integrate VR in a truly meaningful (vs. non-gimmicky) way so that it creates a necessary value-add to the dealership experience. It’s also a way to lure in younger buyers.
Understanding the Consumer of Tomorrow: Cybrids
Technological templosion is forcing us to rethink how we traditionally segment generations. Instead of lumping them into 12-15-year age cohorts, generations now change every two to three years. Understanding who your customer of tomorrow is and what makes them tick will be increasingly difficult. But it’s also worth paying particular attention to today’s youngest consumers – those commonly referred to as Gen Z. We call these under-18-year-olds “cybrids” – cyber hybrids. What sets them apart from preceding generations is that this is the first generation in history that has a truly symbiotic relationship with technology. Some of their defining characteristics include:
- Decreased brand loyalty
- Shifting purchasing habits
- Expectations that the brands they interface with will use sophisticated technology, but…
- They don’t want to be tracked and they want control over their own data.
These are your customers of tomorrow … and even today. They make up 28.6 percent of the global population, and by 2020, will make up 40 percent of consumers in the U.S., Europe and BRIC countries. And as of 2015, Cybrids contributed approximately $44 billion U.S. to the U.S. economy and influenced more than $600 billion U.S. in family spending. Those figures are likely to rise very quickly as this group gets older.
Collaborative consumption – a.k.a. the “shareconomy” – (i.e.., Uber, Lyft), represents a fundamental value shift from ownership to access. While many dealerships may view this trend as inherently threatening, there are many inherent opportunities to capitalize on. For instance:
- BMW is running a car-sharing program in Seattle called ReachNow that offers chauffeur-driven services, valet vehicle delivery service, short- and long-term rentals and peer-to-peer car sharing.
- Toyota entered into a partnership with Uber. A key component of the deal is a new car leasing program, where vehicles leased from Toyota can be paid directly out of Uber drivers’ earnings.
Fractional ownership is also an appealing idea. Right now, the average car sits unused 94 percent of its life. Why not think about the adoption of a subscription model? For instance:
- Audi is trying out a fractional car ownership program called Audi Unite that allows up to five people to own a car together.
- Fair is a service that promotes micro-ownership of cars, offering a more flexible and frugal alternative to having a car in a city. This model could give car dealers a new way of monetizing their inventory.
In an ever-changing environment, it’s important to stay abreast of trends that will shape the industry so you can be a part of the change instead of reacting to it.