Traditional OEMs have a global network of dealers, with strong product expertise and local market knowledge. But are vast physical dealership networks still a competitive advantage? Tesla is breaking one sales record after the other, banking on online sales and small showrooms in selected cities. While most traditional OEMs and dealers are still clinging to the sales models of yesterday, today’s customers have completely changed. Spoiled by Netflix and Amazon, they expect a hassle-free, seamless and digital sales experience.
Sales model transformation is a requirement for the dealers of tomorrow
When comparing the actual wants and needs of end customers to the perception that dealers have, we find that dealers are largely aware of the shortcomings in their current sales process. But is this enough reason for them to change their practices? Quite the opposite: Despite dealers’ understanding, many of them seem worryingly ill-prepared to adapt:
With newcomers introducing innovative sales models, dealers are under pressure to react. They have always been close to their customers. But without an excellent online presence and seamless omni-channel processes, dealers will quickly lose touch with their customers, leading to sharp declines in sales.
Dealers consider their future outlook to be challenging
More than half of dealers believe the dealer network will significantly decrease in size in the next 5 to 10 years. We have identified five aspects that have dealers particularly worried:
Because many dealers and OEMs have failed to establish a successful online presence, they are turning to others for help. Every third dealer is already selling vehicles via third-party platforms such as Carwow, who are providing the digital capabilities that dealers are lacking. But this comes at a cost. Platforms are cutting into dealers’ already low margins and are monopolizing customer access - dealers’ most important asset. Cooperation with third-party platforms thus seems a dangerous path to go on.
OEMs are taking initiative
OEMs are not sitting idle but have started to regain control over their sales networks. More specifically, many OEMs are piloting direct sales initiatives for selected models or regions. In a direct sales model, the role of dealers is transformed to that of agents who act on behalf of the OEM and receive a commission for each vehicle they sell.
Naturally, dealers have mixed feelings about this. Their fears primarily include declining sales, decreased motivation of sales consultants, and direct sales eventually replacing stationary sales. But given the challenges ahead, most dealers also see positive aspects. With direct sales, they expect a reduction in expenses and financial risk, higher vehicle availability due to national stock pooling and reduced intra-brand competition.
As dealerships lack the resources to master the necessary changes on their own, they are at a crossroads: Either they cooperate with third-party platforms and trade customer access for digital competence, or join OEMs’ direct sales initiatives that promise a significant reduction in financial risks and intra-brand competition.
Are you ready to choose your path?