How Auto Retailers Can Embrace Digital Disruption

Disruption generally begins with the idea that things can be better. A look across history will show that much of the technology and innovation that changed the world started with this belief.

But, in order to achieve this potential, industries have to harness new advancements and adapt to change. If they do not, disruption can have a negative impact until a market corrects. Organizations can avoid this by embracing technology and innovation, and by learning how to use it to their benefit.

Prior to 2020, no more than 2% of auto sales annually were made online. It leapt to upwards of 30% during lockdowns and has continued with expectations to increase. Several automakers have announced plans to sell certain models solely online. Others have said they intend for digital sales to comprise up to 50% of their business.

While current state legislation keeps dealerships at the table, digital disruption is arriving and dealers still need to adapt. Once technology disruption starts, it is unavoidable. However, the internet and other innovations can provide opportunity, with the potential of lower costs, better margins and reach. Dealers should take hold of the power and potential it can create for them.

Auto retail is fortunate in that it is one of the last retail industries to see disruption from the internet and innovation. Music, television, fashion/apparel, electronics, home goods and service retail have endured digital transformation. Unlike these categories, auto retail can look to their past as digital disruption proliferates.

For example, the legacy music industry initially fought to keep innovation at bay and lost enormous opportunities, sales and market share. Apparel/fashion brands that did not embrace technology are either struggling or defunct. Legacy auto retailers need not suffer the same fate.

While many dealers are opting to sell or consolidate, they have the option to adapt and use innovation. The first step is to understand the likely future of auto retail and how it can help dealers make decisions and navigate change.

For example, the dealership as distribution center is a likely scenario, where consumers can pick up new and used vehicles after purchase or receive by delivery service. Or, dealerships may opt to continue to sell directly to consumers by creating a strong position as a digital retail or hybrid business. There also is the possibility of taking both approaches, where they serve as distribution centers for automakers while continuing to sell their own inventory directly. To stay in the game, dealers should consider these options and begin planning today.

There is much to gain from learning how other retail industries use technology in the customer experience beyond online sales. Retail giant Nordstrom offers customers the ability to buy in-store, or they can purchase online and either receive their order by pick-up or delivery. Streamlined inventory is often found in the brand’s physical stores, along with cafes, restaurants and tailoring services. Value-added channels have potential for auto dealers, too. A multitude of offline stores offer self-checkout or other efficiencies.

Apple customers purchase directly from the sales associate assisting them, with no need to wait at cash registers. Purchases that involve contracts provide documents digitally. It reduces time and effort during the buying process, and records can be stored electronically to save space and resources.

Nathan Hecht

What dealers can do today to harness the future is gain a solid understanding of what’s ahead, and the options available at every stage. While it is often changing, keeping a constant pulse can help dealers stay savvy, flexible and ready. This can be as simple as regularly reading industry trades and watching others in the market. Attending trade shows and other events, and maintaining professional networks, can also give eyes and ears. They should look to innovation partners and platforms that can provide rapid, turnkey advancement and insight, as well. From here, dealers can best develop a plan and approach to succeed in the new world ahead.

Nathan Hecht (pictured, upper left) is founder and CEO of Rodo.com, an online marketplace that connects auto dealers and consumers in the purchase, sale or leasing of new and used vehicles.