Digitalisation is revolutionising not only automobile manufacturing, sales, service and marketing, but the very concept of mobility itself. Already, a number of traditional consumers are choosing not to own cars, preferring to “use and share” them on-demand, instead.
Digitalisation is encompassing a multitude of changing developments happening across the automobile value chain, from supply of parts at one end to factories to fully-finished vehicles dispatched to the dealers.
Automakers in India are embracing the change, especially in the retail chain with many opening new online channels – virtual, digital showroom and mobile applications for bookings, test drives and experience centres.
Though online interference will play a vital role in developing a lead funnel for automakers and dealers at the same time, physical stores and experience centres will play an equally important role as vehicle purchasing is an emotional buying decision, and the “touch and feel” parameter continues to be an important factor for a consumer.
Traditional Model
For decades, the traditional franchising model has proven to be very effective in automotive retail. Albeit there are variations in sizes and standards, in general, the retail model has been very singular in the form of dealerships.
However, the continuing viability and sustainability of the traditional format (of having a Taj Mahal everywhere) has gone for a toss in certain areas over the last few years. Various forces have contributed to that, including sharp increase in real estate prices in the metros and to an extent in many Tier 1 cities, intensifying competition and shorter product life cycles.
In certain areas, especially in larger cities, traditional representation is becoming cost-prohibitive. As a result, OEMs may lose coverage & convenience (and, potentially, market share) in areas where the opportunity is the highest.
Innovation In Retail
Therefore, in the pursuit of market share growth or, in defending existing market share, many automotive manufacturers are taking innovative routes to increase their reach and coverage to optimally cover the potentials of these pockets, which includes everything from short-term ‘pop-up’ stores at airports & high-streets/malls to permanent and smaller 1S format stores.
ATAWADAC (AnyTime AnyWhere AnyDevice AnyContent) and phygital (physical as well as digital) ecosystems by Citroën and virtual showrooms by Renault in India are some of the examples towards future retail formats.
Although the innovative retail formats themselves differ widely across the industry due to specific brand attributes and customer target groups, there are some commonalities. It is important to understand that, throughout the story of innovative retail formats, the fundamentals of franchising and the interests of stakeholders remain unchanged.
In a digital age, consumers have access to almost all the information they want about a vehicle online and thus are more educated shoppers. There is a difference, however, between being a knowledgeable shopper and being a satisfied customer.
It is important not to make generalities about the impact of innovative retail formats, especially since they come in many shapes and sizes. The intent of having innovative ways to retail circles around using the digital world. It is best to increase the brand effectiveness translating into better retail, convenience and experience, besides using technology to reduce the fixed expenditures and to create a competitive edge.
About the Author: Amit Kaushik is a widely acknowledged automotive retail expert and currently heads India operations for Urban Science, a US-based consulting firm. He has consulted various automakers in India to define their retail and network strategies besides advising them on partner’s profitability aspects by creating an efficient and effective value-chain.
N.B.: As part of this series, we will look at the different types of innovative retail formats that are, or will rule the automotive industry in the future.