Three months ago, I made a prediction in a LinkedIn post that only 5% of today’s car dealerships will survive the changes currently affecting the auto industry.
Currently, most dealerships are focused on owning the markets they exist in, instead of optimizing the car-buying experience itself or addressing the drastic change coming their way.
In order to succeed, these dealers will have to figure out how to design a better customer experience, while also addressing challenges impacting the auto industry at large.
As dealers scramble to stay ahead of massive disruption, large conglomerates—like Warren Buffett’s Berkshire Hathaway Automotive—are on a fast track to consolidate the industry.
Those who have consolidated are, in part, doing so to have access to expensive tools and technology that will allow them to fend off new types of competitors like Amazon, Uber, and Tesla through more seamless buying experiences.
But I see consolidation as a short-term solution for an immediate mindset shift that will upend the very business model of the auto industry.
Instead, we’re speeding quickly toward a future where people will stop wanting, or even needing, to own a car. Despite setbacks like the recent fatal crash involving an auto-piloted Uber car, self-driving technology and autonomous vehicles are a significant threat to the auto industry.
Some manufacturers are starting to retool, and change is already underway. Jaguar Land Rover recently entered into a deal with Google’s self-driving technology company Waymo. Meanwhile, General Motors launched a self-driving rideshare program.
And almost every car company is introducing its own electric vehicle in response to market demand. Volvo has gone so far as to announce its intention to transition entirely to electric or hybrid engines by 2019.
But if you tell a group of car dealers that their industry is in danger of bottoming out in less than 10 years because of a new technology, they dig their heels in and start coming up with reasons why their industry is insulated against such dramatic disruption.
I think it’s mostly because of a deep-seated aversion to change. As humans, our brains actually thrive on the comfort of consistency.
All businesses are built on a set of core assumptions about how things are supposed to work. I call these constants—basic beliefs that form the foundational pillars of how the business is supposed to work.
In the car industry, the biggest constant isn’t haggling or the long buying process that many people point to as their primary customer service problem.
No, the biggest constant is the belief that people need or want to own cars. Take that assumption away, and the industry is instantly adrift.
For most of us, it’s hard to imagine a scenario in which people don’t need to buy a car.
But before you write off such a driverless future as far-fetched, remember that it was only five years ago the taxi industry thought it was immune to disruption and competition because of its assumption that to start a taxi company, you first needed a fleet of cars. Everyone thought the constants in the industry were unimpeachable and, yet, Uber did away with the given that a taxi company needed cars.
It goes to show that constants can be an industry’s or business’ single-biggest blocker between innovative thinking and action. At one time, constants may have provided businesses with efficiency and security, but they are now the barrier preventing imaginative new ways of doing business.
So, if you’re a car dealer looking to position your business for the future, the question then becomes, “What should I focus on first?”
You have to pay attention to everything, including customer experience and technology. Make no mistake, massive change is underway in every industry, and technology has a lot to do with that change.
Although there’s disagreement about how fast the change is happening and how we need to address the challenge, it’s time to take a critical look at fundamental constants that have long propped up businesses.
Instead, we must think about the world in a different way and embrace the change. That’s where true innovation comes from.
I believe the way to win is by focusing on what you do best. If you’re the best at servicing cars, reorient your business around that (autonomous cars will, after all, need to be serviced). Whatever you decide, you have to imagine a future in which your main value to customers is not selling cars.
Ultimately, you will need to refocus your core value proposition or run the risk of facing consolidation, like everyone else.
With a focus on innovation, Ben Gaddis sets the vision for T3 to help clients build useful brands through an agency culture driven by collaboration, prototyping and making cool stuff happen. Ben oversees T3 offices in Austin, Atlanta, New York, and San Francisco. At T3, Ben has helped craft innovation, marketing and loyalty strategies for 7-Eleven, Staples, UPS, Allstate, Coca-Cola, Sprite, and other clients. He started his career in account service at The Richards Group. Ben is also a Techstars mentor, a contributor to Wired, and a frequent speaker at events.