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Connected Car Helps Drive Automotive Retail Consolidation

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Automotive Retail is Consolidating It’s no secret that significant consolidation of automotive retail is underway. Every week, Automotive News reports additional acquisitions by the leading retail consolidators. Earlier this year, Automotive News reported that the consolidation trend has continued steadily over the past 10 years – even through the pandemic. At the end of 2020, the Top 150 Dealer Groups owned 21% of all dealership locations and represented 23% of industry sales volume. This is up from 13% of locations and 16% of volume ten years earlier.   The need for significant technology investments is one driver of consolidation. Smaller dealers are faced with large investments to enable digital retailing to meet customer expectations. Dealers are also facing new investments in electrification technology to accommodate the industry shift to EVs. And some dealers are choosing to sell rather than make the investments. For example, approximately 20% of Cadillac dealers are reported to be walking away from their franchises, rather than make required investments in selling and servicing Electric Vehicles.   Tesla’s Retail Approach Shows What is Possible Tesla’s retail network shows that technology can not only be a driver of consolidation, but also an enabler. Tesla has fewer than 200 Sales Galleries and fewer than 150 Service locations. Connected Car technology is one of the keys that makes it possible for Tesla to service its customers with so few facilities. On the sales side, Tesla enables comprehensive on-line shopping. In service, Tesla says that it can accurately diagnose 90% of all issues remotely and that it can repair 80% of problems without a visit to a service center. Connected Car technology makes this possible by allowing Tesla to remotely connect to its vehicles for diagnosis and for ongoing insights into real-world customer usage. Tesla can also determine the customer’s location if it needs to dispatch a remote repair and Tesla can often repair vehicles with an over-the-air software update. It is safe to say that Connected Car technology is the only way that Tesla could operate with so few physical locations. As this technology becomes more widely used by all OEM’s, there will be growing opportunities for other OEMs to consolidate sales and service facilities. Lessons from the Pandemic and the Chip Shortage Both the pandemic and the chip shortage have accelerated trends toward digital retailing and reduced inventories. As reported in Car and Driver , Ford has concluded that the pandemic accelerated customer interest in shopping and ordering vehicles on line. Many dealers successfully responded by offering at-home test drives and deliveries. A build-to-order mindset for consumers has been further accelerated by the chip shortage, which has made it difficult for dealers to hold inventory and for customers to shop from inventory on the dealer’s lot.   Connected Car Technology Will Enable Further Consolidation Connected Car technology will further enable the trends toward retail consolidation and digital retailing. As Tesla has demonstrated, a well-connected OEM and Dealer network can easily provide remote sales and service to customers without needing so much real estate. As customers become more comfortable with online ordering and remote service, the most successful dealers will be those who make the best use of technology to serve customer needs.   We will soon see dealers making extensive use of Connected Car tech in their sales and service operations. For example: In Sales, vehicles can be made available for any-time test drives and parked inaccessible locations. Vehicles can be electronically disabled to prevent theft and only enabled for prospects with a valid authorization code. Also in Sales, a limited test drive can be extended to a short- or longer-term rental, with data collected to make effective suggestions to the customer for a customized vehicle, accessories, and software. In-Service, ongoing monitoring of vehicles will create increasingly sophisticated predictive models. These will allow Dealers to contact customers long before a failure occurs and offer either a physical repair or a software update. Also in Service, Dealers can monitor vehicle diagnostics trends, and can proactively schedule vehicle maintenance to be done at a time that is most convenient for the customer and also the most efficient for the dealer. The bottom-line result will be continued consolidation and more efficient use of real estate to meet the needs of automotive shoppers and owners. 
Everyone Wins With A Seamless (Online And In-Store) Experience

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Think about the last time you experienced a retailer with a digital experience that seamlessly connected to the in-store experience. Maybe it was as simple as opting to pick up a purchase in-store, rather than having it shipped to your home. Or, it could be that you saw a product at one of the retailer’s locations but waited until you got home to research and make the purchase. Do any retail experiences like this come to mind? Now think about the digital experience your dealership provides car buyers — does your in-store experience connect online? Does your in-store pricing match or differ from your online inventory? Imagine finding a different price for coffee on the Starbucks app than what you find in-store. Everyone, from coffee drinkers to car buyers, cares about a seamless, efficient and pleasant experience, no matter how big or small the purchase. Connected experiences drive customer satisfaction In a recent survey , we learned that almost 50% of consumers find increased satisfaction when provided with a seamless experience in-store and online. When asked which retailers provide the best experience they answered: Walmart , Apple , Best Buy and Target . What’s the common thread? Each of these retailers allows for an easy, transparent shopping experience that fits individual shopper lifestyles wherever they are. Black Friday 2019 is a perfect example -- shoppers clicked and thumbed their way through 20% more online sales than 2018 (a record-breaking $7.4B) while in-store sales dropped by 6.2% and foot traffic down by 2.1% . Walmart’s dedication to the customer experience is evident with its entry into the grocery business, which ranked as the #1 Best Overall Customer Experience, according to the survey. Customers are able to start shopping from their website or mobile app and have their order delivered for free the next day or pick it up in-store. During Black Friday 2019, we can see the impact of their and other retailers’ efforts. Reports showed that 65% of online shoppers made purchases with their phones , but chose in-store pick-up 43% more of the time than 2018. Shoppers want to make the purchase when it’s convenient for them, but are willing to visit the store to ensure what they bought is what they’ll get. The above retailers have Net Promoter Scores that average around +70 (on a scale of -100 to +100), while the auto industry averages around +39 1 . Dealerships are not providing the worst experience by any stretch of the imagination, but what we’re finding is that shoppers are coming to expect similar research and purchase experiences at a dealership that they might get with other retailers. After implementing Roadster’s Express Storefront , which connects online and in-store experiences, we’ve found our dealer partners average a Net Promoter Score of +83. 1 Temkin Group NPS Benchmark Study, 2018 Build relationships to grow loyalty Another key learning from the survey is more exclusive to the automotive industry and a more human one. When asked what they would change to improve the car buying experience, the top choice among respondents was to work with one salesperson from start to finish. For the first time, a “one salesperson” approach beat out transparent pricing and inventory selection. This means the person who reaches out when the initial lead comes in is also the same person who hands over the keys at the end of the deal. It may seem like a big ask for a salesperson to drive every step of the sale (including F&I), but systems like Roadster’s Express Storefront are built to empower salespeople with all of the information they need to complete the transaction while ensuring profitability for the store. This approach also allows managers to get out from behind the desk to focus on higher-level tasks such as early customer introductions and coaching the front-line sales team. Shoppers are willing to pay more for a better experience Consumers are increasingly expecting their shopping experiences to fit into their individual lifestyles, and 80% say they’re willing to pay up 10% more for it. Some people want to go to the store, others want to research and buy in the privacy of their own home. At the same time, car buyers still want someone nearby to guide and move the sale along. It is time to close the gap between online and in-store experiences at the dealership. We can embrace tools that empower car buyers to define their own shopping experience and, at the same time, connect them to onsite salespeople to answer questions, discuss products, and ultimately build long-term relationships that benefit both the buyer and dealership. The technology can get you started but it’s your process and culture changes that will bring it home. Methodology: Between July 11-17th, 2019, we surveyed, in partnership with Survata , over a thousand weekly shoppers who do their purchasing both online and in-store. These respondents also had to have purchased or leased a car in the last year.  Read the full study and learn about Roadster’s Omnichannel Commerce platform here .
online shopping
Today’s Consumers Shop Differently—Dealers Need to Change Too

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Today, search engine marketing (SEM) represents 55% of the typical dealership’s total ad spend. Yet, dealers are not getting the results they want. Conversions on the big guys (Google, AutoTrader.com, Cars.com and Edmunds) even on key terms, are less than one in four. In fact, our research shows that of all buyers today, only 30% will ever engage through a lead device like a form, chat, email, or phone call. Fully 70% will avoid all forms of engagement and make their first contact with the dealer on the lot. What we’re seeing is a fundamental shift in how consumers shop online. They are spending less time on big search engines and more time on topical sites where they can hunt down specific inventory. These self-directed and highly engaged consumers close at a rate of 64% or more, and at a fraction of the cost of paid search. Shift the way your dealership spends online, and you can nab more of these shoppers and close more sales at a lower cost. The New Search Paradigm Over the last decade, searches on topical sites, known as vertical search, have steadily climbed. To explain this shift, think about how you shop online. Say, for example, you’re planning a vacation; you’ll likely start with Google to get a general idea of your destination, then move to a research/review site like TripAdvisor to narrow your choices, and ultimately end up at a site like Kayak to compare real-world air and hotel prices and book the inventory you want. For another example, think about how you shop for a consumer product. You may navigate to Google for that general idea, than go right to Amazon, eBay, or PriceGrabber to find the exact product you want. This is the de facto shopping behavior for almost every retail category: people navigate to an “upper-funnel” search to get a general idea, move out of the search engine to a “mid funnel” search and ultimately end up on a “low funnel” vertical search site to purchase real inventory. Leveraging This Search Shift Putting more focus and budget on that sweet spot where the shopper is in the low funnel and ready to buy real inventory, will nab more sales. For dealers, the sweet spot is the vehicle detail page (VDP) view. The proof is in the millions of vehicle internet searches that light up the internet each month, and the fact that inventory search is by far the most used feature on all automotive sites. A strategy that focuses on creating comprehensive and complete VDPs, and deep linking them directly to the over 135 popular automotive vertical search sites (topical sites) where nearly 70% of inventory search happens, has huge ROI and far speedier closings than traditional SEM. Getting Real Results Dealers using a deep linking strategy see an average of 147% more shoppers per month from paid search. These highly engaged shoppers are more likely to visit the lot, where they close at a rate of over 65%. Not only do sales shoot up, they also happen faster. New inventory VINs with Deeplink views move 42% faster than those without. Used inventory VINs move over 60% faster with deeplink traffic. These results are possible with only a small shift in ad spending. A study of 197 Dealer Groups found that shifting just 24% of search spend to VIN deep linking dramatically improved results. Rooftop paid search shopping volume went up nearly 147% and engagement increased by 2X. Most astounding, deeplinking increased inventory search reach by 425%! Advertising costs were also dramatically lower. Cost per shopper decreased by over 94% and cost per VDP view dropped by 83%. It’s a fact: shoppers are evolving and changing their search behavior. If your dealership wants to increase its reach to the in-market, self-directed consumers who are ready to pull the trigger on a new vehicle, you have to deep link your inventory to low-funnel vertical search sites. Do that and you’ll increase engagement, lot visits and most importantly, sales. Len Short is a founder of Lotlinx, the first deep-linking automotive advertising platform. Short is an online marketing pioneer having headed up marketing at Charles Schwab and AOL. You can reach him at Lshort@dealermark.com .