The future of auto retailing: preparing for the evolving mobility ecosystem

Posted by Andrew DinsdalePhilipp Willigmann, Scott Corwin, and Jeff Glueck

Remember the last time you bought a car?

Hardly anyone finds today’s automotive retail experience—researching, contacting the dealership, test driving, financing, and closing the deal—efficient and satisfying.1

Indeed, just 17 out of more than 4,000 car shoppers in a recent survey said that they were happy with the status quo car-buying process.2 That’s 17 people, not 17 percent.

Auto retailers have acknowledged this dissatisfaction and responded with incremental changes. As other industries become more customer-centric, however, creating a less painful retail experience is increasingly table stakes for carmakers and dealers.

Compounding this challenge are the fundamental shifts under way in the extended automotive industry—indeed, the disruptive trends threaten to undermine longstanding assumptions of personal car ownership, on which today’s automotive business models are built.3 The convergence of a series of forces could propel a long-established system into a transformation yielding a new mobility ecosystem, one ultimately defined by two critical trends.

First, and most critically for auto retailers, is the move from individual ownership toward shared access to mobility, where the emphasis is on the movement from point A to point B.

Second is the emergence and adoption of autonomous vehicles. Figure 1 shows the four future states of mobility emerging from these two trends.

Figure 1. Future states of mobility

Change will happen unevenly, with different populations in different geographies requiring different modes of transportation, which means that the four future states may well exist simultaneously. Each, however, carries with it a unique set of customer expectations and needs that determine how value is created for both the consumer and the dealer (figure 2).4 Auto retailers have a “right to win” in states 1 and 3, where something approximating a conventional retail process—cars sold to individuals—endures. The same cannot be said of future states 2 and 4, where customers are buying miles traveled, not vehicles. What is being consumed is end-to-end mobility, and the basis of competition shifts from a capital asset sale to providing or managing a seamless and integrated mobility experience. This introduces a broader set of competitors that dealers will have to out-compete if they aim to remain relevant for a growing part of the personal passenger transportation business.

Figure 2: The future of mobility for auto retailers

Preparing for the future of mobility

The future of mobility poses numerous challenges to automotive retailers. The emergence of autonomous vehicles and, in particular, the rise of shared mobility will force a rethinking of nearly every aspect of the car buying process; as more consumers migrate to shared mobility, it could make many established processes irrelevant to a large swath of the population. Even absent those trends, shifts in consumer expectations will compel auto retailers to focus more on relationships and experiences than on vehicle performance. OEMs and dealers need to undertake a clear-eyed assessment of their businesses to decide “where should they play” and “how should they win” in the future mobility ecosystem.5 The answers to those questions will help determine the capabilities companies will need to develop. You can find a detailed discussion of those capabilities in our full paper, The future of auto retailing.

But there is one tactic every auto retailer can adopt: Experimenting relentlessly. The capabilities to succeed in the future of mobility will likely take years to develop and mature, and there is no established model for success. Incentivize innovation and risk-taking, and be prepared for setbacks. Invest in the infrastructure to support new thinking, including exploring new organizational structures such as standalone innovation incubators.6 By fostering agility, failing fast, and capitalizing on ideas from inside and outside the organization, OEMs and dealers will be better positioned to turn the challenges that the future of mobility presents into opportunities.


1 Scope note: For the purposes of this analysis, “automotive retailers” refers to entities that sell vehicles and mobility services to consumers. Additionally, this paper focuses on the retailing experience for the end consumer only. Finally, the retail capabilities and strategies focus on new and certified pre-owned vehicles; vehicle trade-ins and consumer-to-consumer used car sales are not addressed in this paper.
2 Autotrader, “Car buyer of the future study,” March 31, 2015, http://filecache.drivetheweb.com/mr5mr_autotrader/196064/2105+Car+Buyer+of+the+Future+Brochure4-7-15.pdf.
3 Corwin, Vitale, Kelly, and Cathles, The future of mobility.
4 Customer-centric value drivers are the dominant aspects of the retail experience that most critically shape customer decisions to buy, and likewise shape retailer strategies and priorities in purveying their product or service.
5 A.G. Lafley and Roger L. Martin, Playing to Win: How Strategy Really Works (Cambridge, MA: Harvard Business Review Press, 2013).
6 Larry Keeley, Helen Walters, Ryan Pikkel, and Brian Quinn, Ten Types of Innovation: The Discipline of Building Breakthroughs (New York: Wiley, 2013), p. 200.

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