Fewer dealerships in future, more service-only McKinsey report

Fewer dealerships in future, more service-only – McKinsey report

Dealers will remain a crucial part of the sales process, but they will need to adapt their sales and service to embrace a more digitized customer base, says a new report by McKinsey & Company.

The dealers role has already changed, McKinsey says. With more than 80 percent of new-car and almost 100 percent of used-car customers starting their research online, dealers are no longer the primary source of retail market information. Thats especially true for consumers aged 18 to 34, who use a variety of online sources – OEM and dealer websites, social media, blogs and forums – to gather information and compare offers.

That means dealers often get just one chance to influence consumers. They have to fight for that chance online, not only by upgrading their own website, but also by integrating traffic from third party sites such as Kelley Blue Book, Consumer Reports or JD Power. Salespeople will need to be more knowledgeable than ever, especially on questions of connectivity for smartphones and tablets.

As the market is saturated and fewer dealerships are needed, OEMs are making greater demands on their dealers, the report says. More OEMs are adding terms to their dealer contract renewals that give them the right to set up an online channel, partially bypassing or at least augmenting the traditional dealership channel, as well as increasing their control over the dealerships appearance and operations. OEMs are experimenting with new retail formats, including boutique-style stores in prime city center locations, such as Tesla stores, and online stores, such as BMWs customer interaction center. In the future, dealerships may specialize in particular aspects of car ownership, creating, for instance, service-only centers.

Even with increased digitization, however, vehicle consumers generally want to test drive a car before buying it and get expert advice on optional equipment and services such as F&I. Thats especially true with used-car sales. Designing a superior test drive with a well selected route and explanation of the cars features will become increasingly important, the report concluded.

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