A predicted 20-fold increase in the volume of EV sales in the next five years and an online sales revolution that could spark “the most dynamic decade the industry has ever faced” – AM DigiTech offered delegates an insight into two potentially disruptive influences on new car retail whenTom Callow, Chargemaster’s director of communication and strategy, and Martin Sewell, the managing director of Rockar, took to the stage in Milton Keynes.
Sewell highlighted the benefits of his business’s omni-channel approach to retail, stating: “We see more visitors in 10 minutes than most traditional car dealers see in a week.”
Both men highlighted the “massive profit opportunity” open to franchised retailers who adapt to the market quickly and challenged delegates to embrace the changes.
Sewell said Rockar, founded by Simon Dixon, its chief executive, in 2014, had proved customers were ready to buy new cars online and suggested it was time for retailers to acknowledge the shift.
“In our three years trading, we’ve had 1.4 million store visits,” said Sewell.
“With Hyundai, we were the brand’s third-biggest-selling retailer in the country and we remained in that position until the day we left.
“Little Rockar, in the South East of England, has sold 4,000 cars through our omni-channel business model and 65% of them are online.
“Your customers are ready for this kind of car buying experience, but you don’t provide it or the manufacturers you represent simply are not ready.”
Despite being bullish about its sales results at Hyundai stores in Bluewater, Kent, and Westfield, in Stratford, Sewell and Dixon’s vision for the Rockar business is as a facilitator, rather than a retailer of cars.
Sewell told the conference that the business intends to operate only the Jaguar Land Rover site, at Westfield, on an ongoing basis, maintaining the business as a “flagship facility”.
In November, Rockar announced a partnership with Mitsubishi, which will see it consult on the recruitment and training of staff for 12 UK stores, along with providing its online retail platform.
In March, it announced a further, similar collaboration that brought together Ford and Next, initially with a retail space at Manchester’s Arndale Centre, which will open in July.
Sewell said: “Those manufacturers that get on board really quickly are going to secure themselves some great retail space to support their dealer network. The two things have to work in tandem.
“Having come from a manufacturer platform, I know that you have got to have a profitable sustainable distribution network to remain viable.”
Sewell said some of the advantages of opening car retail locations on the high street were brought into sharp contrast through its work with Hyundai.
Cameras over the doors in its Hyundai stores helped to track the number and make-up of customers, helping to establish that the average age of a customer was 39, as opposed to 54 in the wider retail network. A total of 54% of visitors were female.
Sewell said: “Some research done last year identified that 70% of female car buyers don’t like visiting car showrooms on their own and, interestingly, the same of men aged under 30.
“Someone in a shopping mall is not someone that is in the car market today, so you have to treat them very differently to the way you would treat a customer that has walked into a dealership.”
He said the fact that Rockar’s staff are not paid a bonus and are not on commission, results in “a pressure-free environment that appeals to customers that a manufacturer might not reach otherwise”.
Rockar hopes to licence its online retail platform to franchised car retailers and facilitate a wider shift to the high street.
Sewell said: “The idea was always to take the car to the people”, adding: “This is going to be the most dynamic decade that the automotive industry has ever faced.”
The unstoppable rise of EVs
The products that retailers are selling are likely to change even faster than the sales model, according to Callow.
“Five years ago, Nissan started manufacturing the Nissan Leaf at its factory in Sunderland. Back then, there were just over 4,000 electric cars on UK roads. Today there are 148,738”, he said.
“Five years ago, one in 862 cars was an electric vehicle. Today it’s more like one in 50 and in the latter months of last year that was closer to one in 40.”
Callow told delegates that just under 50,000 new EVs sold in the UK during 2017 and Chargemaster expects that to rise to just under 70,000 this year.
He insisted that the only obstacle is supply: “There is no demand constraint at all”.
Chargemaster estimates that the number of EVs on UK roads will reach one million by the end of 2022 – still just 3% of all cars in the UK – and to about one in six vehicles, or about 17%, by 2027.
From just 10 available EV models five years ago, Callow said there were now nearly 60 available to consumers. He said that number would double over the next two years and triple to about 150 in the two years after that.
Chargemaster is one of the UK’s leading providers of charging infrastructure solutions and is installing its Luton-built charge points at strategic locations across the UK.
Callow said there were about 3,000 three-point-plug charge points for EV cars in the UK five years ago, a figure that has now increased to about 15,000.
He added: “There’s 70,000 fuel filling points across the UK, but there are 100,000 dedicated charge points at people’s homes, and that’s where 80% of people charge their vehicles.
“Why is that? If you had a fuel pump at home, would you ever visit a filling station again?”
The growth in EV infrastructure and the sheer choice of vehicles available to consumers is already fast-forwarding the growth of alternative fuel vehicles (AFVs), according to Callow.
He said: “Motors.co.uk observed that EVs were much faster-selling than in Q1 last year and demand is rising. Demand for the Hyundai Ioniq has increased by more than 200% last year to this year. Quarter to quarter, you’ve got Nissan Leaf over 500%, the Renault Zoe 1,000% and it goes up and up…”
Highlighting an apparent discrepancy between reported residual values and actual EV prices in the marketplace, Callow cited KeeResources data, which suggested that after 36 months and 30,000 miles a Nissan Leaf Acenta would be valued at about £7,000.
He claimed a near-identical vehicle identified in the retail market on the day of the conference was being advertised for £15,000.
He listed others – a battery-inclusive Renault Zoe, £9,500, retaining 47% of its original price after three years; a Tesla Model S, retaining 65% after four years; and a BMW i3 at 46% after four years.
“You are going to lose some money from servicing, there’s little doubt about that. There are fewer moving parts in an EV, there are fewer things to go wrong,” he said, citing a Kee Resources study that predicted a 30% drop in service, maintenance and repair (SMR) on EVs.
“As dealers you’ve had to adapt in the past, I’m sure you will in the future.
“The key point that emerges from a look at the market, and the real-life value of used EVs is clear. There exists a missive profit opportunity out there for car retailers and not embracing that now would be a huge mistake.”
‘Design everything around the car buyer’
Businesses succeed when they give consumers what they want, in the way they want it, said Chris Penny, franchise brand director at Auto Trader. That should be the focus in every channel, he said, rather than worrying about how you can get better at digital retailing. “Look at everything through a consumer lens. Really design everything around the car buyer,” he said.
Beware of confirmation bias, where people find facts to support their beliefs, to show they have the right plans and ideas. The best businesses constantly examine all the evidence in the market to try to prove themselves wrong, he said.
Ease the purchase journey with digital ‘sign anywhere’ options
Digital tools help to improve the customer journey and provide finance options that consumers really want, said Jason Turner, head of franchise development at Barclays Partner Finance, who outlined how a digital ‘sign anywhere’ solution can be used in any sales process to help give customers a consistent, compliant and frictionless purchase journey.
He believes dealers will follow the lead of furniture and home improvement retailers, which have shifted from high APRs to low-rate or 0% finance as marketing tools to drive an increase in sales.
Online retail is allowing consumers to find what they want, best suited to their specific needs, said Turner. “There will be 10% of consumers who will always want to do everything online, and 10% who will want to do everything on-site. Then the 80% left will do bits when they feel comfortable with it,” he said.
Consumer car-buying trends in 2018
According to carwow’s data, diesel sales levelled out at 36% in 2017, meaning dealers need to apply the fundamentals of supply and demand even more strategically, said Karen Hilton, commercial director.
“Smarter dealers are offering more competitive pricing on diesel cars to help stimulate consumer interest and retail their way out of the surplus stock.” However, with petrol demand increasing, she said “dealers should be seeking to retain more margin in petrol models”.
The challenge for dealers, she added, is being this granular in their marketing.
Get your internal IT systems right
“Choose the tools that help you understand and manage your environment consistently, securely and with minimal effort,” said Gary Smith, managing director of Optimising IT.
Dealers should consider both customer requirements in the showroom, and what experience they are providing. Wi-Fi speed, protection and segregation from the corporate network should all be considered.
He said staff can also be affected by poor IT support, which could result in individual downtime and lower morale.
Learn from wider online retail sector
Car retailers are having to keep up with the best in online retail practice to ensure they attract customers to their showrooms, said Andrew Haywood, head of performance management at Modix.
He said: “Customers online are no longer simply looking for a particular product in their online searches, they are looking for the ‘best travel website’ or the ‘best restaurant’.
“Only the highest-ranking businesses gain traction online now, so retailers really need to be paying close attention to their online presence. Not just the functionality of their websites, but their reviews and online interaction.”
In a survey tracking the car-buying journey of 2,500 consumers, Modix found 95% of their research was carried out online and 65% was on a smartphone, but few buyers completed the transaction that way.
Haywood said: “The purchase process hasn’t changed – 95% of car purchases still happen at the dealership.”
The survey identified high points, such as when customers met a knowledgeable salesperson and during the handover, but saw a dip in experience when the finance arrangements were being made.
Haywood said: “Where we can facilitate a customer with an online platform, an iPad for them to work through a process themselves, that is seen as a huge advantage.”
Dealers may ditch B2C model for B2B
KPMG’s Global Automotive Executive Survey 2018, which found up to half of UK dealerships could close by 2025, attracted a lot of attention when AM reported on it.
Some 75% of the survey’s 907 executive-level respondents said that between 20% to 50% of the bricks-and-mortar automotive retail sector could disappear in just seven years, but Justin Benson, UK head of Automotive at KPMG, told delegates that he does not believe the future is quite so bleak.
“It is my belief, my hope, that the outcome will be rather more to the bottom end of that range,” he said.
However, Benson went on to say that 50% of consumers would no longer want to own a car as of 2025, which should prompt car retail groups to consider changing from a business-to-customer (B2C) model, to business-to-business (B2B).
He said: “The majority of UK automotive executives are convinced the only means for dealers to survive is by restructuring into a service factory or a used car hub.
“This is certainly a warning sign for physical retailers and presents a need to rethink retail concepts and business models.”