Not since the first Model T left the factory floor more than a century ago has the automotive industry undergone such a period of upheaval, driven by the meteoric rise of electric car manufacturers such as Tesla and digital disruptors such as CarMax and Carvana.
Tesla turned established business models upside down by clearing the way for automakers to start selling directly to consumers. CarMax and Carvana succeeded in the difficult task of bringing car sales online. It would take a global pandemic for the rest of the industry to accept this simple truth: E-commerce is a viable option for car sales.
Disruptors born into the digital age have removed historic barriers and proved the potency of new business models–and consumers have demonstrated they are not just willing, but eager, to shop online for cars. So, what comes next?
E-commerce and DTC sales will transform everything
Tesla and other electric car makers are continuing to fight rules in hold-out states like Louisiana, which still restrict direct-to-consumer sales. As new markets open around the country, industry giants such as General Motors have already started selling used cars online, while Ford is building its own e-commerce platform and planning for a 100% online future.
Online vehicle sales will grow exponentially–and even for car buyers who prefer to make their final purchase in person, more and more of the buying process–from research to financing–will take place virtually.
Today, automakers (except for a handful of luxury bespoke brands) may attract customers with flashy advertisements and exciting new vehicles, but they do not own the sales process and therefore, the customer. Only 26% of automakers believe they’ve adapted well to selling online. This will all change–and automakers will have to fundamentally reimagine how they engage with consumers.
Automakers will become the center of the industry, not the starting point.
Experiential retail will make the traditional dealership a relic
Gone will be the days of dingy dealerships with fluorescent lighting and pushy salespeople. By the time customers arrive at the lot, they will have done much of their research and even financing online. They’ll expect a seamless, engaging experience and transparent pricing.
Dealerships will become experiential. We will see well-designed, modern retail locations that provide a comfortable space for learning about vehicle features, test-driving cars, and processing paperwork. Dealers will continue to consolidate into larger operations, allowing them to curate a thoughtful, cohesive brand experience.
They will also no longer resemble giant parking lots, filled with 45 to 60 days of inventory on hand. In the future, more consumers will buy their cars built-to-order, selecting custom features and waiting for their vehicle to be delivered. Cars may not disappear from the lot altogether, but dealers will likely carry no more than 15 days of on-site inventory. This business model is already widespread in Europe where, as of 2016, more than half of automobiles were already being built to order.
The shift towards customization and less on-hand inventory means dealers will have the opportunity to explore new locations that were previously inaccessible due to size and facility restrictions as a way to increase their retail presence while providing more curated experiences. We can expect to see new models like pop-up dealers and smaller, community-focused storefronts in more densely populated areas where customers can come in to explore customization options and receive personalized, in-store shopping experiences.
Software will finally eat the automotive industry
The true power of technology has yet to be unleashed in the auto sector. Vehicles will be increasingly software-driven and connected, providing a constant stream of data to automakers. Manufacturers will be able to deliver upgrades and provide proactive service before breakdowns even occur.
Dealers will continue to play a role in servicing vehicles, but the visits will be driven by the customers, who will be armed with information coming straight from their vehicles.
Automakers are going to have to quickly learn how to leverage the wealth of data created by connected, tech-driven vehicles to thrive under these new selling and servicing models. Technology investments will expand beyond design features and servicing, with a focus on capturing customer mindshare and delivering seamless experiences.
To flourish in this new world, the entire industry must evolve–fast. Automakers must build meaningful and lifelong relationships with customers and redefine their partnerships with dealers. And dealers must evolve to become brand curators and convenience-driven service providers.
Those who become customer-centric, learn how to harness the power of data, and deliver personalized and digital-first experiences will thrive.
Achyut Jajoo is the SVP and GM of manufacturing and automotive at Salesforce.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
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