Could millennials be the saviors of the car dealership?

Sep 22, 2019 - 5 min read
Natalie Sweet, VP of Marketing for the Sopra Financing Platform at Sopra Banking Software

At the many industry conferences my team and I attend, we’ve heard a lot about millennial behavior and how disruptive the generation’s buying influence could be to dealers and the auto industry as a whole. However, I’ve recently seen market data that shows the millennial generation is more, rather than less, likely to value a quality car showroom experience than the generations who have gone before.

On the face of it, this is encouraging news for the auto retail sector, but it is positive news with certain caveats; as my colleague Helen Woodhouse wrote, the dealer model must change, and the greatest challenge will be a deeply embedded cultural shift that has long focused upon a sales “push,” rather than supporting a buying “pull.”

In July 2016, CiTNOW TV suggested car buying, selling and part-exchanging will be totally remote by 2020. Whilst we know it’s a question of ‘when’ the dealership model will change, rather than ‘if’, 2020 always sounded a short timescale for this. Nevertheless, any seismic shift such as this would undoubtedly hand a dangerous blow to the traditional auto dealership.

However, I recall an article I read in Business Insider based on MSN poll data, “Millennials are buying everything online— except cars”, that stated the following.

  • 62 percent of American millennials (aged 18 to 29) plan to buy their next car in-person at a dealership
  • Overall, 65 percent of Americans will head to a dealership when it’s time to buy a new car

This US data perhaps shows the strength of US dealerships and how embedded they are in society, but it could be that there is little difference in the UK with a recent Black Horse survey showing that over half of all millennials still want face to face guidance from a dealer when buying a car.

It is here that the change required in the showroom and online is so evident. The requirement is for guidance.

Indications are that millennials are looking for:

  • Ease of process
  • Expert guidance
  • A great experience

Today’s modern dealership can be seen as a cathedral to the car, but has that really taken the “dealing” out of the dealership? Other areas of retail would suggest this isn’t the case. On our roadsides in the UK, the Little Chef restaurant chain failed, yet the same premises re-launched as Costa Coffee and are booming. The change is both physical and experiential.

Today’s millennial (and arguably other customer segments) want and expect a great buying and after-sales experience. This needs to start online, continue into the showroom and be sustained through aftersales in a seamless experience. Models of the future need to incorporate both “bricks and clicks.”

Digitally, retailers can develop a more engaging customer experience promoting their products and their own business ethos, ethics and experience. The return on these soft values should not be underplayed, particularly for the millennial generation. Emerging digital retailer Car Wow continues to highlight that it is these soft factors, rather than price, that dominated its buyers’ decision-making.

Amazon shows brilliantly why playing the long game works so well.

A further reason I believe a new showroom model must develop to keep millennial buyers engaged is that the dealer proposition must widen. Today, the model is dominated by metal profit, and in the current climate the vulnerability of this is evident.

Going forward, millennials are likely to demand “add-on” products and services, which could take an increasing role to create a basket of products/services that people will buy from businesses and brands they trust. Today, this added value portfolio is relatively narrow in dealerships, but moving forward and as servicing levels decline, this must be developed. Along with the idea of additional add-on products available to the buyer, the emerging trends towards mobility as a service (MaaS) and “cars on demand” need to be included. If a dealership can offer a variety of mobility solutions that enable “use” as well as “own,” then they will continue to be valuable and the physical presence in the community will survive.

In short, the showroom can compel millennial buyers to retain their loyalty and reposition the dealership to become a real hub of the emerging mobility world. But the experience digitally and physically must change, as must the line-up of products and services on offer. The old model is under threat, but as recent data shows, the need for showrooms is still there, and will be for some time. It is now over to dealers and the vendors that support dealer transactions to develop an imaginative future, in which the spending power of millennials will soon dominate the economy.