To the confusion of many, car dealerships still exist today. But, by 2025, they may be a thing of the past.
While self-driving cars are not on the road today, that future isn’t too far away.
Many car manufacturing companies such as Volvo pledged to go all electric before 2025. Many of those same companies are also developing their own autonomous vehicles.
Other companies such as Tesla, BMW, and Lexus have a pilot or fully-fledged subscription services. That’s right: you don’t even need to buy or lease a car anymore. You just engage in a subscription which functions like a long-term lease with full warranty in some cases.
You can even have cars delivered to your doorstep with services like Carvana.
Yet, despite more than 80% of Americans not liking them, car dealerships persist. In fact, a recent study suggests that traditional car dealerships may be adversely affecting the adoption of electric cars, too.
So, with all of these reasons to move forward, why are car dealerships still around today?
Why Brick and Mortar Stores are in Trouble
Big box retail can’t compete with e-commerce in terms of overheads, staffing prices, and supply chain. But, when you add automation into the mix, the odds of survival become even murkier. People prefer more direct sales these days.
That’s why things like brand loyalty matter in 2018: this trait can make or break a business’s future. But there are a few more things brick and mortar companies can do to hedge their bets.
Apart from inspiring extreme brand loyalty like Target has been able to do, companies can become early adopters. Fully embracing new technology means that you can be at the forefront of it instead of playing catch up.
Perhaps this is why Walmart decided to adopt the grocery store robot from Bossa Nova.
Real life shopping experiences are already shifting toward “experience” over “shopping”. You can read here about “town squares” and how luxury brands may become the only brick and mortar stores in the 2020s.
But, unless they catch up with the times, car dealerships may not survive the coming wave of automation and e-commerce.
How People Approach car Buying in 2018
You know the drill: walk in, get greeted by some smiling dude in a wrinkled suit. You opt to take the free water bottle they offer you and the car make-branded pen. Then, the salesperson proceeds to tell you all the reasons why you absolutely need any car you walk by.
The process of buying a car can be stressful for reasons like this.
You can easily get swindled by a motivated salesperson looking to make a commission. You could just as easily get overwhelmed by all of the cars, information, and dollar signs.
Moreover, it can be difficult to understand how auto loans work. There are a ton of variables that complicate the modern car buying process.
Car dealerships with their humongous lots, brand ambassadors, and sales-driven service don’t fit in the world of 2018.
Everything is on demand, from information to food to entertainment and communication. So that means that someone can do all of the research about a car upfront.
When a salesperson tries to give them the “elevator pitch”, the person already knows the true facts behind the veneer. So why should they bother listening to that and going through that trouble when they could just buy a car online instead?
Here are the things eliminating the need for car dealerships:
- Near instant access to relevant information
- Delivery options for products and services
- Variety of new payment forms including cryptocurrency
- More car buying options than ever before
- People’s over-saturation with advertising and sales-driven content
But you also have companies like Carvana and Yoyo, as pictured below. Even Zipcar functions similarly to a subscription service.
There are more things at play, however, than just millennials and business competitors.
Singular Ownership vs Shared Wealth
Let’s get into some coffee table philosophy here with the guy nobody remembers: Mill.
John Stuart Mill developed the idea displayed in a classic Star Trek quote.
You might remember that moment in Star Trek II: Wrath of Khan when Spock tells Captain Kirk that “the needs of the many outweigh the needs of the few.” That, my friends, came from one John Stuart Mill and you might recognize it as Utilitarianism.
Some of you might see where I am going with this thought experiment, so stay with me.
You also need to know about populism which can, in fact, mean a variety of things. But think of it as the common people vs the elites.
The last concept you need to incorporate is the idea of shared wealth.
We all share the Earth, the air, the sea, dinner, seats on public transit, etc. Why not expand this to other aspects in life like purchasing a really expensive 3D printer or handling car maintenance?
You can see these concepts reflected in things like coworking spaces, as well.
Given how integrated data, information, and almost everything is in today’s world, it makes sense that people should share the costs or weight of things, too.
Car subscription services and direct car sales benefit both the car manufacturer and the car buyer, so it’s a no-brainer. It also eliminates the need for leases, regardless of the term. You can still swap cars for variety or stick to “Old Faithful” in a subscription model.
People can also still own cars (for now), but not many people necessarily need to. Unfortunately, direct car sales don’t get much support from the entrenched car dealership system in the U.S.
How car Sales Rules Influenced car Buying Practices
A car — especially a luxury car — has always been a sign of wealth in the U.S.
I still see people driving Range Rovers occasionally and I wonder a) how much longer they have on their warranty and b) how many times they had their car serviced in a single year. If Doug Demuro’s experience is any indication, the answer to part b) is quite a few.
The maintenance cost on certain cars can be insane, but subscription services help to absorb some of this cost from car drivers. At least, the ones from dealerships like Tesla or BMW can do that.
For things more like car rental services like Zipcar, that’s a different story.
Tesla showed the world that people will buy cars without the unnecessary aspect of a car dealership. “Selling” directly to consumers makes so much more sense in 2018.
Despite this, the National Automobile Dealers Association (NADA) didn’t approve of this new sales technique back in 2013. It goes back to how car sales have historically functioned.
Dealerships get independently franchised in most states because it’s required. Initially, car manufacturers preferred this in order to more quickly grow their reach and potential sales numbers.
But think about that in a world where you can get a flat screen TV delivered in an hour.
When Will car Dealerships go Permanently Extinct?
People still deal with car dealerships on a regular basis these days. But the ways in which people find themselves at car dealerships is no longer the same.
You don’t see a commercial or find out from a friend; most people look things up on their smartphones. J.D. Power and Associates found that 53% of internet shoppers looking for automotive information use mobile devices.
The 2016 study also found that 87% of Americans don’t like some aspect of car dealerships. What’s worse, 61% feel that the car dealership is taking advantage of them.
With the power of the internet, cold car dealership calls are just nuisances now.
No one needs a salesperson to tell them about the car specials because we can see them online. And no one needs someone to “sell” them on a car if the person has done the research and determined that this is the car they want.
Direct car sales just make sense in an age powered by information and connection. Car dealerships might not be extinct yet, but their days are definitely numbered.