Information Technology Key to Dealer Profitability, Customer Satisfaction; Digital Dealers Will Flourish, Lead Auto Retailing Into Next Century
2 February 1998
Information Technology Key to Dealer Profitability, Customer Satisfaction; Digital Dealers Will Flourish, Lead Auto Retailing Into Next Century
NEW ORLEANS, Feb. 2 -- To survive and prosper in a market
undergoing drastic change -- and stay in touch with consumers -- America's new
car dealers will become increasingly reliant on the use of Information
Technology.
This is according to a report issued by consulting firm A.T. Kearney, Inc.
here at the 1998 annual convention of the National Automobile Dealers
Association.
"Digital Dealers -- the most technologically advanced automotive retailers
-- are emerging as a leading force in deploying Information Technology to
fulfill their customers' needs and communicate with them throughout the
vehicle-ownership cycle," said Jim Mateyka, vice president of A.T. Kearney's
global automotive industry group.
"Dealers are becoming digital in response to digital consumers who
research vehicle content, prices and availability on the Internet," said
Mateyka.
According to Kearney's report, the successful automobile dealership of the
future will utilize its own resources, and information provided by automakers,
to better understand the demographic and psychographic make-up of its
customers and the characteristics of its trade area.
In addition, Digital Dealers will integrate their own information systems
with customer data centers (such as mall kiosks, home PCs, telephones and the
Internet) so that appropriate data can bc accessed by consumers and dealership
personnel.
"Automobile dealers and automakers have been capturing large amounts of
information about their customers for decades," said Mateyka. "Now, for the
first time in the industry's history, this information is being interpreted
and utilized in ways that can dramatically streamline the business and improve
customer satisfaction levels," he said.
Mateyka said both dealers and consumers can utilize Information Technology
as an enabling mechanism to make the shopping and purchasing process less time
consuming, more personalized and save money for both sides.
"There's a lot of stages in the process of acquiring a new or used vehicle
that make the process more difficult than it needs to be," said Mateyka.
Mateyka said that some of the Internet-based automotive services now
available to consumers clearly illustrate how the information gathering and
pre-purchase stages can be simplified.
"Consumers can research vehicle content and pricing, read reviews, and
receive financing and insurance quotations in a matter of minutes. Digital
Dealers are beginning to apply these technologies to their own operations,
which will result in happier customers and healthier bottom lines," said
Mateyka.
Future models for Auto Retailing
Information Technology is a major force of change in the auto industry,
but it is not the only thing shaking up the world of car dealers. A mature
market, reduced profitability and retailing initiatives taken by the
automakers have fueled a large-scale consolidation and reduction of automobile
dealerships in the last 10 years.
The total number of U.S. dealerships has decreased by almost 12 percent
since 1990. This trend is expected to continue through the early part of the
21st century.
Based on these factors, the Kearney report outlines four scenarios which
suggest different strategies for the future of automotive retailing:
1. Customer focus model -- Privately owned, well run, individual dealers
in a single market. Saturn-like with emphasis on customer service, one-
price/low pressure selling. Extensive use of Information Technology and a
focus on keeping customers loyal.
2. Market domination model -- Automakers own or control all of their
dealerships in a single market. Eliminates competition between same-make
dealers and allows for major cost savings by reducing overhead. Large,
centralized inventories of new and used vehicles and more links to consumers
via proprietary Information Technology systems.
3. Retail chain model -- Exemplified by Republic industries/AutoNation,
publicly owned corporation buys and controls many dealerships, including
almost all makes. Allows for cost-savings by reducing overhead and can market
new vehicles by category, rather than brand. Large volumes allow chains to
have increased influence with automakers. Lower overhead costs are passed on
to customers, further increasing competitive advantage.
4. Unbundled services model -- Independent parties serve as
intermediaries between customer and dealers. Highly dependent on Information
Technology, these shopping/buying services seek lowest price and recommend
dealers, provide financing options, and offer warranty/service and insurance
information and quotations.
"The next 10 years are going to see a lot more change for automobile
dealers," Said Mateyka. "Overall, these changes will make the dealers more
efficient and more profitable. The good news for the consumer is that they
will also make car and truck buying much easier and more pleasant."
A.T. Kearney, Inc. is one of the world's largest and fastest growing
management consulting firms. The firm has over 3,600 employees at 60 offices
in 30 countries around the world.
Visit A.T. Kearney's Automotive Information website at,
http://www.prnewswire.com/comp/124145.html.
SOURCE A.T. Kearney, Inc.
