The death of the dealership: Fact or fiction?

By John Gavljak - March 6, 2019

If you’ve been reading the news lately, you could be excused for thinking automotive dealers across the board are reassessing their life choices and planning a change of career.

This article was originally published in AutoTalk magazine in March 2019.

Stories on the rise of electric and driverless vehicles, online buyer subscription services and ride sharing have prompted a host of forecasts painting a dire picture for the future of the industry, including recent predictions that up to 50 per cent of automotive dealerships globally would shut their doors by 2030.

There’s no question disruption is coming. It’s already underway. But it’s not coming at the breakneck pace some of those recent stories would have you believe.

In January this year, I attended the National Automobile Dealers Association (NADA) Conference in San Francisco. It’s the biggest retail automotive convention in the world, with more than 22,000 people attending from over 50 different countries.

The theme for this year’s conference was “Focus on Innovation”, and as part of the Australian Automotive Dealers Association (AADA) Study tour, I was lucky enough to tour the headquarters of Google and eBay and hear from some of the leading thinkers in that digital and disruptive space.

What was interesting was that despite the focus on innovation, the underlying message we were left with was that digital retail was very much a tool in a retailer’s toolkit – an important one, yes, but not the end game.

As noted in the NADA Daily Magazine, “… buying a car simply is more complicated… and a much bigger purchase than a pair of Cole Haans (shoes). So it’s OK if the process takes longer than a pizza delivery.”

In other words, buyers understand and respect the fact that a car is a significant purchase. It’s the same reason the test drive isn’t dead – people still value the experience, and want that level of contact and insight from a dealer.

This has been underscored by the fact that while buyers in the US have the option to have their new car delivered to their home, just eight per cent of them had taken that up. The remainder preferred to go to the dealership to pick up their keys and get the full introduction to their new vehicle in person.

Electric vehicles and ride share services are other disruptors frequently cited in industry forecasts. Both are clearly in use in Australia, but neither are in a position to pose a serious threat to the industry in the foreseeable future; we just don’t have the supporting infrastructure or population density in place to drive significant growth in either.

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