New retail formats in the automotive industry: what are their strategic targets and when are they worth an investment? A study of the Munich-based management consultancy iic group gives answers.
- New retail formats address strong customer experience but the decision-process needs further development.
- OEMs need to ensure a consistent brand experience across all new and existing retail formats
- Future success factors will depend upon a system that makes relevant customer data usable across all sales and retail channels
As the industry of consumer products evolved rapidly over the years with great customer experience programs like Nespresso or Apple, the retail system for the automotive industry lost track. As Ian Robertson, Member of Board at BMW Group, was already famously quoted, “The dealership experience is as old as the car industry, roughly one hundred years old. While cars have changed, the retail experience is much the same as it was one hundred years ago.”
The good news is that consumers still rely on offline retail formats, since they want to physically feel the car and seek for expert advice, especially in the decision phase of the vehicle purchasing process. The key for premium OEMs is to generate a premium retail experience again and transform the dealer landscape into a profitable, multichannel format. As a result, through the development of new retail formats premium OEMs want to come closer to the customer and offer more possible touch points with the brand. Mercedes-Benz therefore launched their strategy “Best Customer Experience”, BMW calls it “Future Retail”. Audi’ new retail format, “Audi City” spreads in many megacities.
Various studies have already dealt with the transformation process from a dealer-only into a multichannel landscape. However, these studies mostly didn’t distinguish between the different retail formats but generalized them. In the underlying study, iic group investigates the various targets and effectiveness of the following four new retail formats at premium OEMs:
- Pop-Up Store: set up for a short period of time in highly frequented location, with the target to generate as many leads as possible.
- Brand Store: inner-city showroom to create atmosphere through customer experience that lets customer stay for longer period of time.
- Driving Center: different test-drive tracks and other program that aspires a whole-day experience for the family.
- Brand Experience Center: brand temple, mostly connected to the main production plant and unique for each brand (eg. Autostadt, BMW Welt).
Therefore, as one part of the study, expert interviews were conducted at three premium OEMs in Germany. The research findings show that primary targets the OEMs want to address with the new retail formats are customer acquisition and loyalty. Secondary objectives like brand awareness and an improved touch point management take on a supporting role.
“The results of the study show that the decision to open up a new retail format is very unique at the moment, and that there did not emerge a universally applicable process yet from OEM-side”, explains Thomas Hegger, Manager at iic group.
Therefore as part of the study, iic group developed a KPI Matrix, that provides brand, market, dealer network and customer requirements for the decision-process and gives distinct recommendations. Furthermore, the study contains a Business Case that evaluates a Brand Store financially. Results point out that in the current retail landscape such a format can hardly be profitable solely from in-store sales – however the positive radiation effect such a format has on the sales of the whole brand is still hard to measure.
Research further revealed that the success of the respective new retail format strongly depends upon a system that connects the different retail formats, gives a transparent overview of the customer touch points with the brand and provides universal standards. “A platform that links and analyses existing customer data and makes it accessible to everyone in the organization will clearly represent a future milestone” explains Igor Bonacic, Managing Director and founder of iic group.
Further details and results are fully available as part of the study via: moc.p1573949149uorg-1573949149cii@o1573949149fni1573949149.