Death of the car dealership called too soon
Predictions that car dealerships will soon be extinct have become commonplace, but Australia’s oldest listed automotive retail group is betting big on radical plans to future-proof the business model.
Keith Thornton is Chief Operating Officer of dealer group AP Eagers, which has been selling cars to Australians for over 100 years. He says the dealership industry is, like so many others, experiencing disruption, but businesses are evolving and innovating to meet the challenge head on.
Evolution not revolution
“The car dealership is very resilient and has a great future,’’ says Thornton. “Which doesn’t mean there’s not change, but it’s evolution, not revolution. How we respond to customers’ changing needs is part of our strategy to be around for the next 100 years.’’
So confident are Brisbane-based AP Eagers in the industry that they recently launched a $2.4 billion bid for Automotive Holdings Group that if successful would make them Australia’s largest auto group.
And they are investing millions more in innovative ideas, including relocating the hub of their operations to a massive new state-of-the-art Automall that will offer a new level of immersive experience including a high-speed test track, an offroad test track and a skid pan.
Path to purchase
The internet has certainly changed the way we buy cars forever, but only up to a certain point on the customer’s path to purchase, says Thornton.
“With any retail transaction these days, especially a large one, customers are spending a lot of time doing their homework online,’’ he says.
“In fact research shows cars are one of the most researched products online, and customers are increasingly arriving at our dealerships transaction-ready.
“But when it comes to the final step of actually transacting, we are finding they still want that personal touch, the ability to ask someone knowledgeable and experienced for face-to-face advice.’’
This is because of the size of the transaction involved - typically the biggest we will ever make after our homes - and its complexity.
“Apart from their final choice of new vehicle, customers still face the same issues they have always faced at this point, such as how best to dispose of their old vehicle, and how best to finance their new one,’’ says Thornton. “Around 90 per cent of new car buyers in Australia will access finance.”
Should their takeover bid succeed, the combined AP Eagers and AHG business will have over 220 new-car dealership locations in Australia, 13 in New Zealand and 68 new-vehicle truck and bus dealership locations in Australia. The merged business would have over 10 per cent of the total new-car dealership market in Australia.
Thornton says AP Eagers will be investing heavily in upskilling dealership staff, and developing new ways to make the entire salesroom experience as seamless as possible for customers.
At the same time they are working in conjunction with OEM partners and others to develop new retail approaches, including basing themselves at a massive new 64,000 square metre Automall currently under construction at Brisbane Airport, eight kilometres from the city’s CBD.
Due to open by 2022, the $85 million development will include a test track designed by V8 Supercars and Bathurst 1000 champion Mark Skaif featuring high-speed straights, skid pan, handling and off-road circuits which will be available for manufacturer launch and media events, driver training, vehicle engineering and development, and general test driving.
Like other dealers and indeed car brands, AP Eagers are also planning to bring automotive retail closer to their customers with showrooms embedded in shopping malls.
This omni-channel retail approach will ensure that dealerships are ready to meet customers’ constantly changing needs into the future, says Thornton.
“We have to provide new ways for consumers to access, experience and immerse themselves in the products, and we have to be future ready, for example for subscription or vehicle sharing models,’’ he says.
“But at the end of the day, car dealerships are still about all the traditional offerings that customers still need – parts and servicing, new and used vehicles, and finance.’’