What Is the Future of Auto Retail in Australia?

He warned that to survive post-pandemic, dealers must remain agile and prepare their business models for fundamental changes in buyer behaviour. He cited trends such as the increased use of digital channels and the rapid escalation of value for money as the critical driver for consumer purchase decisions. 

“The bounce-back in auto retail sales in May and June this year after a difficult few months was primarily due to the boosts in household income from superannuation withdrawals¹ and the Federal Government’s stimulus packages,” he said.

Overall, Australians had 5% more income in the June quarter than in the same quarter the year prior.² Two-thirds of these extra funds went towards discretionary items and a fifth to essential spending.³

“The jump in auto sales shouldn’t be seen by the industry as a permanent sign of recovery. We can expect to see another quarter of resurgent household income, but this activity will likely flatten and downturn for the December quarter and into 2021,”⁴ he added.

“The journey to recovery is unlikely to be linear as multiple waves of crises occur over time.”

According to KPMG research into the lasting impact of COVID-19 on consumers’ needs, behaviours and preferences, these are some of the persistent trends set to shake up the auto retail industry.

Value for money is the top purchasing driver that influences consumer buying decisions

Eighty per cent (80%) of Australians rank value for money as the primary factor in their purchase decision making. In the global KPMG survey,⁵ Australia ranked well ahead of other developed nations, and third only behind Spain and Brazil when it came to the number of consumers who were predominately motivated by price-value.

While the economic effects of the pandemic have escalated price sensitivity as a crucial concern, businesses shouldn’t look at this trend as just a short-term margin dilution, said Mr Bragg. 

“This buyer attitudinal change is a fundamental alteration of purchase priorities. Auto retailers should be aware that consumers are now less inclined to pay a premium for branded products or nice-to-have experiential factors. Needs-based assessments have become more conscious, and restraint celebrated.”

He suggested that dealers should be prepared to run cost-saving offers, as well as make contracts more flexible through subscription models that have lower up-front costs.

Online car shopping is accelerating and likely permanent

Online auto research is already a significant part of the sales process, and there is an increased willingness by consumers to make online purchasing decisions. The convenience of a buy-it-now, on-your-doorstep experience puts increased pressure on car dealerships to invest in online and omnichannel marketing, retail platforms and even virtual showrooms.

A dramatic reduction or reshaping of physical auto retail outlets is expected in the years to come as car companies test the viability of sales through online portals and shopping centre-based showrooms. Several premium brands, including Mercedes-Benz and Jaguar Land Rover, have already invested in experience hubs in Australian cities, where the focus is on customer-centric service with only a small number of cars on show. 

Tesla shifted away from brick-and-mortar retail stores in 2019, giving customers the option to purchase their Teslas online and return it within the week if they were not satisfied. Hyundai’s luxury brand, Genesis, which launched in Australia last year, is rolling out its brand with both CBD studios and more traditional dealership spaces. Prospects can book a test drive vehicle, delivered to them at their convenience.

“The question to come from the rise of the digital-savvy consumer is whether dealerships need to continue investing in large footprints on expensive real estate to deliver the optimal experience to their customers,” said Mr Bragg.

Shopping rhythms have shifted to a new favoured shopping window

Lunchtime has replaced after work as the preferred shopping time, and the favoured two-day shopping window is now Sunday and Monday.

“Our research shows that almost half of all weekly visits are now occurring on Sunday and Monday, compared to a quarter of visits before COVID-19,” Mr Bragg said.

He explains that Monday was traditionally the quietest day in the retail week, but with more people working from home, shopping habits have shifted. People are heading to stores earlier in the day instead of making after-hour visits.

“Dealers can look to adjust their operations, marketing, re-stocking cycles and workforce planning to the new weekly shopping rhythm”, he said.

The new gold standard is convenient customer experiences

As digital expands the choices available to customers, dealers have a chance to differentiate with a buying experience that is frictionless and customer-focused. 

“The sales process needs to be seamless, with dealers using digital tools like credit scores to bring confidence and speed to the loan origination and financing process,” said Mr Bragg.

The use of credit scores and data analytics to create a more comprehensive view of the customer will enable dealers to personalise the experience to develop frictionless customer-first value propositions. 

Data-driven technology will help dealers apply a customer lens to all improvements, including the transformation of the sales cycle from a transactional to a customer lifetime approach.  

Contact us to find out how our credit scores and globally connected analytic insights can help you adapt your credit decisioning, marketing, sales and management processes to changing market conditions.

Source: Research presented at the Equifax Automotive Finance Forum, including Consumers and the New Reality, Global Automotive Executive Survey 2020, and Beyond COVID-19: The Shifting Foundations in Retail Property, KPMG.

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1 APRA, ATO and Citi Research
2 ABS, Citi Research presented at the Equifax Automotive Finance Forum
3 ABS, Citi Research presented at the Equifax Automotive Finance Forum
4 ABS, Citi Research presented at the Equifax Automotive Finance Forum
5 Consumers and the New Reality, KPMG International