There is a revolution in new vehicle retailing. Selling and servicing new vehicles will never be the same.

Maybe, but at PricewaterhouseCoopers we see the industry's traditional "push" selling tactics continuing to blunt any real progress in retailing. True, some noteworthy experimentation to rewrite the rules of automotive retailing is evident in practice:

  • Increased manufacturer participation in the distribution process and retail network
  • Large public and private dealer groups as well as manufacturers seeking to implement "best practices" and alternative retailing models
  • Consumers, empowered by emerging E-commerce technology and their experience with other retailing processes, finding alternative retail structures or end running the current system through brokers or affinity groups

Automotive Retail Barometer
Whether these experiments represent real progress has been difficult to measure - until now. We at PricwaterhouseCoopers would like to introduce a new approach to measuring efficiency in automotive retailing and how it changes over time. We call it the PricewaterhouseCoopers Automotive Retail Barometer ("PwC ARB"). The PwC ARB considers the interrelationship of key automotive retailing factors and their interrelationship with the ever-changing macroeconomic environment and gauges the efficiency of the retailing process.

PricewaterhouseCoopers Automotive Retail Barometer - When we look at the industry's performance in this way, we discovered that rather than improving, automotive retailing efficiency has become less so in recent years. This is largely because of various retail and dealer incentives being used to move vehicles. These incentives, which averaged approximately $2,000 per new vehicle retailed ("PNVR") in 1998, are being used to move vehicle inventories and are functioning as a safety net to compensate for the inadequacies of the existing distribution process.

Advances in technology continue to drive rapid change in automotive design and manufacturing. But sadly the production of vehicles for retail inventories in a push mind set remains the defining element of the relationship between manufacturers and their retail channels. Given this grim reality, it is difficult to determine which of the aforementioned industry experiments will prove capable of breaking out of the industry's historical pattern. But one thing is already clear: No single approach is likely to serve all needs.

Consumer-centric retailing
What is evident, however, is that for an automotive retailing approach to be truly effective, it must be consumer-centric and have the organizational and product assembly and delivery flexibility to function effectively in multiple distribution channels simultaneously. At PricewaterhouseCoopers, we know that successful enterprises will include the following:

  • An assembly and distribution value chain capable of anticipating and responding quickly to customer demand for high value products through genuine value enhancing distribution channel
  • A merchandising strategy that goes beyond just satisfying market demand for new vehicles, but providing a broad ranges of transportation products and services over a lifetime.
  • A multi-channel retail network that is responsive to the diverse sales and servicing needs of individual and household customers.
  • A technology-based information support system for the extended retailing enterprises focused on enhancing customer retention and loyalty and empowered by real-time customer information preferences and aspirations.

It is also possible that retailers from outside the industry will play a part in the changing industry landscape. Some are already looking to automotive retailing as an alternative way to leverage the economies of scale of their existing consumer-focused distribution network and retail stores for the benefit of their loyal customer base. We expect that one or more of these non-automotive retailers will invest substantial new capital and challenge many of the traditional approaches to automotive retailing. These new entrants may make effective partners as certain segments or products become viewed as commodities or when the existing retail channels are deemed to be undistinguished, similar or too expensive for the value delivered.

Then as Now
Ten years ago, the U.S. automotive market was very similar to what it is today. Annual new vehicle sales were almost 15.4 million units. Profitability for Chrysler, Ford and GM was at a record $11.2 billion. Franchised automobile dealerships earned a 1% pre-tax return on total retail sales of approximately $300 billion. Then, as now, incentives, rate subventions, dealer margin reductions and a myriad of other financing tools supported the new vehicle market. And, also then as now, manufacturers, dealers, consumers and industry pundits alike groused about the need for greater manufacturing efficiency, a more customer-friendly buying and servicing experience, brand distinctiveness and an improved ordering and delivery network. Why then, despite this clarion cry for change has so little changed in automotive retailing?

To answer that question in depth order a full-text copy of our study, "Measuring The Automotive Retail Revolution", by contacting J Ferron of PricewaterhouseCoopers @ (313) 446-7174.