1、Direct to Consumer Sales in AutomotiveTaking a closer look at the motivations of car buyers and future D2C commerce strategiesAutomotive D2C is a question of when,not if.Auto companies will steadily shift to a direct-to-consumer sales model as consumers demand the convenience and flexibility of orde

2、ring the exact vehicle they want with fewer barriers and needless in-person interactions.2Direct to consumer sales in automotiveThe pandemic,which forced virtual sales processes to be adopted,showed that consumers are willing to purchase an expensive vehicle without seeing it first.The shift to dire

3、ct-to-consumer(D2C)sales is no longer a question of if,but when.However,it will require more than setting up a simple website.The experience must be frictionless,and buyers still need to be able to speak with experts who can handle non-traditional situations.Connection to physical retail locations i

4、s still needed for in-person support and other types of services.Many consumer brands now are successfully operating a dual sales model.Apple has its own stores,a web portal and resellers.And Nike has seen the benefits of selling D2C for over 10 years now.Sports enthusiasts are ready to pay a premiu

5、m to order a customized pair of Jordans direct from Nike.Consumer goods companies and even high-end luxury goods manufacturers are leveraging some form of direct-to-consumer sales.In nearly every case,these omnichannel experiences and even new ownership models,like subscriptions,are delivering the p

6、roducts in a way that best suits the buyers and are creating better consumer experiences.But automotive has been an exception,not the rule.Why?Its a high-ticket item that most people need to finance.Its a low frequency of repurchase category,and there is the question of trade-ins.In the U.S.particul

7、arly,franchise laws have made it difficult for car companies to sell direct to consumers.But those obstacles are beginning to crumble.The pandemic has accelerated the need for touchless experiences,opening the door for a D2C channel for automakers.Automotive retail is changing with unprecedented spe

8、ed and magnitude,driven by shifting customer expectations,new mobility offerings,and technological disruptions like digitization,vehicle connectivity and electrification.The dealers even recognize that their grip on the sale of new vehicles is weakening.In this paper,we assess the drivers for this c

9、hange and explore solutions that can help get automotive brands prepared for ecommerce and D2C relationships.Direct to consumer business models help customers feel like they are in control.3Direct to consumer sales in automotiveAutomotive consumers want a different retail experienceConsumers have lo

10、ng embraced the convenience,transparency and control that ecommerce provides.Younger people,who have grown up with digital as the primary way of discovering,exploring,engaging and consuming,have especially strong expectations from brands and are now becoming the majority of future car buyers.Older g

11、enerations are changing their behaviors due to COVID,and are regularly purchasing online,resetting their auto purchasing expectations.Because of these shifts,consumer preference has increased for brands that deliver a greater level of digitally enabled conveniences in addition to product and status.

12、4Direct to consumer sales in automotiveThe Drum The rise of D2C:what the modern shopper really wantsMore than half of consumers prefer to purchase directly from brands.“Direct to consumer sales in automotive5Consumer preferences have given rise to D2C brands across all industriesNew startup entrants

13、,especially pure-play EV brands,are capitalizing on the margin gains that D2C business models provide.Rather than relying on the traditional retail and reseller models,these brands are cutting out middlemen,focusing on developing a simple,end-to-end experience for their customers,and with great effe

14、ct.Recent research shows that over half of consumers(55%)prefer to purchase directly from brands1.In automotive,Tesla is a testament to this trend,and other new entrant brands like Polestar and Rivian are following suit.As electric cars become a preferred alternative to traditional gas-powered cars,

15、newer D2C purchasing methods will be welcomed as well.While the startups have sometimes struggled in areas where mature companies excel,like quality,vehicle supplies and service,customers love the way they were able to purchase and service their vehicle and are vocal about it.D2C sales is growing ac

16、ross all categories.D2C is expected to grow from$129 billion in 2021 to$151 billion in 2022,according to eMarketer.Direct-to-consumer(D2C)ecommerce sales in the United States from 2019 to 2023(in billion U.S.dollars)2001801601401201008060402002019202020212022*2023*Sales in billion U.S.dollarsNote(s)

17、:United States;2019 and 2020Source(s):Retail Council of Canada;eMarketer;ID 11098336Direct to consumer sales in automotiveCar brands are starting to provide better experiencesLegacy car brands have been improving the car buying experience with“build your own”configurators and inventory stock finders

18、,but the hand-off to the dealerships becomes a pain point when that inventory is inaccurate,or the build plan is not possible or the price changes.Additional enhancements put in place during lockdown,like remote test drives and contact-free vehicle delivery,have further improved customer experience.

19、Yet,lack of price transparency,control over the process,and disjointed experiences between all the parties involved have consumers still askingisnt there a better way?Given these persistent issues,automotive Average Digital Experience Score,DXS(0-10)8RetailSource:Medallia Study-Digital Experience&Co

20、nversion:Industry Benchmarks for 20212digital experiences continue to score lower than any other industries for customer satisfaction.It comes as no surprise then that in recent years premium car brands have taken strong positions on owning the entire online commerce experience.Some have already emp

21、loyed D2C for their electric vehicle line while others are rolling it out for other parts of their business,like branded products.Even mainstream brand leaders,like Fords CEO Jim Farley,have been vocal about D2C being the future for the industry.76543210Financial ServiceTravelHealthcareAutomotiveNon

22、-ProfitEnergyTechTelecommsMedia&PublishingRestaurants6.226.476.006.625.866.256.555.975.876.427.567Direct to consumer sales in automotiveThe move to D2C in automotive does not mean abandonment of retailA recent study by EY found that more than 50%of car buyers want to physically experience the produc

23、t before purchase and to have access to knowledgeable resources2.However,these physical experiences need to be reimagined with more focus on addressing customer needs and convenience.Customers expect a digitally-enabled retail experience early in the journey when researching vehicles,taking the expe

24、rience offline when test driving,and then when completing the purchase choosing to have the ability to pick which method(physical or digital)presents the least amount of hassle.As such,original equipment manufacturers(OEMs)need to look at a wide approach for online commerce,with D2C as just one of s

25、everal ways to sell.COVID has increased the cost consciousness of OEMs and dealers,who are now making decisions about further outlet consolidation,leaner retail formats,direct customer access,and alternative sales models.Watch the VideoMore than 50%of car buyers want to physically experience the pro

26、duct before purchase and to have access to knowledgeable resourcesaccording to a study by EY.8Direct to consumer sales in automotiveEV and new ownership models will change dealerships primary revenue streamsTraditionally,dealerships make about 50%of their gross margin from post purchase engagements

27、with customers and about 10%from new vehicle sales.McKinseys Global After Market Model team forecasts a 40%reduction in aftermarket part spends of Battery Electric Vehicle(BEVs)over Internal Combustion Engine(ICE),and for service labor,the reduction is likely to be even higher.The aftermarket for pr

28、oducts and services is very competitive and filled with independent third-party players.The market is set for solid 20%compound annual growth rate over the rest of the decade3.For OEMs,it makes sense to push their genuine parts through as many channels as possible to maximize market Car owners after

29、market spend on parts*,2030,$*Includes routine replacement parts such as batteries,accessories,and collision costs.Source:McKinsey Global Aftermarket Model Teamshare.So,as dealership relationships change,aftermarket D2C options become another possibility for additional direct revenue and continued r

30、elationships with customers.Marketplaces like Amazon are also powerful tools to effectively consolidate marketing spend and decrease effort.Finally,retail staffing,including service technician skills,will need to match the new product technologies and changing consumer driving habits that come with

31、EVs.While the transition will be gradual,with ICE vehicles making up most service sales well beyond 2030,the changes are coming and being prepared is important.40%ICEHEVPHEVBEV940720640565The market is set for solid 20%compound annual growth rate over the rest of the decadeaccording to a study by Ma

32、rket Research Future.9Direct to consumer sales in automotiveThe evolution of ownership modelsWhether it be subscription models,car sharing solutions,or other new ways of ridership,car brands will either drive these directly or partner with select entities to manage a unified experience.Either way,th

33、e dealership role in these programs will be diminished.OEMs will need to build out their own capabilities to conduct transactions directly with the customer or build deep digital integrations with select partners.Partnership and integration becomes paramountOEMs and dealerships need to think through

34、 what their future relationships look like.Who will play what role,in what case?How can we tighten alignment and integration?Digital readiness on both sides requires process alignment and deeper integrations of business functions.Is there an opportunity to give the consumer what they seek?A truly un

35、ified and easy experience?Can the brand and retailers continue to play their respective roles in the journey?What will collaboration between the two parties look like?Current structures must evolve,and new ones must be developed together to include the proper mix of both digital and physical touchpo

36、ints.As seen in the example on the next page done by Valtech for BMW,every touchpoint must be considered.10Direct to consumer sales in automotiveThe car is becoming part of marketplacesAs connectivity of vehicles has increased,OEMs want to build loyalty to their brands by providing increased value d

37、uring their drive times.Companies like Amazon,also want to extend their engagement through the connected car by partnering with OEMs.From parking and toll costs to charging fees,there are many commercial transactions that vehicles automatically facilitate for the driver.With consumers spending sever

38、al hours per week driving,actively or passively,that is a lot of time that could be used for commerce.This idea requires car manufacturers to build out commerce capabilities that can live outside and inside the vehicle.The average consumer spends many hours per week driving,providing a great opportu

39、nity to tie commerce with drive time.11Direct to consumer sales in automotive11Market variances and impacts from regional regulationsThe path to D2C for OEMs will be tricky due to a wide set of market-specific regulations.Franchise and dealership laws as well as consumer privacy laws need to be care

40、fully assessed and will play a critical part in mapping out the path to car makers future approach to commerce.Tesla has shown ways to work around some of the issues,but for legacy OEMs with established networks,making commerce work will require more finesse.The U.S.market for example,has only 22 st

41、ates that permit some form of direct sales,making it difficult for car makers to make the change across all states4.Regulators in many markets are revisiting current laws and are looking at laws through a more globally connected lens.Based on the variety of marketplaces,laws and considerations,it ma

42、kes sense to build out commerce solutions with a wide set of approaches that enable customers to move easily between online and offline.Market research Future Automotive Ecommerce Market to expand at 24.8%CAGR during the forecast periodCar manufacturers deal with stronger barriers to change network

43、structures in U.S.than in the EU.“12Direct to consumer sales in automotive12A path to online sales and D2C for OEMsAs we have seen,the dealership model is not going away soon,so it is important to explore solutions that allow for inclusions of dealerships in the car-buying process while providing th

44、e desired control over all relevant data and the customer experience layers needed for a full D2C execution.13Direct to consumer sales in automotiveDefine leaner store formats to reduce retail costsEstablishing a cross-functional team and cooperating with dealers to identify ways to reduce retail co

45、sts through digitally enabled sales and new store concepts(e.g.,experience centers and city stores)is one way to complement traditional dealerships.Enhancing the integration between offline and online channels into a connected omnichannel journey is another way to reduce costs.Offline vehicle experi

46、ence and ordering should be directly linked to one digital backbone that creates efficiencies and allows for a more personalized customer interaction.OEMs driving competition and partnering with selected third partiesDealer Test-drive DeliveryPurchaseOEMOnline salesOffline salesSource:McKinsey Autom

47、otive:A future beyond brick and mortardisruptive change ahead in automotive retailDealer Purchase Test-drive Delivery AftersalesOther service providers(car sharing)Purchase Test-drive Delivery AftersalesThird-party repair shop Test-drive Delivery14Direct to consumer sales in automotive5Steps to crea

48、ting a path to full D2CDevelop a solid understanding of target groups and their specific needs,wants and behaviors.Define a D2C strategy with clear goals and milestones based on inputs and agreement from all relevant stakeholders.12Traditional loyalty has eroded,making every interaction with a custo

49、mer a must-win battle.The more you know about your customer,the more effective your efforts can be.Determine your access to solid customer data and what data should be further enhanced.Based on the analysis,create customer requirements and priorities for your solution and a clear and distinct custom

50、er first vision for your D2C experience.Develop a data architecture that ensures compliance with privacy laws while providing necessary data access to help BUs succeed in their interactions with customers.Employ an approach that keeps a clear view of the future vision while allowing for present need

51、s.Investigate direct and online sales models.Online sales touches most business units within automotive and requires everyones participation.Look to unlock new business models,such as automated maintenance programs and subscription services,and other ways to provide greater convenience for customers

52、.Create clear roles and responsibilities for all parties involved in the process and assign ownership for technology and data solutions.Map out an end-goal roadmap with intermittent milestones that enable gradual introduction of commerce capabilities without negatively impacting the business.15Direc

53、t to consumer sales in automotiveAudit existing digital solutions and experiences.(Marketing efforts,product presentations,shopping and service tools,CRM,payment solutions,etc.)as well as the wider technology and data set available within the organization(i.e.ERP)relevant to powering online sales,de

54、livery,customer care,service and all other.Map out the current digital and physical experiences in place and the underlying technology and data solutions.Determine what changes are needed based on future customer needs.3Develop a modular,composable platform vision.This will allow markets to adapt th

55、e local offerings to specific market needs and lets the platform evolve over time.Identify key components to deliver an omni-channel experience.Assess which changes can be achieved within the current solution and where new solutions need to be implemented.Deploy an integrated,yet composable technolo

56、gy infrastructure that underpins all digital customer initiatives spanning digital asset management,digital experience platforms,social platforms,customer and relationship management.416Direct to consumer sales in automotiveEnsure business transformation is taking place across all layers to enable s

57、uccess.There are a few core organizational factors that will make or break a D2C strategy.Organizational commitment to D2C:from executive level down through the entire organization,including the independent retail body.Ensure investments and resource needs are understood and fully committed to.Consi

58、stently and persistently build against your articulated customer experience vision.Develop and build a customer lifetime-focused experience that drives loyalty,repeat business and continued engagement through subscriptions and new product and service offerings.Increase your digital talent pool.Retra

59、in and enhance digital capabilities of existing staff and hire new talent to ensure all D2C specific roles are adequately staffed.Manage and resolve the internal tensions that will arise between the traditional retail teams,partners and D2C teams.517Direct to consumer sales in automotive17Powering t

60、he mobility revolutionValtech is in a unique position to help automotive companies to compete and thrive.Over the years,we have worked with BMW,Toyota,Volkswagen Group and many other major automotive brands as well as start-ups.We supply innovative solutions that are thought out and can be operated

61、intuitively.With our user-focused design and implementation methodology,were helping OEMs define the future of the connected vehicle and the automotive customer experience.When Volkswagen needed to get the word out about their upcoming selection of EVs,Valtech was there fulfilling our role as the VW

62、 Groups strategic partner and helping them to build the Electric Driving hub.This hub serves as a repository of knowledge and a FAQ location.But more importantly,it helps customers to get all the information needed to make the switch to electric and start the process of buying their first EV.When To

63、yota was looking to test out whether buying a car online was something their customers would be interested in,they partnered with Valtech to build a platform that would facilitate that.The question now is what can Valtech do for you?The first step is contacting us and starting a conversation.Contact

64、 us today to see how our experts can help.18Direct to consumer sales in automotive18Endnotes1 The Drum,The rise of D2C:what the modern shopper really wants,https:/ Decibel,Digital Experience&Conversion:Industry Benchmarks for 2021,https:/ EY,Can digital and physical meet at the dealership,https:/ 3

65、Ketchum,Daily Ride Index,https:/ Market research Future,Automotive Ecommerce Market to expand at 24.8%CAGR during the forecast period(2022-2030),https:/ sourcesMorgan Lewis,Changing the Rules on how Cars are Sold,https:/ Future of Customer Engagement and Experience,Direct to consumer automotive:Is i

66、t finally getting up to speed?,https:/www.the-future-of- Market Insights&Data Analysis,https:/ to consumer sales in automotiveDenny Pezic Global Industry Lead,Automotive&Mobility,VHugh DeWitte VP,Transformation Strategy,Valtech ContributorsValtech is the experience innovation company.We exist to change the way people experience the world through advanced digital technologies,data and design.We do this by bringing together a global network of engineers,designers,analysts,and CX professionals with a proven ability to accelerate business growth by transforming clients products