From the rise of AI to modern omnichannel customer experiences, explore the car dealership trends shaping the future of automotive retail.
As the automotive industry emerges from one of the most challenging periods in decades, car dealerships are finding themselves facing new pressures to better adapt to constantly evolving customer demands and unpredictable economic realities. Used vehicle values are still well above their pre-pandemic levels, and inventory shortages, though slowly recovering, remain low as the industry grapples with brittle supply chains.
Despite these car dealership trends, there are new opportunities dealerships can capitalize on to increase customer lifetime value and future-proof their business models. New and emerging forms of AI and analytics that can automate and scale sales and service operations are increasingly shaping automotive business models. Digital merchandising solutions are also evolving rapidly, further closing the gap between online platforms and physical showrooms.
In this post, we’ll explore five of the most important trends shaping the future of car dealership operations.
#1. Personalization at scale with AI-driven sales and marketing
The rise of AI is perhaps the single biggest technological development in the world of sales and marketing, and the implications for the automotive industry are every bit as significant as they are for any other. We’re no longer just talking about AI’s ability to process and derive insights from huge amounts of data – that’s already old news! Rather, the industry is seeing the potential of AI to transform car dealership operations like sales processes, marketing, service communications – and even customer service.
In an era of high-speed digital consumerism, customers crave relevance, convenience, and timeliness. The latest generation of AI solutions, such as large language models (LLMs) and conversational AI, can help dealerships scale and automate communications, freeing up time for staff to focus on high-value activities like welcoming customers to showrooms. Imagine, for example, the potential of a language model like ChatGPT, albeit one designed specifically for dealerships and trained on customer and inventory data, in scaling and automating sales and service outreach.
#2. Informing winning marketing strategies with data analytics
While data analytics is nothing new, the fact that more OEMs and vehicle retailers are operationalizing AI is redefining the operating model. Advanced analytics can unveil insights not only from both structured data (like customer records in a dealership’s DMS) and unstructured data (such as conversations via text and email). That’s a big deal, since approximately 90% of data is unstructured. Until recently, this wealth of data has largely been an untapped resource for improving car dealership operations.
Although it remains to be seen what sort of impact LLMs will have on data analytics, solutions already exist that can derive insights from large amounts of text or recorded conversations. An AI-enabled sentiment analysis solution, for example, can leverage Natural Language Processing (NLP) to determine a customer’s particular attitude to a brand or product or service offering. This, in turn, can inform how to best communicate with customers on a hyper-personalized level. Add conversational and generative AI into the mix, and the potential is virtually limitless.
#3. Bridging the gap between digital and physical showrooms
The entire car buying experience has changed with the emergence of digital merchandising products that replicate many of the aspects of physical showroom visits. That’s not to suggest that the traditional showroom experience is any less important, but what it does mean is that buyer journeys have become omnichannel. Many shoppers want both the convenience of an online browsing experience and always-on conversations with the tangible experience of a physical showroom visit.
A truly omnichannel buyer experience seamlessly merges the two. To make that happen, more dealerships are investing in interactive digital experiences, such as the ability to virtually tour vehicles in 360° and interact with specific hotspots to get more information and high-resolution photos. Multimedia experiences that deliver VIN-specific feature showcases also enable customers to understand the full value and uniqueness of a vehicle, moving the conversation away from price. There is also potential for augmented reality (AR) to allow customers to virtuallyplace cars in their driveways, further advancing the convergence of virtual and physical.
#4. Improving inventory management with equity mining and AI
For many dealerships, one of the biggest challenges of 2023, much like the previous year, is maintaining a healthy inventory of new and used cars. Continuing disruptions to global supply chains mean that new vehicle inventories remain much lower than before the pandemic. At the same time, high average purchase prices and reduced purchasing power mean reduced demand for new cars. On the other hand, demand for used vehicles continues to grow, making it difficult to keep up with inventory pressures.
Equity mining is one emerging form of data analysis that shows great promise in both helping dealerships maintain strong used car inventories while growing sales. By analyzing DMS data at scale, equity mining helps identify customers who are most likely to trade in their existing vehicles. Equipped with these insights, dealerships can proactively reach out to past customers at just the right time, improving sales, service, and inventory management.
#5. Rethinking the customer lifetime value opportunity in fixed ops
Current economic conditions are encouraging many car owners to hold onto their vehicles for longer, and that’s not likely to change any time soon. In fact, the average age of cars on US roads has been increasing steadily for decades due to factors like extended financing terms and improved manufacturing processes. Recessions only exacerbate the situation, pushing dealerships to optimize the service drive to maintain a healthy revenue.
Despite these car dealership trends, the most forward-looking dealerships are no longer thinking about fixed ops marketing as an isolated process, but as a fundamental contributor to customer lifetime value. They’re now using advanced analytics and AI-augmented communications to automate service outreach and generate more appointments to enhance customer loyalty. As the average age of vehicles on the road continues to increase, that’s only going to become more important.
Impel’s range of AI-powered digital merchandising and communication solutions helps dealerships effectively manage the customer lifecycle. Book your demo now to see how it works.
