So GM wants to avoid becoming the next Circuit City, insofar as not being wiped out by the online sales experience. Dodge the bullet (excuse the pun) of massive layoffs, shareholder wipeout and supply chain trauma. Might be a little late for that perhaps? Well, necessity is the mother of invention, and GM’s decision to partner with eBay to sell new cars has the potential to be a seismic change in the automotive customer experience.
As we have written before, online sales channels have considerable experience advantages over that of bricks and mortar operations. Based on our most recent benchmarks with US consumers (taken, mind you, in December last year in the midst of the economic meltdown), even average performers in online shopping garner NPS® of about 50%, while top-scoring companies achieved scores of 70% or higher. The National Retail Federation rates Zappos, Amazon and Overstock as three of the top four retail experiences (LL Bean keeps physical retail of any kind in the top 4) and yes, we know that the top 3 will be the top 2 very soon. Their advantage springs from several sources. Supply chain efficiencies drive better fulfillment performance at lower inventory levels (the law of large numbers apply). Better data about their customer’s behavior enable them to customize offerings and merchandize more effectively. Oh, and considerably less dependence on "the carbon element" – people, although Zappos has turned that into an asset.
Nothing new to report here. However, the automotive industry had always faced the dilemma of channel conflict. Their customer experience, to a very significant degree, lay in the hands of their channel – the dealers – and their channel was pretty resistant to focusing on customer experience. It didn’t help that JD Powers had built a lock on the industry notion of customer satisfaction which, although a terrific marketing tool, didn’t always line up operational dealer excellence with measured outcomes. Oh, and dealer satisfaction measurements have been the "poster child" for gaming results.
So why not do away with them altogether? Early online efforts around car sales were clearly a compromise. Last year, I was scouting dealers for a new car purchase, without much pricing relief here in the Bay Area (what a difference a year makes). I tried getting a quote from Yahoo Cars, only to find I was referred to – guess who – the same local dealers with the same local prices and inventory. Why couldn't I get a quote from other dealers? Not going to happen, this was a system constructed to preserve a local monopoly. Problem was, sooner or later I found an online service that brokered a better deal with a dealer in LA – who promptly shipped the car right up to my door.
GM’s experiment with EBay leads in only one of two directions. Either the design of the program continues to protect dealers from regional or national competition, in which case people won’t bother to use it, or they will finally open up the door to a national or regional marketplace. If they do – and I hope they do - the consequences will be profound for the industry. If I can easily get a quote from a dealer in Denver, and shipping costs remain reasonable, it’s possible that premiums in distribution will pretty much evaporate for dealers nationally. This is likely to drive consolidation and efficiency, and a superior customer experience. An easy purchase experience, with a competitive price will improve everyone’s dealer experience, but the dealers will transform into service centers which do need local presence (and are not a bad business to boot). Other brands are likely to follow or face market share loss, assuming other factors (making cars people want to buy) are neutralized.
What about test drives? Clearly autos are product that rarely get purchased “sight unseen” (although in parts of Europe that’s sometimes the case). Firms like GM will need some form of showroom to display their product, but won’t need the expensive immediacy of inventory that bogs down their supply chain. Of course, none of this happens overnight, many car buyers will take time to transition their buying habits. But once the genie is out of the bottle, as bookstores discovered, the outcome has inevitability about it. Better customer experience combined with superior economics win out in the end.
Will GM win this race? Distribution experience is not the only factor, by a long way, in purchasing your car. Nevertheless, when you have little to lose, reinventing the customer experience could prove the most cost effective of the transformative initiatives the company has to take on to thrive in the long run.
How can eBay put you into a GM next week?
