Digital dealerships: The next big thing or a gimmick bound to fail?
LONDON – Audi believes it doesn't need a showroom full of cars to make a sale, especially to young, Web-savvy buyers in crowded big cities.
The Audi City digital dealership in central London, opened in July, is the first of more than 20 that the luxury brand plans to open globally by 2015.
The question is whether this retail approach is the wave of the future -- especially in city centers where real estate costs are massive -- or just a gimmick that will flop long before Audi's 20th "clicks and mortar" cyberstore opens.
Technology fans will love the stores. Potential buyers customize the car they are interested in on touchscreen tablets before the magic moment when the chosen model is downloaded on to one of four Powerwall screens.
The screens display the life-sized cars and customers get to watch the vehicle driving on roads in their preferred colors and trim levels. They also hear the exact noise of the engine they chose and even interact with the digital image by opening the trunk and doors.
The sheer “wow factor” should give the Audi brand image a boost, said IHS Automotive analyst Ian Fletcher. “It’s all about people coming out of curiosity, and getting them to think about Audi as a potential acquisition. Whether they’ll sell cars out of there, who knows?”
Ambitious sales targets
“We will sell cars and we have,” said dealer principal Jim Leckie. “Of course it’s a brand experience, it blows you away. But there’s a strong underlying message to sell cars.”
In the first 12 days Leckie’s sales team had already sold 15 vehicles.
The car-free showroom in London has only tentative sales targets for 2012, but next year the center, which is located in upmarket Piccadilly, will have official manufacturer targets that are “as ambitious you would see from any Audi dealer,” Leckie said.
The Audi City concept is designed to connect with city center employees who normally wouldn’t visit a dealer during the working day. “If it’s near, you can pop in when you’re getting a sandwich at lunchtime, which isn’t something you can usually do,” said Louise Wallis, head of business development at the National Franchise Dealers’ Association in the UK.
More models, limited space
The sheer cost of inner-city retail space combined with expanding model ranges means traditional showrooms are being pushed from city centers. “Audi’s 2020 strategy calls for a massive increase in model lines, so it’s impossible to continually build huge dealerships,” Leckie said.
Customers who buy are directed to servicing facilities in a much less glamorous building 2km away at the back of Victoria train station. Test-drives are conducted at the buyers’ home or office, but Leckie said some buy without. “Out of the 15 we’ve sold so far, only six said they want to test drive the car. With the popularity of the brand they already know someone with that model.”
Despite the reduced space needed, the costs are still high. “It’s a very expensive project, but it’s a long-term plan for Audi,” Leckie said.
In Paris, BMW has launched a similarly high-profile and digitally enhanced showroom on the exclusive Avenue George Cinq. Five 3-D car configurators let potential buyers customize their car before it’s displayed on an 84-inch screen, viewed with 3-D glasses. The digital element cost 3 million euros of the 11 million total.
It’s part of a new BMW push to improve the buying experience in line with customers ever-more sophisticated digital knowledge. “The world of retail has changed significantly – customer behavior, needs and expectations have changed, as well as communication technology,” said BMW global sales boss Ian Robertson at the center’s launch in May. This so-called “Future Retail” strategy will be rolled out to dealers across the world.
A catalyst for enhancing the buying experience seems to be Apple’s global chain of computer stores. BMW’s Paris showroom has a Product Genius, which is a nod to Apple’s Genius Bar tech specialists. BMW’s “Genius” won’t sell cars. Instead this knowledgeable member of staff walks around with an iPad answering questions about the products. Soon every BMW dealer will have a Genius.
U.S. electric car maker Tesla hired former Apple and GAP retail executive George Blankenship to build up its network of 26 showrooms, seven of which are in Europe.
“Our sales strategy is very different from the rest of the automotive industry – we put our stores in high foot-traffic locations so we can tell as many people as possible about Tesla’s incredible cars,” said Blankenship, Tesla’s vice president of worldwide sales and ownership experience, at the opening of its store at Westchester shopping center in White Plains, New York, in May.
With just one model in its range, Tesla doesn’t need much space, so it is trying to be urban, high-tech and interactive to win over buyers who might take a chance on an electric car.
BMW is taking a similar route for its so-called “i” subbrand of electric cars. The automaker opened its first EV-dedicated showroom in London in May. Audi also will use its urban location to market electric cars to those most likely to buy them: “In the future, Audi City will also play a crucial role in the marketing of new mobility services and electric-drive Audi models,” the company said in a statement.
The bottom line is that innovations such as Audi City’s Powerwalls put a brand ahead of the competition, according to Peter Cooke, professor of automotive management at the University of Buckingham in the UK. Said Cooke: “It’s about seducing the customer and making them feeling loved and wanted.”
You can reach Nick Gibbs at firstname.lastname@example.org.