Is Car Subscription the Way of the Future?

Emerging trends in mobility, such as the rise of ride-hailing, car sharing, and subscription services, are changing the way people use, value, and relate to personal vehicles. These new mobility services are contributing to a growing change in transportation preferences as consumers are shifting away from vehicle ownership and towards “vehicle usership.”

But while pretty much everybody already understands ride-hailing and car-sharing (think: Uber, Lyft and Zipcar), vehicle subscription is still shrouded in a bit of mystery. What is it? How does it work?

SUBSCRIPTION CULTURE HAS ALREADY ENTERED THE MAINSTREAM

Spurred by the success of services like Netflix, Spotify, Rent the Runway, and Amazon, consumers can now access goods and services from groceries, to luxury items like purses and gowns, to commodities like razors, to meal delivery kits – all for a monthly fee.

The growing demand for subscription-based services represents a wider cultural shift in how people consume, moving from an ownership model to an access model. Consumers are now paying to access things temporarily that they used to buy outright.

This shift isn’t just about personal economics or reducing the cost of ownership. In fact, consumers are sometimes paying more to access products. It is a redefinition of what it means to “own” and whether or not permanent possession of a product is more valuable than the convenience of having access to it. In fact, some would argue that access is ownership. As a result, many consumers today are less willing to pay larger amounts for products and services upfront, preferring to use a product or service on demand and for shorter periods of time, shirking long-term commitments while giving them maximum flexibility.

The subscription business model has infiltrated industry after industry from ecommerce to media to retail, and now we’re watching this ownership-to-access transition unfold right before our very eyes in the automotive business.  In fact, the 2018 Cox Automotive Evolution of Mobility Study revealed that consumers are already reconsidering whether vehicle ownership is even a necessity, with nearly 4 in 10 consumers agreeing that while transportation is necessary, owning a vehicle is not.

But that’s not bad news for car dealers. Subscription-based services are a fundamental transformation in the nature of customer engagement, and it doesn’t displace traditional car-selling and leasing. It’s a viable add-on for dealerships that simply expands the focus from exclusively pushing big-ticket car purchases to servicing customers’ needs in an ongoing, dynamic relationship that also builds a new, recurring revenue stream for the dealership. Consumers receive the ease of access, a fixed rate, and personalization inherent with subscription services, so customer loyalty is built right in, which keeps them subscribed.

Dealerships of the future will have to be integrated transportation providers. That means instead of only being able to sell or lease a new or used car, subscription will empower dealers to sell more to those very same customers as well as reach a whole new customer base. The reality is, dealer profits from the traditional automotive buy/sell retail model are eroding with shrinking margins threatening the future of some rooftops. As a result, it is more important than ever for dealers to find ways to generate diverse revenue streams.

HOW It WORKS

Let’s start with the basics. Forget everything you’ve heard about car subscription programs. You know, that it’s only for really rich people rotating between high-end cars and could never work for the mass market. Wrong. Car subscription is much more than multi-vehicle programs.

At its core, subscription is merely an agreement to provide ongoing products and services in a continuous relationship based on an expectation of value, and that can take shape in many forms for dealerships – from offering concierge services and on-demand rentals in the service department to car owners, to full-blown multi-vehicle subscription programs in the sales department for customers who choose not to own but still want access. The key is that flexibility is built right in – and not just for customers, but for dealers, too. Powered by smart software, dealers are able to scale their subscription offerings as slowly or as quickly as desired.

The good news is that to get started delivering subscription services to vehicle owners, you already have everything you need sitting right on your lot. You don’t have to get a line of credit. You don’t have to buy a building. You don’t have to hire a bunch of people to get started.  You will simply be creating multiple demand patterns across your existing pool of assets, which translates into potentially more dealer profit.

DIPPING YOUR TOE INTO MOBILITY INSTEAD OF DIVING HEADFIRST INTO THE SUBSCRIPTION DEEP END

You may recognize that change is coming but don’t feel equipped to offer consumers the transportation mobility services they seek. Because, let’s face it, introducing new technology and processes at your store can be hard. You can’t just “turn it on” and reap the benefits. The good news is that Rome wasn’t built in a day and neither should your subscription business.

Certainly, there are dealers who go with an “all-in” approach with a multi-vehicle subscription offering from the get-go, but there are better ways to ramp up your operations and build a foundation for your mobility evolution. Dealers in the immediate future will be able to use technology to drive more value and profit out of their existing fixed-ops business while building infrastructure for their variable ops in the longer term.

Using the same technology that will one day power a full-blown subscription offering allows dealers today to automatically recover more costs out of their loaner fleets (think: fuel charges, unpaid tolls, damages, etc.) while protecting those assets through the use of telematics and GPS-enabled location services. It could also enable an enhanced service experience: think of a technology-enabled Service Pickup and Delivery service (versus a more manual process that is prevalent today) that not only differentiates your dealerships to customers but drives more revenue to your service department and increases the efficiency of your loaner fleet. Standing up your subscription services business on one seamless platform – rather than relying on disparate providers – gives dealerships the opportunity to ease into mobility services at a manageable pace while optimizing important parts of your existing operations.

Let us show you firsthand how you can stair-step your way into subscription services. Or, there’s a whitepaper that explains it in more detail and shares all the ways dealers can grow into mobility. Get the white paper here.