Direct to consumer automotive: Is it finally getting up to speed?
The concept of direct to consumer for automotive is quickly gaining popularity. Learn the challenges and opportunities in going DTC for OEMs.
Twenty years ago, a newspaper or magazine may have been the only subscription services you had. Even though the same products and services were consumed again and again, we’d always purchase them individually each time. Today we’re subscribing to a lot of things – but will automotive subscription services ever be one of them?
Almost anything that we regularly consume can be bought on subscription.
As our lives get more and more busy, the time involved in regularly shopping for the same item becomes more and more precious to us.
You can get your food from the likes of Able & Cole or Hello Fresh, music from Spotify, films and TV from Netflix or Amazon, printer ink from HP, socks from Blacksocks, cocktails from Tipplebox, and a company called Casanova will even deliver condoms to you once a month.
For retailers, this model gives them recurring revenue from customers. For customers, subscriptions give them the convenience of not having to purchase the same items repeatedly.
Of course, it’s digital that has made all of this possible. Rather than spending time making these purchases, you can set up a subscription in a matter of minutes and normally cancel whenever you like.
As the providers have lower overheads, the prices can be reduced, and e-commerce has driven the huge growth in distribution channels which brings down the cost of delivery, which can make posting something like a pack of razor blades (yes, I have a razor blade subscription) very affordable.
I think that over the next five years we will see further growth in subscriptions across a number of verticals, some of which may not be immediately obvious, including automotive subscription services.
Automotive subscription services: Yep, it’s going to be a thing
You may be surprised to hear, but I expect to see huge growth in subscriptions within the automotive industry over the next decade.
The inevitable move towards electric and autonomous cars is going to completely change the relationship we have with our cars. The motivation behind a car purchase varies from person to person, but it will often be about:
- the brand
- how it drives
- the sound of the engine
- how fast it is
- how fuel efficient it is
- how you feel sitting behind the wheel
It’s often a very expensive and emotive purchase. Jump forward ten years when a car will simply take us from A to B, a bit like a taxi or a bus, and our relationship with the car will be very different. The car becomes more of a functional object or utility. Will you really care what brand it is? Will you care how fast it can go when the car is automatically obeying the speed limit?
When we see this shift in our relationship with our cars, I expect to see a big shift in the attitude to car ownership. If you can hail a car to take you anywhere at will, why do you need to own one?
If you use your car during weekends, why pay for it to sit in your drive five days a week?
Enter automotive subscription services.
Subscription business models: Start small, plan big, reap rewards
70% of organizations are deploying subscription business models to sell directly to consumers – thereby creating recurring revenue and customer loyalty.
Subscribe to the future of auto ownership
Rather than buying a car either outright or on finance, how about subscribing to a service that gives you access to a range of cars as and when you need them? Some companies such as Zipcar have been providing on-demand cars for a while now, but are generally limited to larger cities.
I predict that we will see car manufacturers start to offer subscriptions directly to customers, with access to multiple models at different times, depending on consumer needs.
You may want to have a small car for commuting, but a bigger car for a few weeks a year when you are going on holiday. They’ll probably throw in access to one of their performance models for a weekend each year.
Cadillac is one of the first car manufacturers to offer start trialling this. Their Book by Cadillac service allows customers to subscribe to the service from $1,500 a month. This gives them access to a range of models which can be changed up to 18 times per year. At the moment, this service is aimed at drivers of high-end cars and is limited to the New York metropolitan area but, should it be successful, it is expected that this will be rolled out to further areas. There are also plans to roll this out throughout Europe.
Cadillac’s service is clearly a little experimental and aimed at a very specific demographic. However, I think that this is just the start of a movement towards car subscriptions becoming more commonplace. The vast majority of new cars are now bought on finance where the purchaser may not actually own the car so a subscription is just a step onwards from that.
Volvo has also just joined the fray with the launch of Care by Volvo for the new XC40 model. This subscription model is not as flexible as Cadillac’s, as it is a little like a contract hire plan, but is only for one year and includes tax, servicing and insurance. After a year, you can cancel and give the car back or upgrade to a new car.
As retailers look for new ways to engage customers and acquire recurring revenues, I expect to see more and more services and products being offered on a subscription basis. Maybe airline tickets, jewelry, chauffeurs, gig tickets, or fine art will be next. (or maybe they already exist).
