With consolidation increasing since 2008, OEMs and dealers throughout the retail automotive industry have been impacted by acquisitions, mergers, and other competitive pressures. The end result is the price of cars going up, but the revenue per unit on those vehicles going down. The ability to sell more cars is diminishing in favor of selling more aftermarket services. Now more than ever, especially as buying trends are in flux, the pressure of addressing customer needs is rising.
Purchasing and getting a vehicle delivered is now all possible online, pushing the in-dealership experience away from the car buying process. This on-demand webinar covers how dealerships can optimize their showroom floors to maximize sales, drive engagement, and improve operational efficiency.
Meagan: Good afternoon, and welcome to today's Digital Dealer Webinar. Today's webinar is sponsored by Samsung SDSA and Harman International, and is titled Optimizing the Dealership Experience to Drive Sales. Today's webinar presenters are Joseph Lanners, Director of Auto Retail Innovation at Samsung SDSA, and Stephen Surhigh, VP and General Manager of Automotive Cloud Services at Harman International. The webinar will run approximately one hour with a question and answer session at the end. Please welcome Joseph and Stephen.
Joseph: Good afternoon everyone. Welcome to today's webinar. We're looking forward to talking a little bit about all the mega trends that are going on within retail automotive, as well as some of the next generation technologies that are affecting and impacting retailers in the automotive space, and how those technologies are being utilized to drive new customer adoption, better profitability, higher sales, as well as addressing next generation trends for millennials, Generation Z, and traditional buyers. So, just to dive in real quick on the mega trends, some of these you may be familiar with and others were pulled recently here from NADA 2018, and probably the biggest points to go ahead and point out are that the Auto Group consolidation has been increasing and accelerating since 2008. You're seeing quite a few consolidation activities going on in the marketplace, acquisitions, mergers, and so forth. That's affecting all OEMs and dealers throughout the industry.
The end result is that the price of cars has been going up, but the revenue per unit on those vehicles and other automobiles has been going down. The average total profit is essentially being effected, going from $1,791 back in 2005 to $1,402. That is drastically impacting the amount of gross profit that dealers and automotive groups have to operate on forcing them to sell more aftermarket services, aftermarket warranties, also impacting essentially their ability to sell more cars. So, as the profit has been going down and the total profit's been going down on each vehicle, the pressures have been increasing to address customer needs, customer needs that have been impacted by the buying trends on the web and delivery trends now that are happening from the purchases that are being made on the web. They're now being delivered outside the dealership at people's homes with companies like Carvana.
All these pressures are just like traditional retailers, automotive retail dealerships are experiencing a lot of pressure to find new strategies to utilize to bring people in to the dealerships. Customers, new buyers, address the buyer trends in different ways. So, just like Amazon has been putting pressure on traditional retailers out in the marketplace, digital dealers and dealerships have been using new technologies like artificial intelligence, machine learning, and other great technologies like video analytics to capture more information about their customers and create an omni-channel purchasing process. Let me click into one more big trend and it's sort of like a mega trend as well. If you haven't been paying attention to what Tesla and other car companies have been doing, or OEMs have been doing, they're opening small stores, small stores where they're only exhibiting one or two vehicles or the next new vehicle. And this trend has been accelerating out in the marketplace, so as millennials have grown up and Generation Z buyers are entering the marketplace, they're very comfortable with the self-service model using kiosks, using digital signage.
Not necessarily seeing the actual car they're buying right away, but ordering the car that they want, with the features they want, and the packages they want. Experiencing the car at events, malls, sporting arenas, and not the traditional way they experience at malls. They're actually building pop-up stores. Dealerships and large auto groups are also rotating these cars out and branding the spaces depending on which new models just come out. That's helping them to capture more leads and better qualified opportunities and helping to make an impression on customers before they actually purchase the car.
All right, so, one of the other big challenges that will hit in terms of mega trends that we've been tracking out in the marketplace for a little over four years now, the customer journey's changed. It used to be that we all go into a store, we make our purchases, the cars, we configure it, we work with the sales associates. We may or may not have had a digital experience within the dealership and we get a personal consultation and the car is delivered. But web came along, right? And all the online content has changed the way that our customers are interacting with us. So, our customers may usually start on the web, they may continue on the web, and they may bounce back and forth between in store, or out of store, or a virtual store, or pop-up store experiences. And that purchase process may take quite a while if you're counting the impressions you're making on customers as they come in for a dealer service. So, being able to track a customer's web habits, their in-dealership experiences, which include the service center experiences, moving on into the digital showroom or the actual physical show room, that journey has changed significantly and it can take a vast number of permutations and different paths. And so, for instance, if Lauren, our fictional character on the screen, were to bounce around in this journey, she may start at one point in the journey in the store, or she may actually start in an exhibit, or at a concert hall where a car was being displayed.
And we capture those leads and those leads could go through the dealership, but then she may bounce back and forth throughout that entire journey. And the car may even be delivered virtually. Many OEM and auto groups are now delivering the car directly to a person's driveway. So, competition's increased, the world has changed, and the need for data and the synchronization of data being captured within the dealership showroom and outside the dealership showroom on the web or in other venues, the need for synchronization of that data has increased significantly. So, how do you craft that better in-store experience to match up with the web experience?
What we've been doing and what we work with and consult with our dealership customers and clients, and industry experts on is creating some sort of a factor that says we've got a unique customer identifier. Something that tracks that customer from web, to inside the dealer, at events, and then beyond. Those customer identifiers can vary greatly and with that identifier as those customers walk into our dealerships, they then are able to basically, specifically target targeted promotion information based on the customer's profile, what they've been looking at, what specific car they need, what their next car requirements would be. So if I were looking at an SUV on the web or Lauren was looking at an SUV on the web, it would show the SUV when they walked into the store. And it's that unique customer identifier that can drive that personalized content, that targeted promotion directly to them while they're in the store on a digital screen.
Retailers alike are using machine learning technologies, artificial intelligence, you've probably heard a lot about M2M or machine learning. That is one form, or video analytics is one form of that. So being able to actually identify customer segmentation based on everyone who walks in to a dealership showroom, or at an event center, or in a pop-up store, we can gather based on age, gender, visitor count, attention time, and all of that content. That content then gets promoted specifically, and this is the cool part, specifically to the person who's up in front of a particular monitor or a screen. So, if we know that it's a female or a male walking up in front of the screen, we can do targeted promotion directly to that. Also, knowing their age category: Gen X, Gen Y, Gen Z, so on, so forth. We as dealerships as well are now able to provide a much more digital experience using kiosks, self-service touch panel displays, other technologies, even on a tablet, just like you would on a web, we're able to do that within your store.
That configuration can be customized to the point where even if you have your own specific dealership add-ons, whether it be special window tinting or special wheels that are aftermarket, those can be integrated into the configuration tool and allow the customer to make that car their own. That vehicle, the truck, whatever it is that they're looking for. You can even make suggestions using analytics engines, and access all that digital content that the OEM manufacturers have supplied us as dealerships. That browsing then can happen without interruption from a sales specialist or a product expert. However, at some point in time during the process, you're bound to want to talk to a product expert, or ask a question specifically about the vehicle, or maybe there's something that's not covered. Once you press the "I'd like to speak with a sales associate, or a product expert, or an FNI consultant," all those notifications could go specifically to a wearable device or even a tablet that's available for all the sales associates, or the product experts, or the delivery experts to use within the dealership. Could even be a service expert.
So, automating that function of being able to connect to the associate when you're ready to talk to them mimics exactly what happens on the web. When customers are ready to talk to somebody or chat with someone in a chat window on the web. In addition to that, especially in pop-up stores, or where, you know, your inventory is low, or a car has sold really well and the particular model, color, and combination is not available, virtual reality is being used very well out in the marketplace and augmented reality using tablets or cell phones to specifically configure a vehicle that may not be available on the lot. So now, I can put the VR goggles on or we can put our VR goggles on, sit in a similar vehicle, but then see all the color combinations real time, and even a sales consultant can control what you see and help guide you through those processes. So, these types of technologies are really creating a unique experience for our customers and our dealers, and it really does assist with getting the exact car, the right car for our specific needs.
That can continue without VR. If someone's not comfortable using VR, you can do it on a tablet, or even connect that tablet to a view on a large format display. Large format displays are also being used significantly by some of these pop-up stores in extreme fashion where you have dozens, or 20, or 30 of these displays available to dynamically display content. And at a desk or as a personal consultation tool, it really helps with visual aids. So, if we, as the consumer, are actually looking at multiple cars or multiple car configurations from the web all the way to VR and tablet-based, the digital experience can continue outside the dealership because the profile that we've created as a customer will follow us. And we may be a lifetime customer of an auto group or a particular dealership because of the service level that we receive. But being able to actually pull that car experience as you're bonding with the actual emotional purchase that you're going to make, that will follow you onto your cell phone, your tablet, could be HTML at your home computer, and then you can share that with your friends. So, it's extremely mobile, and we know that most car purchases don't happen on the same day. That it happens...you know, people make decisions over, you know, several days and sometimes they like to take some time to talk about it with their spouses, and significant others, and family members.
Once it gets time to actually deliver the vehicle, all of this digital experience continues on to where the sales consultant then hands off to an actual delivery consultant that walks you through the features of the vehicle. Large format displays and music can be used to then teach the customer about all the features of the car, the safety features, the autonomous vehicle components, those configurations that are required. And if they have any questions it becomes an additional tool to help them, you know, move things forward and that can also be tied to their profile as well.
So, what are the benefits, of course? And I think we've been hitting on some of these, but being able to increase the actual showroom utilization is critical. Getting the right message to the right buyer, at the right time, targeting to the right demographic, increasing branding from the OEM level, but also specifically at the dealer level outlining all the services, the aftermarket capabilities that are there. The extended warranties, the right customization packages, those all matter as well. So, being able to track that through the entire process becomes a huge benefit, building that loyalty and increasing the deal size also matters. And then when it comes to sales funnel, there's a couple of really key points that come here. And if you pay attention to this one, I think it helps with dealership inventory, so if a customer decides not to purchase, you still gathered a ton of information about that customer along the way. And you know which car configurations are getting the most traction in the marketplace. So that way when you make your next order for the next month, you're ordering the right cars, the right mix of vehicles, the right trucks, and so forth. Being able to then, you know, connect with all the passerbys, know the number of impressions you've made, which types of advertising have been making the best impression or had the longest dwell times.
We've seen the conversion rates using higher-end artificial intelligence-based or web integrated technologies along with artificial intelligence video analytics have increased conversion rates as much as 23%. So, you're getting more sales, higher sales, as well as a better traction and a lot more data that can help in dealership operations, service management, as well as sales showroom support. So, how does it all work? Probably the best thing to think about when we think about how artificial intelligence from traditional retail shops is being applied into the automotive dealer groups and dealership market is the industry has been using video analytics. So, these are traditional cameras, they may be special mounted, they may be integrated into self-service kiosks, pop-up stores, and they can gather all sorts of information. Where customers are spending time within the showroom, where they're spending time within the service center, how long did they dwell around a certain vehicle helping with merchandising of your showroom, where you're seeing the most traction, if there are areas that are not getting a lot of traction. All that data is captured into an enterprise level or enterprise class system and it will tell you which vehicles are getting the most interest and so forth.
All that data can be managed from a single dealership standpoint, to a dealer group, or even at a very large OEM level nationwide. And you can categorize them by store, by region, by country, so it's an enterprise class, but is simple and easy to use for a single dealership as well. It's the right type of scalability at the right time in the marketplace. And the options have been developed in such a way out in the marketplace to where, as you've seen, the pop-up stores have become quite simple to deploy. They're very easy to rebrand when a new product launch comes out, and they can target the young and casual buyer, all the way up to premium luxury brands and a full service experience. So, the options are there, they're very easy to integrate and a lot of valuable data comes from both store operations, sales management, and of course, the service center operation as well.
Now, I'd like to turn it over to Steve Surhigh. I know we've covered some of the trends that are going on within the physical retail space. Steve's going to cover a little bit about what's changing within the automobile industry and the actual ownership technologies.
Steve: So, I work for Harman International, and many of you may not necessarily recognize Harman, but you may recognize some of our brands, Harman Kardon, JBL, Revel. We have been instrumental in supplying automotive OEMs with a number of the key technologies that sit in the vehicle, namely, not only the audio products, the stereos, and speakers, and other components that go into that, but we are also one of the leading suppliers in making what is now the navigation system which, as many of you are aware, is kind of the connected vehicle hub of how that vehicle connects to the outside world. So, whether it's the telematics device or the infotainment unit itself, Harman is a key supplier for those technologies in the space.
So, Joseph talked a lot about how the cloud is impacting and how technology is impacting the ability to transform how vehicles get sold. It's also transforming what goes on in the vehicles itself. And what we're showing on the screen right now is an actual concept vehicle that Harman has developed. It's making its way around the globe at various auto shows. It was recently at the Geneva Motor Show, and in essence, all of the technology that you're seeing is functional, but it is technologies that we're currently working with the automotive OEMs to bring into the vehicle. And while it looks like a lot of information on a lot of different screens, it is a number of different screens, but there's a lot of technology that's going into it. Similar to what Joseph talked about in terms of using data to help drive decisions in the dealership. We're really using data to help support the driver in terms of how they're using the vehicle. So, we're really trying to make the vehicle very contextually aware, and instead of having the driver have to take their hands off the wheel or their eyes off the road, we really want the vehicle to be more of an automated co-pilot.
You'll see that we're actually using some of the same technology that Joseph talked about that's being applied in the dealership. We're using augmented reality. There are 8 cameras on this vehicle, and within the vehicle itself we stitch a 360 degree image of the vehicle. So, when there is a passenger in that seat they can actually bring up the 360 view of the vehicle and they can actually move around the vehicle and show it from different angles based on the stitch video. If you go to an auto show and you see a Maserati with the kind of blue Harman logos on it, go on the inside and you'll see all this technology in there. And really, it's a combination of both Harman technology and Samsung technology. What you're seeing with that display on the right side is it's a 28-inch Samsung display, it's a QLED technology, which basically what it means is unlike the screens that are in the vehicles today, it's much more like the screens that we would have in our living rooms, that we're watching our high-def movies and our forte movies on.
And so, the colors are much more vivid, the pixel refresh rate, all of the features of what goes into a video display are just that much sharper, that much crisper. But we're also able to take it and as you see with that kind of stitch video, not only are we able to put that 360 video up there, but we're connecting the vehicle to the cloud to bring in an augment reality by showing that image and then overlaying various points of interest that we're passing. So, whether it's our favorite restaurant, or whether it's something that we have tickets to later in the week, as the vehicle is on the move and passing by different things, it's getting rendered on that display in real time. The other thing that you see along the left side it shows up kind of purple in the image is some personalized audio feeds. And really, what we've done is while many OEMs have historically taken the approach similar to a mobile phone of providing apps in the vehicle, really what we're doing with this next generation interface is we're stitching all of that together the same way if you were to bring up your local dealership or dealer group's website, there's probably 100 different calls to the cloud to render that image of the website as it comes up.
But as a user, when you log on with the browser, you experience it as one kind of cohesive experience. And that's really what we're trying to do in the cockpit, and that's what a lot of the OEMs are trying to do with how they're bringing all these different technologies together. So, in the center cluster, you know, obviously, we're seeing it even in the vehicles today. But that center cluster is talking to the navigation system, the audio system, it's all being brought together. But in the future, we're actually driving more personalization by being able to bring cloud profiles in the vehicle. So, we're able to have individual profiles for drivers so that whether it's their presets, whether it's their destinations, whether it's any of their credentials associated with their Spotify accounts or Pandoras, it allows them to bring the things that are relevant to them up to and including the ability to connect into their home and/or some of the other devices that they have. And whether that's watches, smartphones, or whatever. So, by being able to drive this personalization into the vehicle, again, we're trying to make the vehicle more contextually aware. And this particular vehicle that we built out as a concept vehicle, not only recognized the driver based on the Bluetooth phone that pairs with it, but when a passenger gets in, it pairs with a second phone. And that's what lights up a bunch of additional technology on the display that sits in front of the passenger.
So, it's very sophisticated in terms of being able to go out to the cloud and bring in data that's relevant to, not only the driver, but also other occupants in the vehicle. So, here's another example or a shot from another angle of kind of what goes in that vehicle. And you see along the right side where it says "Connected by Harman," that's the display that in that other mode was showing some additional features. So, when it's the driver only, that display shuts down to avoid any distractions. But what you have is kind of in that higher display on the center console along the left, they have all of their audio components, and then kind of along the right, they have all of their navigation components. And then you can see what he's playing with there in the center console is really the ability to configure different aspects of how the vehicle is reacting to him as a driver. And one of the key points that you'll see is there are three knobs in the center and they appear as round knobs. And those are actually knobs that allow the driver to dynamically configure those knobs. And the way they're configured, in this particular example, the one on the left is a digital assistant.
So, integrated into this vehicle are three different digital assistants. It's IBM Watson, it's Alexa, and it is Samsung Bixby. And so, the driver can either select one of those, or can go back and forth between different ones using different wake words. In the center knob, the center knob is configured to be the volume knob in this particular example. So, for any of the audio, it's controlling the volume and that knob is not only as an LED display, but it's also a physical knob that you can rotate it, you can push it, and a lot of OEMs are really liking this as a contextual device within the vehicle. And I think you'll start to see this in a number of different vehicles moving forward, where the knob can change dynamically based on the configuration. So, you're not just relying on touch screens, you're not just relying on static hard buttons, but it's really giving you the option to blend the best of both worlds and have things that drivers can physically touch and feel and get real feedback on, but still have the configurability that comes along with displays. And also, from a kind of target area perspective, those knobs, if you push them, you can either push on the display or you can push the entire knob.
But obviously, as you can see a relatively big target area. So it's something that is very easy to use, very driver-oriented, and you can see from the kind of structure of the HMI, it's really not app focused, but it's really intended to be more immersive in terms of anticipating what the driver needs and bringing that functionality to their fingertips. In those first couple of slides I showed you, the display on the top actually opens up and you see it in this picture in the open mode, but for sport driving mode, the display closes and it'll just show you the weather, the time of day, and then it will give you messages associated with calendar appointments and other things. But from an overall personalization perspective, as you can see with what Joseph was talking about with the in-dealer experience, a lot of the OEMs are looking to drive that in-vehicle experience, so that there's more personalization, it's more attentive to what the driver's looking for individually. It's trying to anticipate the driver's needs, it's using the cloud, it's using data analytics, it's using machine learning. It's really trying to bring a unique experience into these vehicles where, not only are they looking to differentiate with the physical trend levels, but also within the digital experience in the vehicle.
So we're tremendously excited to be working with the OEMs and for a lot of you that are on the call today, whether you're representing brands that are German OEMs, or Asian OEMs, or even North American-based OEMs, Harman's working with all of these different OEMs to bring this technology into their products, getting into the market as quickly as possible. So, expect to see a lot of this technology make its way into products in the near future. And so, Joseph, with that, I'll turn it back to you.
Joseph: That's perfect, Steve. Thank you. So, as you summarized, there's a significant amount of synergy that's going on between the OEMs and the dealers, and of course, with Harman and Samsung out in the marketplace. Consumers are more educated than ever, they're using a lot more web, they're expecting more integration into their vehicles, they're expecting a retail-like and an experience like inside the physical showrooms. So, that's one of the reasons why we're seeing such an alignment between our organizations, the web, artificial intelligence, video analytics, and all the new engines that are out there that we're able to integrate in to both the vehicle and inside the dealerships is going to merge into a unique, seamless experience for the customers out in the marketplace. One example, and we thought we'd give at least one example of a German OEM dealer group of about 400 dealers in China.
They've really taken self-service and advanced technologies like artificial intelligence, and video analytics, and all the personalization and self-service capabilities that are required to transform a dealership and bring it into the digital age linking the digital side of the web to the digital experience within a dealership. So, welcome boards, and car designers, and e-pricing stands which are obviously a lot more eco-friendly, no more paper on the side, and if changes to occur, they change more dynamically, the ability to do self-service-based consultant panel or even tailor that to a salesperson's tablet, or wearables. And also being able to add accessories or shop for accessories and schedule your service appointment even. So, all that tied directly to an advanced content management system that can dynamically change the content based on personalization. And a lot of that data is if you don't self-identify yourself, you're anonymized. And that data then is anonymously targeted towards the general demographic that's in the dealership at that time.
So during the week when you have professionals that are able to take off of work and drop off their car and hang out in the dealership, maybe they're targeting the young professionals in the Generation X segment. And on the weekends when you have more families coming into the dealership because they're busy during the week and it's still working families, you're targeting some of the larger SUVs towards their next purchase. You know, they've got a family of four and we know that there's another one on the way, they're going to be targeting the larger SUVs with a third row. So, these are the types of things that are being dynamically used to align the branding at the OEM level with the large automotive groups, and the individual dealers, and the demographic that's local to that dealership. And it's being done within the physical space, but remember, they're also extending into pop-up stores in experience centers, might be in a mall as well as sporting events and other venues. And that's generating more leads and higher value and higher brand loyalty.
So, with that, Meagan, let's do our Q&A and see what types of questions we have from the audience via chat or audio.
Meagan: Awesome. Everyone, we're now in the Q&A portion of the webinar. We have a first question here, what does it cost to implement behavior analytics in our dealership?
Joseph: So, you may have remembered that we have small individual pop-up models. It can go from a kiosk-based trial, all the way up to an implementation inside the store, and it can support an entire physical space, both service center and non-service center. The price varies a little bit and also depends on how digital you've already gone in terms of digital signage. So, packages are extremely reasonable can be, you know, can be broken up on a monthly basis and consumed over a period of time and it's quite reasonable. We can get that over to you very easily.
Meagan: Can you describe other implementations and how they're leveraging your solution?
Joseph: So, it's really important to understand, I think, maybe where this question is going are the implementations. We have gigantic big box retailers that are using our retail analytics capabilities to help re-merchandise their physical spaces, know how customers are interacting with a significant number of retail products, how they're displayed on shelves, and merchandise. Even in pop-up stores in public transportation areas, we have other retailers or consumer packaged goods companies, you know, popping up the store and being able to gather a lot of demographic information, and customer information, and be able to do follow-ups and generate new leads that they wouldn't already have. That would probably translate very nicely. A pop-up environment could be even put in a, you know, in a different venue, a subway, a large entertainment venue, during concerts, that's exactly the way that we see this working. It works for consumer-packaged goods companies already, and also works with, you know, other retailers. So, probably gives you a good idea of how that's going.
Meagan: Do you have tiered solutions for smaller dealerships?
Joseph: Yeah, I think we may have covered this, there are absolutely tiered solutions. We have small starter sets that are more kiosk-oriented or small pop-up store-oriented. They could be set up as a kiosk or an individual area within a dealership, to a midsize dealer or lifestyle dealer, all the way up to high-end luxury brands.
Meagan: Final question. Can you help us create VR content for our dealership experience?
Joseph: Here's the thing. Yes, we can. We have some really great partners that are really good at digital content creation. We also have some other partners that have already created hundreds, if not, a few hundred total cars dating back to about 2005, depending on whether you're using used cars or new cars, they've been able to create virtual content for those vehicles. Permutations of those vehicles many times are created as well by your OEM, virtual content has really taken off with Generation Z and millennials, you're seeing it in all the movies. Now, even what players Z or, you know, which player X movies that are out there in the marketplace. So VR content is pretty important. We can connect you to the pool of, you know, creative agencies that have done really amazing stuff at reasonable prices for a VR experience. And then some of our dealerships that we're working with have also created a virtual dealer on the web to extend, you know, what their physical showroom looks like as a VR experience, you know, on a handheld today. We'd be happy to connect you with some of those.
Meagan: Great. Well, thank you so much everyone for attending today's webinar. And thank you to Joseph and Stephen for some great content. To view this webinar on demand and future Digital Dealer Webinars, please visit digitaldealer.com/webinars. Thank you, and have a great day.
John Bertoli currently serves as Head of Marketing & Partner Services at Samsung SDS America where he is responsible for brand awareness and driving demand through outbound campaigns and optimizing inbound marketing channels to generate meaningful opportunities for the various business units and solutions, namely retail technology, digital out of home (DOOH), HPC Managed Services, blockchain, and retail analytics software.