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Last weekend, I headed to the mall to shop for some lipstick, a pair of black pumps and, while I was at it, a new car.
These days, Westfield London, an urban mall, is one of the hottest places around for those in an automotive frame of mind. Sprinkled among shops selling Tag Heuer watches, Tiffany’s jewellery and Apple iPhones are outposts of five different car brands including Tesla and Polestar, Volvo’s electric-only marque.
The contrast between the first UK outlet of Genesis, the high-end arm of South Korea’s Hyundai, and the suburban dealership where I bought my first car could not have been more stark. Back then, the condescending salesmen who guarded the acres of vehicles were so high pressure that I ended up enlisting my dad to handle the sale.
The high-ceilinged Westfield “studio†featured wood floors, leather chairs, custom spotlights and just a few gleaming cars. “Genesis personal assistants†in crisp grey suits were attentive, informative and definitely not pushy as they explained that a car can be brought to my home for a test drive.
Changes in the way we buy cars have been turbocharged this year by the pandemic, chip shortages and the shift to electric vehicles. Would-be drivers now start their search online. By the time US shoppers seek out a physical car, nearly 60 per cent have already settled on a brand, a price and even a model, according to a recent Bain survey.
Growing numbers want transparent pricing and are willing to buy online. In the UK, digital car purchases soared by 10 times last year and are forecast to double again this year. Though most buyers still take a test drive and talk to a salesperson, many are looking for information on customisation rather than seeking to haggle over the price of a specific car on the lot.
Yet the rising popularity of electric vehicles has thrown a wrench in the process because shoppers know so much less. While more than 85 per cent of US and German car buyers had preferred brands, the figure fell to 40 per cent among those looking for EVs, the Bain survey found. “There is a huge opportunity for automakers and dealers to win a lot of new customers,†says Bain’s Eric Zayer.
Chip shortages, manufacturing slowdowns and the time needed to ramp up EV production have also changed the sales process. Tesla has had waiting lists for years; now other makers are using reservation systems to manage rising post-pandemic demand. US dealer inventories have dropped by half to a 23-days supply, the lowest since 1985.
Mall stores address several of these issues simultaneously. They raise brand visibility while requiring few vehicles and allowing carmakers to experiment. Polestar and Genesis have eliminated commissions and offer maintenance via valet service rather than setting up full UK dealerships.
Carmakers like the idea of controlling the sales experience and forging a tighter relationship with customers. Online reservations have made manufacturing systems leaner and more responsive, and companies such as Ford want to keep it that way. General Motors has introduced a single online platform for all EV customers and non-negotiable pricing for its new electric Hummer. “Consumers want a more stress-free experience. The whole industry is moving that way,†says Rajat Gupta, auto analyst at JPMorgan.
Eliminating dealers entirely would further boost margins by a few percentage points, Credit Suisse’s Dan Levy estimates. But a wide network of convenient service locations remains a selling point for established carmakers, and US franchise laws ban most direct sales.
Dealership groups run the risk of being squeezed. To sell EVs, they must invest in charging and repair equipment but the cars require fewer replacement parts and less regular service, cutting into a major revenue source. Last year, 150 GM dealers stopped offering Cadillacs to avoid having to pay for the upgrades. Those that remain could benefit from consolidation and reduced financing and sales costs if the carmakers really do adopt no-commission and lower inventory models.
The change in car sales is unequivocally positive for upscale malls such as Westfield and Minnesota’s Mall of America. They are banking on restaurants, entertainment and other services to draw customers out of their homes and fill the holes left by failing retailers. “It’s not just a shopping centre any more. It’s a town centre in its own right,†says Kate Orwin, UK leasing director for Unibail-Rodamco-Westfield.
If that means I can shop for a car and take the kids bowling in the same place while never talking to a traditional car salesman again, I’m all for it.
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