This is an era of tremendous changes in auto retailing, changes that are having a profound effect on the makeup of dealer organizations, dealership service operations and brand identity. The latter two are driven by the manufacturers' quest for quality.
Of course, dealers and automakers are aware of all this and are trying to adjust as fast as they can. Consolidation should yield fewer but strong dealers; innovations in satellite service facilities may recapture business from the independent aftermarket; and aggressive new brand management campaigns should help at least some brands emerge from the undifferentiated pack.
Firms from outside the traditional industry are active, for better or worse. One wonders, for example, if Republic Industries' AutoNation brand will develop greater strength than some of the car companies' brands.
Our research leads us to estimate that the future of the North American auto retailing industry will be made up of some combination of four subsidiary scenarios:
1. Saturnization: Dealerships will remain tightly linked to automakers, but they will grow in size.
2. AutoNation and beyond: Vast publicly owned dealer chains will emerge to establish their own retail brand power, breaking away from the automakers.
3. Unbundled channels: Automakers and their dealers will sell cars through specialized sales-only points, splitting off functions such as parts, service, and finance and insurance into separate sites.
4. Channel meltdown: Vehicle manufacturers will just make cars and leave a whole host of new entrants to slice and dice retailing as they see fit.
No one of those futures will become dominant because as we look at other consumer goods that are farther down the evolutionary path, we see that a mixture of the four tends to predominate.
Turning to other major changes, the word 'quality' appears in the advertising slogan of nearly every car company. That is all well and good, especially after the bad old days of the 1970s and 1980s, when the Big 3 were hard pressed to catch up to the quality lead of their Japanese competitors.
But quality improvements have a dark side for auto dealerships.
Dealers, faced with shrinking new- and now used-car margins, are trying to do more repair work, and improved quality works against that.
The now-common 100,000-mile first checkup and 'defect-free' vehicles also diminish the link between customer and dealership. There are fewer encounters, as the car is so reliable that visiting the dealership has become an exception rather than a habit.
Another unforeseen problem is driven by the quest for product quality: Defect-free products tend to produce forgettable brands.
Car brands today score roughly equally well on broad objective measures of quality such as assembly defects, performance or equipment installation. The defects have become much less severe. Today we count a rattling sun visor as 'one defect,' as if it were the same magnitude as the 'one defect' of Pontiac Fiero engine fires in the 1980s.
Choice among brands today can just as likely center on nonproduct features such as price or financing terms, as on more fundamental issues such as durability or performance. Those nonproduct characteristics are a lot harder to build a brand upon.
Car companies pursue elusive traits such as 'road feel' or 'product integration,' traits that many consumers cannot even define let alone evaluate. When brands are based on such thin rationales, differentiation among them - and therefore the price premium they might claim - is much more difficult.
Thus, the dealer and the automaker now face a triple whammy driven by improved product quality:
A reduction in customer contacts, during which brand loyalty could be built up.
A corresponding erosion in dealer profitability as service visits become less frequent.
A fundamental blurring of basic brand differentiation as quality levels converge.
Assessing and reacting to a combination of those developments is crucial for every dealer and automaker. For now we would conclude with one key observation: 'Be careful what you wish for.'
Dealers who wished for better quality cars got better quality cars, but also a weakening of brands and their own dealer economics. A car company that wishes for AutoNation to clean up an overdealered network's problems might end up with an unacceptable shift of power away from the automaker.
In the chaotic world of automotive retailing in the waning years of this century, the unintended outcome is probably precisely the one to expect.