Though language experts debate whether it is an accurate translation, there is a well-worn cliche that the Chinese word for crisis consists of characters meaning danger and opportunity.
But there is no doubt that the tired crisis-leads-to-opportunity trope could apply to what's happening in automotive retail.
Purely digital transactions from start to finish are still on the horizon and not the everyday norm. But vehicle transactions that get their start online are growing. In this regard, an analysis of industry trends by international consulting firm McKinsey & Co. provides some bad news and some good news.
Inga Maurer, partner in McKinsey's Chicago office and member of the firm's auto practice, told an industry audience last month that for every 1 percent of used-car transactions that go online, $40 million in used-car profits vanish. Consider that against a backdrop of dealers already saying they generally make no money on new vehicles.
So used-vehicle sales, which dealers are relying on for more of their income, could be systematically less profitable as online transactions grow. And grow they will, Maurer said: She sees a shift to 50 percent online sales by 2030.
That's the bad news.
The potentially good news? Franchised dealers are well-positioned to adapt in several areas. Maurer pointed to alternative store formats, with test-drive centers or mobile stores a possibility for high-traffic, urban areas.
Another potential opportunity: Dealers could launch subscription services independent of their physical locations. As an aside, some dealers who have dipped their toes in subscription services have found them difficult to pencil.
There is also opportunity, Maurer said, with growing ride-hailing networks – those well-traveled cars and trucks need to be serviced.
And while dealers are typically not part of private used-vehicle transactions, they could be in the future — perhaps by providing reconditioning, finance or insurance services.
So while margins on vehicle sales could continue to be under threat, opportunities elsewhere could emerge. Dealers may not have any choice but to look for them.