Tuesday, July 16, 2024

AMG’s First Pop-up Store: Car Dealerships Changing for Good

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Following the example of the parent company, AMG recently opened its first pop-up store called UNXPCTD in Munich. Pop-up stores are not a new thing. Mercedes-Benz itself is surely one of the most active brands in this sense. Since 2016 the brand started quite a few similar initiatives in Europe, Asia, and the US. Before these, it had already extended the concept of car dealerships with the “me Stores”. In proper luxury automaker style Mercedes me Stores included “information, consultancy, restaurant, and events all rolled into one”, and as CEO Ola Källenius said:

“All Mercedes me Stores, with their welcoming bistro and event concepts, are designed to appeal to both young and new customers”

The German company is not the only one of course. Other players such as Jaguar Land Rover, Ford, Audi, Porsche, Lamborghini and, Tesla also adopted this model.

However, this time is different. In 2020 and 2021 there has been a return to this model with several new initiatives for two main reasons that distinguish this “wave” from the previous ones.

A New Motivation

The first reason is, of course, the virus outbreak. The continuous change of conditions and the uncertainty in several countries forced OEMs to be more cautious and adopt a more flexible model that required a minor commitment. Hence, the pop-up setup.

The second reason is well-expressed by Porsche’s latest initiative announced at the end of the year. The automaker is set to open almost 40 new locations. Naturally, these will not be the regular car dealerships that we are used to seeing. They will be split into two different types of locations called Porsche Studios and Porsche NOW. While similar in concept, the first will be permanent while the second will be a pop-up shop, so only temporary. For both these new stores though, the most important aspect is enabling a direct connection with the target and new audiences.

*Source: Porsche

Data has become the most important currency in any industry to understand customer preferences and behaviour. In-car software provides a lot of it, so automakers need to close the gap. The aim here is to reduce the distance between OEM and customers, and the traditional car sales process is increasingly detached and outdated. Alternative sales models offer a more direct point of contact with the customers allowing manufacturers to gather crucial information.

Advantages of pop-up store models

Pop-up shops fit into this changing scenario in several different ways.

As mentioned, they offer more flexibility as they are not permanent by definition. Thanks to this, brands can also attach special events, or limited-edition merchandise releases that further increase the “hype” from enthusiasts and grow the word-of-mouth effect.

Since they are only temporary and most of the time small, they are placed in very strategic positions. The location plays a crucial role. For instance, it is possible to find them in large malls or shopping centres. Regardless of the interest of a single individual, such locations grant a continuous stream of people, giving much more exposure to the brand than normal dealerships that are usually located in more peripheric areas, and clustered with other similar activities.

Also, with these, the automaker brings the product and the brand to the audience and not vice versa. Porsche’s Sales Retail Director Marco Kana said:

“With the urban sales’ formats, we have sought and found new ways to reach customers. Whether it is a Porsche Studio or one of our Porsche NOW sales pop-ups, these innovative formats offer easy access to the brand and are ideally suited to developing contact opportunities with new target groups”

A pop-up store, in fact, can be more focused on the simple marketing activity. Along with selling cars, these spaces are focused on delivering the brand experience and identity through digital integrations (i.e. Mercedes placing an F1 Simulator in its Liverpool pop-up store a while back), test drives, and just the overall environment. And this in turn creates a true and direct connection with the public that can become brand loyalty, which is extremely difficult to achieve through other forms of advertising.

Most of all, in fact, they offer a smart way to promote a brand. Today advertising has often a negative connotation. Ads are often considered just interruptions in social media content consumption or annoying pop-ups, and new generations end up paying to get rid of them. Pop-up stores offer the opportunity to engage with potential customers delivering an engaging experience to those who want to. And they provide instant gratification.

The Next Step

Going back to AMG’s initiative, along with pop-up store, came also a survey aimed at improving the understanding of people’s preference when purchasing a performance car entirely online.

The importance of these new sales models, in fact, is also in the fact that they represent a departure from the traditional process, and a step toward online sales. The chip shortage meant that in many markets dealerships faced (and are facing) a severe lack of availability, which is causing a bubble in pricing for both new and used cars.

While dealers might somewhat benefit from it in the short term, the overall direction of the market is as much toward EVs as it is toward online sales.

Estimated rate of new car sales purchased online in the United States, Europe, and China(2020-2025)

*Source: Statista

Back in 2019 Tesla announced that it was adopting a 100%-online-sales policy, maintaining fewer locations with the main function of delivering services to the customer, while maintaining just a small stock for customers who decided to come in and buy a car right away. The same year 78% of its Model 3 sales were completed online, and up to 82% of the buyers did not need a test drive. In a similar way, Volvo confirmed that by 2030 it will only sell electric vehicles and shift to online sales. Its showrooms will become centres for servicing, models’ display, pick-up of new vehicles delivery, and other services to the client.

VW too, upon announcing its sales model restructuring through online platforms, teased five new sales formats including city showrooms and pop-up stores. It then visualised also the “dealer of tomorrow”.

*Source: VW

Online sales will mean a much shorter value chain and more transparency and consistency for customers. Ironically, this translates into an even closer relationship between OEMs and clients, thanks to the access to a bigger volume of data on purchasing behaviour and preferences. So, with electric mobility developing rapidly, every major automaker is also investing to develop its sales model in a new direction that increasingly involves digital touchpoints and transactions.

Digital Sales Matrix

Some Conclusions

Technology and digitalisation are changing the automotive industry in every aspect. Not just that of the final product. Car manufacturers are experimenting with different solutions, and gradually moving away from the traditional sales process.

New experiences like pop-up stores have become a popular way for automakers to promote their products and connect in a new and positive way with existing and new audiences. As a consequence of the pandemic, they also offer a more flexible and less risky way for OEMs to approach direct promotion. Covid-19 also brought a sharp increase in online purchases, and every major automaker is developing digital platforms. Automotive E-commerce developer GForces claimed a 1228% rise in online transactions in 2020.

Car dealerships as we know them today are changing for good. The viable path for them will be to transform into integrated touchpoints within the automaker ecosystem, providing a range of services, from car servicing to financial advice, and more. An ecosystem that will be complemented by online platforms and alternative models, like the ones described above. Thanks to data shared at different levels, and technology these will integrate digital and live services to offer a new and more transparent experience.

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