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        home > news > Automakers > Q&A: Unite Digital Chief Strategy Officer Dave Zuchowski

        Q&A: Unite Digital Chief Strategy Officer Dave Zuchowski

        The "retail revolution" is real this time.

        Paul A. Eisenstein
        Paul A. Eisenstein , Publisher & Editor-in-Chief
        March 25, 2021
        Unite Digital’s Dave Zuchowski offered insight into the future of automotive retailing during his session with TheDetroitBureau.

        Since the very earliest days of the auto industry, motorists have shopped for cars much the same way as they do today. Or, at least, how they did until the COVID pandemic struck. During the past 12 months there’s been a massive shift to online shopping and few expect to see a return to the previous “norm.”

        That’s setting in motion a dramatic transformation on the retail side of the business, starting with what dealers do and how they make money. It’s also expected to bring a sharp decline in the number of dealers serving the U.S. market, with perhaps 30% of today’s retailers closing shop or selling out to chains like AutoNation in the not-too-distant future, says Dave Zuchowski.

        Zuchowski has spent four decades in the auto business, including a run as CEO of Hyundai Motor America. After a few years working as a consultant, Zuchowski took a new assignment last year, signing on as the chief strategy officer for Unite Digital, a startup that works with dealers on the challenges of working in a digital retail environment. He spoke to TheDetroitBureau.com about what he sees coming in the new world of automotive retailing.

        Impact of the internet

        Shopping online rose during the pandemic, and is likely here to stay.

        TheDetroitBureau.com: We see more and more car buyers going online, whether to do their homework or to complete a purchase. What are the challenges for dealers?

        Zuchowski: Inertia is a huge issue. Dealers are resistant to change because it’s a high-dollar, top-line business. If all else fails, revenue cures a lot of evils. So, they’re very reluctant to change because what they’ve had has worked for a very long time. They’re very reluctant to walk away from what worked and that, to me, is the biggest problem. (But) what really matters is what the consumer wants and the biggest change is that they’re not putting up with what we put up with all these years.

         

        TDB: COVID clearly sped up change on the retail side, didn’t it?

        Zuchowski: You have all the overlying conditions (for change) and what happened is that dealers reported record profits in the midst of the pandemic. They went through the process, line by line, and they renegotiated costs. They consolidated jobs and responsibilities. They cut back on inventory. They flattened and streamlined the organization. That happens in a downturn. But what surprised everybody was that consumers really turned out to like shopping at home, having a single point of contact and contactless delivery and concierge services, all the things that came out of necessity.

        Dealers saw marketing and inventory costs come down and that let them have very targeted, customized marketing campaigns rather than broad-based campaigns that are extremely expensive and pressure margins and do bad things. They went from a supply-side model to a demand-side model. And they realized that though volume went down, margins came back up. People are willing to pay more for that personal touch, even as expenses go down. Dealers have done this before when the economy goes down. The difference is that this time, with COVID, customers responded very favorably.

        More and more dealers are bolstering their online sales resources as demand rises.

         

        TDB: So, will the car business go the way of Amazon, with everything done online?

        Zuchowski: Digital retailing doesn’t mean 100% of the people will do 100% of the transaction online. It means we need to create a parallel path, replicating every sales process that can be done in the store and make it available online. Then you let the consumer decide how much to do in the store and how much to do online. I don’t think 100% will want to do everything online but I think it’ll be the distinct majority in the not-too-distant future. I’m talking three to five years.

        Other changes in retailing

        TDB: It’s not just the pandemic forcing change in automotive retailing, though. What about the coming age of the electric vehicle? We’ve seen Volvo, for one, say they expect to sell all their future battery-electric cars entirely online.

        Zuchowski: The traditional retail model has been push, rather than pull. It’s supply, rather than demand oriented. In other industries, it’s completely the opposite. Traditional dealers have a lot of staff. They’re top heavy, with an average of two managers for every sales person. It’s a structure that’s very expensive and no longer what the consumer wants. They want a single point of contact. They don’t want to go into a store and deal with a salesperson, then negotiate with somebody else and then deal with somebody handling (finance and insurance). They want someone who can handle things, soup to nuts.

         

        TDB: They also want a set, single price, don’t they?

        Nissan@Home now allows consumers to handle the entire purchase of a new vehicle online.

        Zuchowski: I think “one price” is a misnomer but we certainly have to decrease the variability between transaction prices. Customers know from the internet what a dealer paid for the vehicle so there isn’t nearly as much dependence on negotiations.

        The dealership of the future

        TDB: What does this mean in terms of the number of dealerships going forward and the number of employees?

        Zuchowski: A great question. I firmly believe the 30% of dealers who don’t get it and are slow to react will go out of business or get consolidated. The new number will be 70% of what we have today.

        When I started out in 1980 there might have been 24,000, maybe 25,000 dealers and now there’s 17,000. (Long term) it’s probably closer to 12,000. You’ll have dealers controlling entire market areas with one central facility and maybe inventory in a storage area, service in a commercial area and maybe a few boutique-style showrooms in high-traffic areas. You’ll have fewer stores with smaller inventory, fewer service bays. The stores will look different and they’ll go to different locations for different functions. There’ll be fewer individual owners and more dealer groups owning a bunch of stores.

         

        TDB: Will things be different for those dealers who remain?

        Volvo online buying app
        All pure electric Volvo models to be available online only

        Zuchowski: There’s always going to be an important role for the dealer in this country. But that role will change. Dealerships essentially will turn into delivery and service centers. I would be very reluctant to make huge investments if I were a dealer, say, for a new, $5 million facility. The way a dealer will make money down the road will change. And there will different ways to get revenue. But even with volumes going down, margins could go up. They won’t have to carry 1,000 cars in stock and spend $100,000 a month on advertising, for one thing.

         

        TDB: Let’s wrap up by talking used versus new.

        Zuchowski: It’s a mistake not to look at the business holistically. Every year about 45 million to 50 million vehicles are being sold and when new cars are doing well used cars are off. And when used cars are doing well new car sales are off.

        We’ve had an affordability problem for some time but there’s always been a way around it. We’ve now stretched out payments as far as you can go. And we’ve played with rates, now with the lowest interest rates on record. How many people can afford a $40,000 vehicle, especially if your interest rates aren’t at zero percent? Now, all the new technology isn’t free and there are all the regulations to comply with, and you have to add all that to the price of a vehicle. But we’re running out of ways to manage payments. I think used will gain more steam because new vehicle affordability will become a bigger and bigger problem as interest rates go up.

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