In the 4 months since the COVID-19 induced lockdown began, hundreds, if not thousands of articles have been written, debating the future of car buying here in the UK and elsewhere. A significant proportion of those articles have discussed the tilt towards digital channels from retailers and manufacturers alike, with an overwhelming majority concluding that the digital innovation that has been needed for so long in the automotive sector has been accelerated by the crisis.
You’ll get no argument from us at Atonic4 that there has indeed been a hugely positive change in the discussion around digital innovation and future business models. But there is one subject that seems to be almost always absent from the discussion when it comes to digitisation and future sales strategy. And that subject has sparked some debate amongst us recently (as you’ll see below)… what about fleet?
Despite representing 50% or more of some brands total annual volume in the UK, the potential digitisation of fleet sales seems to have struggled to gather many column inches since lockdown began. We’ve got some different viewpoints around why that may be the case, whether fleet sales should be included in these discussions and if so, what are the customer challenges that could be potentially solved?
Fleet business comprises:
- OEM’s own company car and loan vehicles
- Short term rental companies
- Large leasing companies
- Customers that use the vehicles, some of whom finance via a leasing company
Company car purchases are not sales in the usual sense, and short-term rental companies buy in volume, on good terms, often with a buy back option. What we are talking about here are the third and fourth categories.
I spent 16 years working for Lex plc which was a group of companies that included the UK’s biggest contract hirers of cars, trucks and forklifts. In various roles, I was a customer of and a supplier to Lex Autolease (as it is now). Since then, I’ve worked on many fleet related projects so have a reasonable handle on the challenges faced in that sector.
And when we started talking about ‘not forgetting fleet’, I struggled to see what problem an omni-channel approach would solve. You see, in my experience, the leasing companies that buy most of the volume are sophisticated businesses in a technologically proficient sector.
When I was with Lex Retail Group in the late nineties, I remember working with the lease companies and other dealer groups to develop the Translease process (now Epyx 1Link). This automated service transactions across the industry for most lease companies and most dealers.
I saw first hand how Lex developed clever systems to capture and use vehicle and customer data, to enable them to provide a great service to their customers. I saw how they were able to provide a one stop shop for customers who wanted a multi-brand fleet. I saw how they took care of servicing, breakdowns and tyre replacements.
The leasing companies have consolidated into a big five or six. They run fleets in the hundreds of thousands so are very important customers to the OEMs so can command the best terms. In the UK, most fleet business is done via the agency model where the OEM sells vehicles direct to its customers and retailers hand them over. In this case, the buying process is usually automated due to the volume purchased.
Obviously, the leasing companies are not the drivers of the vehicles. They provide their customers with their company car and van fleets and are usually guard this relationship and the associated data. It will, therefore, be tricky for an OEM ecommerce team to access the in-service data they would have in the retail channel.
Leasing companies are often either owned by banks or they have access to very low interest capital. They buy vehicles outright so there is no finance component for the manufacturer. The market is also served by brokers who service smaller fleets and they also have access to non-OEM finance.
A big majority of fleet volume is company car, short term rental and lease company. Maybe the opportunity for the omni-channel direct sales model we advocate lies with the smaller fleets. Most OEMs provide contract hire products and maybe a new approach might facilitate a greater share of that market.
Also, the advent of the ‘connected car’ provides vehicle usage data. OEMs have started to introduce ‘functions on demand’ which means drivers can update the specification of their car digitally. This will enable them to access more customer data.
Finally, particularly in the UK, the Government regularly amends the tax rules for company cars and there has been a drift into car allowances. This effectively moves the ‘fleet driver’ into the retail customer category. Having been used to the convenience of the lease company offer, maybe there is a market there for the OEM.
During my ten years working at Volkswagen Group, if I had a pound for every time I was reminded by a Sales Director ‘don’t forget fleet’ I would be a rich man. And quite right too! Despite the huge volumes and importance for the brands, very often when tackling many strategic objectives, we found ourselves gravitating towards the retail customer perspective before discussing fleet. Since we launched Atonic4, the ‘what about fleet’ question is something I’ve found myself raising, rather than being told!
Digital solutions are by definition designed to solve a customer problem. I think you’d have to be particularly naïve to think that the same digital sales process that manufacturers and retailers have put in place of late would automatically work for the whole fleet sales market. They won’t, and as Stuart mentions, in some cases, there may not be a customer challenge to solve.
However, if I look towards the small business end of the market, I see an opportunity to solve a customer challenge that is similar to retail. Perhaps a small business owner is buying one or two vehicles for their business. A small business owner that may feel reluctant to visit a retailer, or who may like to carry out all or part of the journey directly online with their manufacturer of choice. Why shouldn’t they be able to do that? In a market where many of these sales are already conducted via a fleet agency agreement with the manufacturer, surely offering small business customers the choice to buy directly online from the manufacturer, fulfilled by the dealer and delivered to their home would potentially solve a customer problem for some?
I do completely accept that online direct fleet sales is a complex subject, but I don’t accept that it should have had as little airtime as it’s had during this time of heightened automotive e-commerce discussion. I think it’s time that changed.
In my opinion, the world has moved on. Not everyone wants to visit, speak to, or be visited by, their fleet company of choice; regardless of the size of the organisation. It’s about choice. In general, we are time poor nowadays (I am, for sure!), and that includes businesses too.
As a small business owner myself, if I wanted to organise some fleet vehicles for my company, I would not want to visit a Retailer, I would not want to visit a fleet company, and I wouldn’t even want to speak to someone on the phone or via Zoom/Teams etc.
I’m not being anti-social, I’m being practical! I’d like to go online, select my vehicles and complete the buying process. The same would be true if I was a bigger organisation, and in fact, the need more choice when it comes to organising my fleet would probably be even greater as I’d no doubt be even busier.
So, I agree with Steve and all those Sales Directors he worked with; please don’t forget fleet!
Well you’ve seen what we think, how about you? Do you think there is an opportunity for the fleet market and manufacturers to devote more time to digital solutions? Should we write it off? Is there no problem to solve? Or is it too difficult? What do you think?