Blog post by Stephane Ferri, flexdrive Senior Vice President, strategic accounts
2018 showed an explosion of car subscription offerings from new market entrants, private labels by specific dealerships and OEMs. Maybe we can call it the year of subscription, even though subscription really came on the scene in 2014. What it says to me is that this isn’t a fad, but instead a growing market that is gaining traction among consumers and dealerships. It also, however, revealed the demise of some subscription programs, and is likely just the beginning of that trend. Some will survive and some won’t.
While programs like BOOK from Cadillac shut down, we’ll also likely see some dealerships that pursue subscription as an offering fall to the same fate. My point?
Not all dealerships are ready or equipped for subscription, and here’s why.
- Organizational commitment required. A top-down or bottom-up approach to integrating subscription as an offering in your dealership is potentially fraught with risk. I’ve seen many dealerships try to take either approach, but it makes the path to building a subscription program more challenging than it needs to be. Having champions at the leadership, operational and sales levels who are aligned and collaborating from idea through day-to-day mechanics makes all the difference. AmeriDrive from Florida Fine Cars deserves a big shout out—from the pitch process through today which is quickly approaching a year of running subscription—this team went after subscription with full organizational alignment across every department. Their tenacity paid off as they are investing in other markets outside of Florida to grow their subscription program!
- Profitability takes work. So – let me see a raise of hands of who wants to implement a subscription program because it’s cool and consumers will like it, but it may not be profitable? Yep, no hands raised… It’s like everything you’ve ever read, start with the end in mind first. A subscription program should be a profitable program that also happens to engage consumers and help you prepare for the next evolution of dealership in a mobility era. Profitability doesn’t just happen. We have learned three major items that need to be in place to mitigate risk. With subscription – it requires a mix of things from running the right cars in your market, targeting the right consumers and to having the business intelligence needed to manage your subscription fleet. If you launch a program and don’t have a partner who can address these areas and an internal team that can respond to the data and suggestions, I suggest you reconsider as it may not be for you…
- It’s a journey, not a sprint. Subscription is new and we are all on this journey together. While we know a ton at flexdrive because of our tenure doing this and even owning our own subscription fleet (over 750 units in 5 markets) in the early days, we also know trial, error and learning are part of the process. It’s a new path and we’re paving it as we go. Close collaboration, partnership and regular evaluation are part of the journey to figuring this out and doing it right. If you expect to launch a program and have 100 subscribers in your first couple months, think again. Slow, steady and applying process to minimize exposure while you learn is how you should be thinking about subscription.
- Applying learnings is equally important. Take our partner eCarOne in Dallas. They launched with a bunch of new, high end cars. Cool, right? But the Dallas market was looking for something different. Data and insights helped us define what a better mix of cars would be for the program and now the subscriber numbers continue to grow exponentially for eCarOne. Walk before you run…
I don’t say any of this to scare you off, but it’s the exact reason we have intentionally scaled our business and fought the urge to sprint and sign up every possible dealership in the country. When we speak to potential dealer partners, we carefully consider their intent for launching subscription, their readiness for it, the way they plan to staff it and their overall progressiveness in thinking…and expectation that this is a journey and not a sprint.
I welcome the chance to chat with you about my observations and to put you in touch with some incredibly smart dealerships that are doing subscription well. I urge you to read this article just published by the Cox Automotive Research Team, “Cox Automotive Evolution of Mobility Study.” Cox predicts that as the future is progressively coming, standing up a new vertical with less margin compression and cost to get consumers should be on your roadmap.
However, I also challenge you to really consider if you’re ready for subscription because some dealerships simply aren’t yet. If you’re at NADA and think you’re primed for jumping in, give me a shout and we’ll find some time – email@example.com.