Disintermediation - upcoming trend driven by COVID-19, Automotive included!
Disintermediation, as a removal of intermediaries in the supply chain, is part of business evolution influenced by new technologies and their capabilities. Many businesses use new methods to reach their customer effectively, with less intermediaries and interruptions in supply chain flow. The reason for disintermediation is to drop the cost of customers' service directly and manage information flow more carefully between the customer and the provider. Elimination in distribution channel is also closely associated with the idea of just-in-time manufacturing, where the removal of the need for inventory removes one function of an intermediary. The higher profitability of participants and their quantity in the distribution channel is the reason to reorganize the supply chain and make it more effective by cutting the middleman, thus the sustainability of profit margins is capable in the pressure-escalated environment by competitors.
Traditional distribution system affected by COVID-19 is under the pressure to reorganize its supply chain to be more effective, so revolution in distribution strategy is a logical solution. The primary function of distribution channel is to bridge the production with consumption. Many traditional distribution channels are re-evaluated and rebuilt to serve the customers directly via virtual interface. Versions of distribution chains, where the wholesaler and the retailer are in the middle, seem to be an anachronism. This set up was made to serve all the customers with no relevance to distance and other barriers.
Automotive and vehicle distribution
Since the beginning, the automotive distribution was mainly about indirect distribution format. Vehicles have been sold and serviced by franchised dealer networks. Automotive distribution is already changing due to the Internet sales capabilities and virtual communication channels. Technical factors have fundamental impact on the automotive industry and the distribution. The life cycle of a vehicle is shorter, and innovation cycle is faster. Additionally, the modularity, platforms and system usage has changed in automotive business in general. The cross-concern policy of modularization and its technical solution impacts brand positioning, pricing, and the quality of service. The e-Commerce with its use of new e-Marketing methods is the biggest technological trend, not just in automotive industry, but also in general worldwide cross industries as well. Technology allows manufacturers to communicate with customer directly and use interactive approaches to improve mutual relationship.
To make shopping decision, car shoppers depend intensively on brand web sites. It makes great sense for companies to put as much effort to develop effective, and interactive communication platforms, just as they would with traditional methods of sales and marketing, using a brick and mortar dealer network managed by a local importer. The challenge of these days is to better integrate ON-LINE to OFF-LINE sales processes. The goal is to provide transition from ON-LINE based data collection of information to complete purchase at a brick and mortar place, with an ambition to accomplish full service via full-integrated ON-LINE application, involving all important and necessary functionalities. Functional and interactive ON-LINE digital marketing is a must.
The pressure of customer to decrease price pushes manufacturers to use other building blocks of the supply chain, which are the ON-LINE, e-Commerce and e-Business models. They utilize the changes of market demand and notify all the divisions such as marketing, finance, manufacturing, logistics and other departments about those expected demand changes. These models are used for information sharing, marketing and aftersales purposes. Manufacturers already promote ON-LINE using social media to connect with future and present customers and connect work related information to share with other parts of the company.
The ON-LINE environment is stronger than ever, people in quarantine get use to ON-LINE faster than it was expected, even the older generations. For sure, it is beneficial for both sides of relationship, for consumers as well as for manufacturers and their suppliers. It provides more options, more possibilities for reaching required information immediately by collecting BIG DATA. In addition, it is used to review offers from every producer and identify individual needs in order to reach cost and value savings of a purchase. The online environment improves customer satisfaction with great experience and pleasure during the process of a purchase.
Some customers are not ready and maybe never will be, ready and happy with the upcoming technology solutions, thus there must be planned process of transition from traditional sales procedures to new high-tech solutions. Due to generation of web-oriented customers, having ON-LINE skills and benefiting through new technology smart-devices, automotive sector must reflect to fulfill the needs of this upcoming generation. Today the Internet plays important role at the searching phase rather than at the purchase stage. It is predictable that with every new generation grown out in everyday touch with virtual interface, there will be a need to customize the whole system according to this demanding generation. And by the way, worldwide it is the biggest generation ever! The fundamental question is, if the position of a vehicle remains the as a solution for need of mobility the same, as well as a need of vehicle for a value in general.
Outlook
Disintermediation as a world megatrend is an inevitable fact. Many industries incline to this philosophical change of distribution. The e-commerce and e-marketing tools serve customers effectively and provide an outstanding service. Models of e-commerce distribution systems reflect to customers' needs and provide options for more effective distribution systems with the supply chain as a part of it. ON-LINE supports new methods and confronts old-fashioned systems. The old systems are pressured to change, due to the importance of efficiency and price sensitivity caused by the on-line transparency.
Automotive industry significantly lags other industries in the use of digital media tools and other e-marketing methods enormous pressure to manufacturers to rethink their strategies for brighter future. It is predictable that this change of distribution model will come with the exchange of generation. The generation of customers with preferences exclusively to ON-LINE shopping is still not fully economically active but post-pandemic market yields traditional customers with newly acquired on-line skills. Within the period of few years global market will change, therefore manufactures must rebuild their distribution system accordingly, to meet the expected need for the direct model of a vehicle distribution affected by trend of disintermediation.
