Blockchain technology really could be the next big thing for dealers – here’s why
Is it me, or does it seem like there’s an exciting new technology solution for dealers almost every day? A new way to sell cars online, another approach for menu selling, a better way to desk a deal…always something new, and always something that’s supposed to be better than the way retail has functioned for the last 100 years.
It can be hard to distinguish between the hype and reality.
Interestingly, something that’s making a lot of noise right now (and might appear to be blown out of proportion) might be one of the real innovations to make a difference: blockchain technology. You might be surprised to learn it’s not new: blockchain is the real gold behind Bitcoin, because it’s the technology that allows the currency exchange to work. And it quite possibly could be the answer to the question everyone’s asking: How can dealerships run profitably in a sharing, on-demand and subscription-style economy?
Blockchain technology is a practical, surprisingly straightforward answer that’s tailor-made for automotive retail.
Wait. What the heck is it?
Search “what is blockchain technology?” and you’re sure to find a few very dense definitions (seemingly as complicated as unearthing the actual valuation of a Bitcoin itself). So, let’s simplify it.
First, blockchain technology is the way Bitcoin actually creates and stores its currency valuation. Second, and more relevant, it’s a sharing-based ledger management technology. Think Google Docs, but you can’t change someone’s document or input; you can only add your own. If there’s a mistake, a new record must be created.
By allowing digital information to be distributed but not copied, blockchain technology opens the door to the secure sharing of data on a decentralized platform, creating transparency, eliminating unnecessary steps, reducing costs, and enabling things like micro payments for limited services. It’s very secure, scalable and could be massively disruptive to the entire industry.
Disruptive…in a good way
While we in the automotive space often get a reputation for being slow to adopt new technology, with blockchain, it’s different: automakers and finance companies are currently working with tech companies, forming partnerships, and investigating how they can use blockchain technology to build efficiencies and speed up processes – all in an incredibly secure environment.
Toyota Financial Services, for example, joined with the R3 Consortium, a collaboration of over fifty big banks and corporations, to explore distributed ledgers and automotive financial services. Why? Because blockchain can enable the growing “on-demand” economy of services and transportation. Think: on-demand cars, insurance policies for limited use, subscription services … blockchain also enables smart contracts, which in turn powers up additional revenue streams.
Revenue opportunities are dealership opportunities
Unlike automakers, retail-side applications aren’t as fully developed, but there appear to be three core areas of opportunity: operational efficiencies, such as the streamlining of documentation like registration and title, service and driving history, as well as finance workflows, like payment services and contract management – including lease payments. For example, a blockchain could enable on-demand access to owner driving history and behavior, making service upsells easier and more powerful. That type of data might also come in handy when the time comes to assign a trade-in value as well, not to mention the value of more accurate residual values.
There’s also an opportunity to leverage blockchain in the pursuit of additional revenue streams such as car sharing, dealer-side subscription services, service scheduling and payment, and more. Consider the ability to timeshare a roadster for weekend getaways, trucks for home improvement, or more. Blockchain would enable the transference of data between consumer, dealer, and any third-party provider, and do so with little cost via a single and secure source of data collection and transference.
The problem with opportunities
The problem? It takes change to make it happen, and that can be painful. But as the automotive industry – and especially the retail side of it – goes through its ongoing transformation, there should always be room for change that helps dealers expand their business, and do their work more efficiently. Ultimately, blockchain just may be the type of technology that can make it happen.