Lessons We Can Learn From the Failure of Blockbuster

As I’m sure you’ve heard, Blockbuster Video has gone out of business. DISH Network, which owns Blockbuster, officially announced last week that they would be closing all 300 U.S. Stores. There was a time when local video stores were the dominant retail outlets to rent movies from. Then along came the mega-video stores like Hollywood Video and Blockbuster, which slowly but surely forced many mom and pop video stores to close their doors. Then Netflix, RedBox and streaming videos came along. These services had less overhead, were less expensive for consumers and more convenient. Not considering Blockbuster’s subscription program that was similar to Netflix, a rental of a new release cost approximately $5 while the same movie rented from RedBox cost $.99. That’s a significant difference for a consumer and, with over 42,000 kiosks nationwide there were many locations for consumers to patronize.

 

There are some parallels that have been appearing in the automotive service industry. Last week, I wrote an article that illustrated a new app named OpenBay with which consumers have the ability to solicit bids from repair shops. If you search “OpenBay car repair” on Google, the search engine returns over 25,000 results including articles from prominent sources. Another service operating in the San Francisco Bay area, Drop and Go Auto, has been getting rave reviews and seeing a lot of buzz from prominent social media personalities including Jeremiah Owyang who has spoken at automotive conferences and has over 140,000 Twitter followers and similar audiences wherever he is present online. Drop and Go Auto offers door-to-door bumper-to-bumper auto repair for all makes and models, and is endorsed by AAA.

 

While recent auto sales have been increasing, Automotive News recently reported that the North American Auto industry would see a supply chain bottleneck within 5 years due to a lack of tooling capacity. Not only does this effect manufacturers ability to make vehicles, it also effects suppliers ability to make parts. Assuming this prediction comes true, this will affect both the sales and fixed ops departments of dealerships.

 

The combination of these trends and predictions make several key issues stand out to me:

 

  1. Customer experience – Ensuring that you provide your customers with an excellent service experience is more important than ever. Services are popping up everywhere that offer convenience and pricing transparency. If you don’t build a loyal base of customers by focusing on retention, you’re at risk of losing business to independent repair shops.
  2. Convenience – With services and independents continuously shifting more towards consumer convenience, dealerships will need to as well. Convenience doesn’t mean that you need to give rental cars to everyone. I’m referring to having processes and technology in place to ensure an efficient and transparent service experience. Consumers have said that they’re willing to pay more for quality service, but another major consideration for them is convenience. Through effective communication, thorough explanations of recommended service, and through building trust with your customers, you will be able to provide that quality service. This will also make it more convenient for consumers.

 

Video rental stores aren’t going out of business because people don’t want to rent movies. There is still a huge demand for entertainment. What’s happened is that companies have found less expensive ways to deliver this content to consumers, which has led to lower pricing and greater convenience. If the consumer begins to believe that the quality of service at a dealership is the same as that of an independent, pricing will begin to dictate consumer choices when it comes to deciding where to take their vehicle for service. Your fixed ops revenue is your bread and butter. Start making changes and plan how you’re going to protect it. Because there are plenty of challenges coming that seek to take it away.

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Tags: and, auto, automotive, blockbuster, convenience, customer, drop, experience, go, jeremiah, More…loyalty, news, owyang, redbox, retention

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Comment by Richard Holland on November 25, 2013 at 10:26am

I agree, Michael... Thanks for the comment.

Comment by Michael Johnson on November 24, 2013 at 9:52pm

The used car department discovered several years ago the necessity to adapt their pricing model to be more intune with internet pricing as consumers are doing a majority of their vehicle shopping online. Service and parts will also find this a necessity. A few weeks, I took my car to my local Cadillac dealer for a problem I was having. I was told my car needed a front hub assembly. I was quoted $493 for the part and $350 in labor. I went to the parts department and inquired about the part number. Armed with this info, I pulled out my iPhone, opened up my amazon app and discovered I could have that exact same delco part delivered to my house next day for $186. I then called my neighborhood independent and was given a labor quote of $240. That's a $400 savings! I was also quoted $36 to replace a fuse in the under hood fuse panel. I understand the need to cover their overhead and make money, but the average consumer is not going to pay a $400 premium to have the dealer repair their car. If you read any of the online car forums the biggest  joke is how dealer service departments are a rip off. Pricing transparency is the next train coming down the tracks for dealership parts and service departments...

Comment by Pat Kirley on November 17, 2013 at 8:02pm
Very true

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