Third-Party or In-House? Why Launching Your Own Car Subscription Service Holds the Key

Discover the limitations of third-party intermediaries in car subscriptions and why launching under your own brand offers strategic advantages, amplified subscriber engagement, and growth potential.

Andrew Mortimer

Executive Chairman
 @ Loopit.co

Published on 

July 24, 2023

  ·  

Last updated on 

July 24, 2023

Key Takeaways

The auto industry stands at a transformative crossroads with the largely untapped car subscription market offering huge potential. However, the crucial factor of supply channels significantly influences this market. For newcomers eager to dive into the arena, it's increasingly common to resort to third-party subscription intermediaries. However, this approach, while seemingly risk-free, significantly reduces long-term potential and fails to fully harness the power of the car subscription model.

The Misleading Allure of Third-Party Subscription Intermediaries in the Car Subscription Market

As the car subscription market evolves, budding entrants are finding a seemingly attractive option in third-party subscription intermediaries. These platforms may seem appealing for those wishing to gauge market demand, due to lower upfront investments and established customer bases.

However, such an approach merely reduces the financial risk and diverts focus away from critical aspects of the business model. Although this route seems to provide a cost-effective springboard, it ultimately hinders newcomers from fully embracing the car subscription market.

Third Party Intermediaries: A Convenient Cop-out for Traditional Players

Traditional automotive businesses are often tempted by the seemingly easy route of third-party intermediaries. Instead of focusing on building a robust online presence and driving innovative marketing efforts, these companies settle for a secondary role, simply supplying vehicles and passively testing the market.

At the core of these drawbacks is a lack of real commitment to the subscription model. Businesses merely 'dipping their toes' in the water by placing a few cars on an intermediary platform often end up limiting their full potential in this new market. Overly focused on the traditional business model of used car sales, servicing, and parts, these incumbents particularly dealers may miss out on embracing alternative models that are increasingly relevant in the face of looming industry changes in the UK.

Embracing third-party intermediaries might seem like a smooth shortcut to launching a car subscription service, but it comes with limitations worth noting. Here are some potential drawbacks that should give businesses pause before opting for this seemingly easy route:

  1. Limited Margins: Operating through a third party often leads to lower margins. As you're primarily supplying vehicles, you're only profiting from the subscription fee and potential residuals, which could limit overall profitability.
  2. Lack of Brand Equity: When you're simply supplying vehicles, you don't establish a direct relationship with consumers. This lack of direct interaction could result in missed opportunities to build brand equity and loyalty.
  3. Absence of Long-Term Value Creation: In the long run, the intermediary model may fail to create substantial business value. The absence of a direct customer relationship also means missed opportunities to build brand equity and loyalty. This approach may also give a false representation of the subscription model's potential, suggesting lower profitability than might be the case.
  4. Limited Upselling and Cross-selling Opportunities: With third-party intermediaries, businesses primarily supply vehicles, restricting their ability to upsell or cross-sell additional services or products directly to the customer.

By merely 'dipping their toes', businesses often fail to fully seize the potential of this burgeoning market. Moreover, an excessive focus on traditional car sales models may prevent the adoption of evolving business models.

Looking at successful market players, it's evident that owning customer relationships, managing a fleet, and leveraging revenue streams result in a more profitable approach. These companies have built multi million-pound businesses by fully embracing the subscription model, indicating that third-party intermediaries may not be the optimal path for long-term success in the car subscription market. Companies that simply opt for the 'easy' route risk becoming bystanders in the future of automotive commerce.

By opting for the 'easy' route of third party intermediaries, businesses risk becoming mere passengers on the journey to the future of automotive commerce. True growth and sustainability lie in fully embracing and investing in the potential of car subscription services, rather than merely testing the waters.

The Road Ahead: Unlocking the Complete Potential of Car Subscription with Your Own Brand

Choosing to launch a car subscription service under your own brand allows businesses to reap numerous benefits often overlooked when using third-party intermediaries. By directly controlling the consumer relationship, companies can unlock various opportunities for a more comprehensive and engaging customer offering. This approach allows businesses to craft an ecosystem that cultivates greater subscriber engagement, an attribute often missing when routed through a third-party intermediary.

In this branded ecosystem, each interaction carries the brand's narrative, amplifying its presence in the subscribers' journey. When it's your brand on the line, every servicing brings a direct communication opportunity. There's space to sell, to discuss, to engage, and even to upsell, a chance that often goes unnoticed in third-party arrangements. In fact,  studies show that up to 40% of subscribers may end up buying the vehicle they've subscribed to.

The imminent electrification of the automobile industry adds an exciting dimension to this branded ecosystem. As more consumers lean towards electric vehicles (EVs), car subscription providers can partner with third-party EV players to offer subscribers all-inclusive packages. These may cover aspects such as home battery storage, charging cables, and more, ultimately contributing to an enriching EV experience. It’s these comprehensive offerings that really  give motorists a holistic understanding of EV suitability for their lifestyle, aligning perfectly with the objectives of EV subscriptions.

Launching a car subscription service under your brand also paves the way for managing the specifics of vehicle usage, like dealing with excess mileage. This offers a more proactive approach, transforming what could be a negative experience into a potential revenue opportunity. The nature of subscriptions predicates an ongoing relationship with subscribers. Operating under your brand gives your business the lever to harness this by leveraging  various touch points across the subscription journey. Invoices, service reminders, or mileage updates are no longer merely transactional communications. Instead, they become strategic opportunities to enhance brand engagement, strengthening relationships that could lead to upsell or cross-sell possibilities.

Undeniably, initiating a car subscription service under your own brand does demand upfront investment and effort. However, it's crucial to see this as an investment that can yield exponential returns. Momentum is key, and as the service evolves, customers will crave that connection with your brand. The essence of local relationships with dealerships translates into the subscription space as well, especially when complimentary services, like vehicle maintenance and servicing, become part of the subscription package.

It's clear that the benefits of enhanced customer relationships and additional revenue streams make the challenges of setting up a car subscription service under your brand a worthwhile venture. The prospect of creating an engaging, customised, and enriching ecosystem for subscribers is a potent argument for moving beyond the constraints of third-party intermediaries.

Building your Own Branded Car Subscription Service with Loopit

Building your own in-house car subscription service has become a straightforward process with the advent of all-encompassing solutions like Loopit. Gone are the days of struggling with disparate software modules with varying degrees of integration or pouring significant capital into bespoke solutions. As the world's leading platform for car subscription management and billing, Loopit equips businesses with everything they need to create a successful car subscription enterprise.

With Loopit, businesses can launch in mere minutes, not months. The platform allows for immediate plan creation and pricing adjustments to suit specific business needs. Billing frequencies and cycles can be easily set up, along with white-label hosted booking and payment pages, speeding up the launch process significantly.

Beyond setup, Loopit allows your car subscription business to grow on autopilot. Leveraging automated fleet management and billing solutions specifically designed for the automotive industry, Loopit takes the heavy lifting off your shoulders. Already, Loopit powers some of the world's leading car subscription providers, including dealers and original equipment manufacturers (OEMs) who have strategically pivoted towards this new era of automotive retail.

As the automotive retail space undergoes significant change management, traditional players such as dealerships and OEMs must reconsider their short-term tactics and explore the long-term opportunities that launching an in-house subscription service provides. This becomes increasingly important given the competitive landscape, teeming with disruptive technology innovators like emerging EV providers and mobility startups. These new entrants often have an edge due to their innovative and disruptive mindsets, but incumbents hold the advantage of brand trust and established customer relationships.

And with Loopit, this ambitious goal is more achievable than ever. Starting now means gaining first-mover advantages and setting your business on a path to long-term success.

About the author
Andrew is the Executive Chairrman for Loopit UK. An automotive leader, Andrew has delivered transformational technology into the industry for 25 years with clients including Castrol, eBay, Mercedes Benz, bp and Gumtree. He has also won multiple transactions in the M&A space for large dealer groups, OEM’s and established vehicle marketplaces.
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