Wendy Swaine, head of retail at Solera cap hpi, explores how new ways of working with industry partners can help to unlock innovation and efficiency.
In the increasingly data-driven world of car retailing, accessing and utilising quality data is critical for making informed decisions, optimising operations, and improving customer experiences.
Traditionally, data has been offered through fixed licensing agreements, but a shared risk model can present a compelling alternative. For UK car retailers, this approach can help to align interests, reduce costs, and foster collaboration, unlocking significant advantages in a competitive marketplace.
In a shared risk model, data providers and dealers collaborate, sharing the risks and rewards of using the data. Instead of paying a fixed fee upfront, retailers’ payments are linked to the value derived from the data, ensuring both parties are invested in achieving successful outcomes.
A shared risk model ensures that both data providers and retailers have a vested interest in success. Retailers benefit from tailored data solutions that focus on measurable outcomes, while providers are motivated to deliver high-quality, relevant data. The alignment fosters trust and encourages collaboration, ensuring that both parties are working toward a common goal.
By tying compensation to performance, data providers have the potential to earn more than they would through a traditional licensing model. This incentivises them to continually improve their offerings, ensuring that the data is accurate and actionable. For retailers, this approach means that costs are directly proportional to the value derived, offering better ROI.
A shared risk model can also lower the cost of entry, making it easier for retailers to access valuable insights and adopt innovative data solutions without straining their finances. Unlike fixed licensing fees, shared risk models offer dynamic pricing that reflects the actual value generated by the data. Flexibility allows adjustments based on performance, ensuring that retailers pay for the outcomes achieved rather than a pre-determined fee.
With compensation tied to performance, data providers have a direct incentive to deliver high-quality, relevant data. Ensuring retailers receive actionable insights that drive measurable improvements, whether in inventory management, customer targeting, or operational efficiency.
Sharing risks and rewards encourages both parties to think creatively about how data can be used. Retailers and providers are incentivised to innovate by exploring new applications, developing new solutions, and extracting maximum value from the data.
A spirit of innovation is particularly important in a rapidly evolving industry like automotive retail. A shared risk model fosters deeper collaboration between data providers and retailers. Instead of a transactional relationship, both parties become partners, working together to achieve shared success.
Data collaboration is becoming increasingly important in today’s interconnected business environment. Effective data collaboration involves securely sharing insights while maintaining compliance with privacy regulations and safeguarding sensitive information. The approach enables retailers to combine their data with external datasets, unlocking richer insights and more accurate decision-making.
In a shared risk model, collaboration is taken a step further. Both parties are incentivised to co-create value, whether through joint innovation, custom solutions, or shared expertise. For car retailers, this means access to more relevant data and better strategies for tackling industry challenges, such as changing consumer behaviours, the rise of electric vehicles, and supply chain constraints.
Structuring a shared risk agreement can be more complex than a traditional licensing model. Clear communication and robust agreements are essential to avoid misunderstandings. For these reasons, retailers should be clear about their goals and circumstances before entering into a shared risk agreement.
The automotive retail sector is under pressure to adapt to rapid technological advancements and evolving consumer demands. In this environment, flexibility and innovation are critical. For UK car retailers, the shared risk approach is particularly compelling. Reducing upfront costs, aligning interests, and fostering stronger partnerships offers a practical way to embrace data-driven decision-making without overextending resources. Moreover, it encourages a culture of innovation, helping retailers navigate challenges and seize opportunities in a dynamic industry.
The shared risk model represents a paradigm shift in how data is shared and utilised, offering significant benefits for UK car retailers. By aligning interests, reducing barriers to entry, and fostering collaboration, it empowers retailers to unlock the full potential of data. In an industry where staying ahead requires agility and innovation, the shared risk model provides a powerful tool to drive growth and resilience.
As the automotive retail landscape continues to evolve, embracing new ways to work with industry partners could be the key to transforming challenges into opportunities and securing long-term success.
