Are online sales the future of automotive retail?
13 March 2020
13 March 2020
The internet has forever changed the way people purchase goods and services. From food to footwear and tech to toys, a shopper can buy almost anything online. So how is the automotive industry evolving to meet the needs of this new digital consumer? Daily Brief journalist Tom Geggus checks out what is on offer.
There’s no doubt about it. The automotive industry is going digital. With increasing investments in the automation, electrification and digitalisation of vehicles, manufacturers are gearing up for a more connected world. This includes adapting to online retail trends. But how automakers decide to use the internet to sell their products should not just start and end at the checkout.
Five steps of selling
Speaking with Autovista Group, Richard Lim, CEO of Retail Economics, explained that shopping online needs to be understood as more than just an internet-enabled transaction. The customer journey has five stages, starting with product awareness, moving onto research and consideration, then purchase, followed by fulfilment and finally service support and returns.
Richard pointed out that the first two stages, awareness and research, have seen some of the greatest digital disruptions. With customers now heading to manufacturers’ websites to learn more about the latest models and even digitally building their dream car, people are becoming more engaged and building stronger relationships with their chosen brands.
′With the big-ticket purchases like cars, the customer journey is much much longer and much more considered. And so before you get to the point of purchase, people spend a lot of time, effort and consideration to make sure that they are happy with their purchase. And digital now plays a really key role in that’, Richard said.
These levels of research and interaction then go on to open the door to direct-to-consumer retailing. This movement away from manufactures as wholesalers using resellers to move goods is being felt in the automotive industry. Using their online platforms, automakers are now able to sell straight to the consumer.
Mustang Mach-E online orders
Joining the likes of Tesla and VW, Ford is riding the direct-to-consumer wave. Electrive.com reported that the Mustang Mach-E has already received over 40,000 pre-orders. In Southern California, about 5% of consumers went to a dealership to make their reservation, according to CarsDirect. The reported figures reveal that only 92 out of 1,712 reservations in the region were made ′in-dealer’.
Speaking with Autovista Group, John Gardiner, Executive director of communications and PA, for Ford of Britain and Ireland, confirmed the same online ordering trend could be expected in the EU and UK, as the Mach-E is being sold using a new online purchasing process. The manufacturer recognises that automotive retailing is pivoting to new trends like electrification, connectivity and online sales. The expectation is that these trends will become even more significant as times moves on.
′For example, prior to the internet, customers made around seven visits to dealers before a purchasing decision. This had fallen to four visits by 2016, and today customers make 1.2 dealer visits before making a purchasing decision’, the spokesperson explained.
′The expectation is this figure will fall even further, possibly to even less than one visit to a dealer by 2025, given the expected growth in online sales’. With these projections, it might seem unsurprising that Ford recently confirmed it would be closing almost half of its UK dealership network. But this doesn’t necessarily mean online sales will be the end of the forecourt.
Research carried out last year by Auto Trader found that 74% of respondents wouldn’t buy a car without speaking to a retailer. A human element continues to be important in sales, 34% of people who bought a new car said speaking with a helpful retailer was the biggest accelerator to purchase.
′Crucially, it’s the nature and length of the appointments that will change thanks to the seamless online experience, so each customer service advisor will be able to sell more cars and recognise greater revenue’, Auto Trader’s report stated.
One year on
Almost a year on from launching their online car sales service, Volvo is reportedly pleased with the results. Their system is more retailer-centric, with customers required to pick a dealer online and accept their offer on finance packages. This puts a greater emphasis on Volvo’s online store as a research tool rather than a one-stop-shop.
′The platform has generated significant interest, particularly with younger buyers and those new to Volvo’, a Volvo Car UK spokesperson told Autovista Group. The average age of the manufacturer’s online customer is 15 years younger than the average age of a new Volvo buyer, which is mid-fifties as of 2019.
Volvo’s online service was developed to offer different car purchasing options, not replace the need for retailers, the spokesperson confirmed. The platform is therefore capable of working in conjunction with dealerships, not over the top of them. ′When using the platform customers can either complete the entire purchase online or complete part of the purchase online and visit their local retailer at any point’, Volvo said.
The next development stage for Volvo’s online system looks to be increased flexibility. This means a customer’s purchasing journey could start in-store, with a retailer, but then be completed at home. This proposal has the potential to take the stress out of visiting car dealerships. Customers would be able to see a vehicle in person, and get advice from a retailer, but not feel obligated or pressured by their environment.
While automakers continue down different roads to making online sales, the internet clearly provides expansive retail opportunities. How manufacturers decide to use this new and developing tool will continue to dictate their success in an increasingly digital world.