Automotive Digital Retailing - Yesterday a Concept, Today a Reality

Greg Kelly

Automotive digital retailing is not just a concept; it is a necessary reality. Given the COVID-19 crisis and its lasting impact, dealers must pivot to survive. Consumer feedback confirms that buying cars online is the “new normal.” The pandemic has also certainly impacted the growth of Carvana and Vroom. Dealers must be ready to defend their share of the used vehicle market.

Amazon customers have embraced the experience and transformation of not only shopping online but also completing their transactions and taking delivery of their purchases. No lines. No hassles. No heavy sales pressures. This transformation has been hyper-accelerated with the onset of the pandemic. One only needs to go to Walmart or Target to find self-service checkout kiosks and parking lots with drive-up lanes for items pre-ordered online.

Digital retailing is the new business reality of meeting consumer expectations. The auto industry is now moving toward providing a revolutionary, easy-to-navigate process that takes consumers from the idea of “Hey, I want to buy a vehicle in less than five hours in a showroom and not take the unnecessary risk of infection” to “Hooray, I just bought a car online!”

The world, as we see it before our very eyes, has changed. CarMax figured this out 25 years ago. It recognized that there was a constituent base of consumers who were frustrated and fed up with the traditional dealership buying experience. Two years ago, CarMax exceeded 1 million sales in a calendar year. It leveraged a niche that franchised dealers had ignored.

What’s occurred in the last 25 years is that the constituent group of people that CarMax originally targeted — people who are negotiation averse, who say “my time is too valuable” or “I buy everything with two thumbs on my phone” — has exploded in size and importance. The critical mass of this consumer group is too large to ignore any longer.

The “fear” many dealers face on this new horizon stems primarily from their expectations. Many see digital retailing as a threat to their very existence. Actually, the opposite is true. The savvy and visionary dealers — and great businesspeople in general — see an opportunity and exploit it in their markets to augment their growth and profitability. Now, consumers demand an online option.

Just one year ago, many thought that automotive digital retailing would never be the majority of a dealer’s sales volume, but today this idea is not far from reality. Early adopters now see digital retailing as the opportunity for what it is: a chance to engage with a new customer base that they have never interacted with before. The chance to grow their businesses with a new subset of consumers yearning for a self-directed, easier and less time-consuming way to buy a car. And, by the way, dealers make higher profits on this constituent group.

Many dealers think they are already in the digital-retailing marketplace. But they are mistaken. What is digital retailing?

Here is what it is not:

  • It is not just having a dealership website and listing inventory.
  • It is not merely a lead generator.
  • It is not to provide a trade-in “ballpark” value.
  • It is not just offering an app, in-store kiosk or touch screen tool to see which vehicles are available.
  • It is not letting customers start the car-buying process online and not allowing them to finish online. It is not gaining a loan pre-approval or simply setting the stage for financing to be arranged at the store.

Intuitive, consumer-friendly technology facilitates the entire sale: from identifying the vehicle, setting a price, locking in a firm trade-in value, digitally auto-decisioning loan approvals and facilitating an Amazon-like checkout to taking possession of the new car.

Some dealers are also using digital-retailing apps in their showrooms, walking customers step by step through a very transparent process. Every dealership in America could use additional salespeople.

What if dealer advertising made a shift and promoted the idea of consumers going to their websites and just buying their next rides online versus the showroom? Or, when we get back to normal, the idea of allowing a self-guided process in the showroom and giving that customer a chance to begin the purchase process at a desk with a monitor or a kiosk?

As forward-thinking dealers embrace the “new normal” world we live in, they will foster new relationships with customers they likely would never have met. The relationships will begin with letting a customer take ownership of the process and continue through repeat and referral business in the future. Dealerships that truly engage in digital retailing will see CSI scores soar, lead-closing rates grow and profitability dramatically rise.