They say to advance a new theory, one must wait for the old guard to die. I prefer to analyze the data and anticipate trends. When it comes to e-commerce, there is ample credible data warning retailers of the steady increase in online sales, year over year. Markets are shifting as more tech-savvy buyers find innovative buying options. The most significant barrier to buying cars online is not the market but the retailers.
The U.S. Department of Commerce reported that 10% of retail sales occurred online in the first quarter of 2019. Compare that to 2009, when only 4% of sales were online. This steady increase accounts for some $127.3 billion over three months. As online stores, delivery services and Amazon-like companies make digital retailing reliable and convenient, early adopters have fully embraced the new technologies. It’s clear the market and landscape are rapidly evolving. It is anticipated that the figure will grow as high as 40% in the coming decade.
Businesses are figuring out ways to stay competitive in the new landscape. One could argue that we are not selling more, but the way people are buying is shifting — to an online platform. Those dealers who do not include digital retailing options will lose market share to technology-savvy front-runners. Carvana went from selling a few thousand vehicles in 2017 to a “Top 10” U.S. retailer in 2018 by simply meeting the customer where they are and want to be. CarMax continues to add locations, newer entrants like Vroom prove the trend is only growing and the industry will continue to see more entrants to attack the dealer model.
The auto industry has some unique challenges with digital retailing. There is the technical challenge of building “the all-inclusive model” but also the issue of consumer trust. Building consumer confidence is no small task in an industry that has not been known for its transparency. Luckily there are now all-inclusive solutions and digital retailing tools to meet these challenges.
By empowering the dealer to set the standards and improve profitability metrics, these tools provide a transparent process for the consumer to manage their transaction. The consumer is buying what is likely one of the most expensive purchases in their life, and today it is reasonable to believe that car buyers want to have control over that transaction, as evidenced by the success of Carvana and others.
Digital retailing will never fully replace in-store purchases, but much like banking, online deposits, bill pay and e-signatures make driving to the bank less frequent. Dealerships who become early adopters will find market acquisition from online sales a pleasant boost to their bottom line. Dealers looking for a competitive edge should start introducing digital retailing to their stores to combat the threat of new competition. The more efficient and transparent the process, the happier this makes the clientele, improving profits and CSI.
Imagine a busy Saturday on the showroom where every salesperson has a customer. What if other customers could start their car-buying experience on a desktop or even their own cellphone and have it monitored by the staff, with minimal intervention? This enhances organizational efficiency, as salespeople now can assist multiple “ups” at the same time, and imagine clients finishing 90% of their paperwork at home and only come into the showroom for the last 10%, and vice-versa.
The world is, again, changing quickly and the dealers who embrace the change consumers are demanding will be ahead of the competition, gain new market share in meeting customers who never would have engaged their dealership previously and see net profitability and CSI greatly improved. The opposite choice is to pretend we can still do things as we’ve always done and see other dealers and new entrants capture this exploding new demographic, and the future profitability impairment that will accompany that choice.
What’s preventing you from selling cars 24/7? Only the resistance to change and the clear and definitive market signals that are like a fire alarm blaring outside your door. The opportunity to evolve with and be an early adopter in this industry lies before you, and I encourage you to take the leap of faith to a whole new market of customers begging you to engage them, higher CSI scores and greatly improved profitability.
Scarlet Fox, Chief Operating Officer for WebBuy
