The Digital Revolution of Car Sales
When shopping for vehicles, or anything really, consumers have already been doing most of their “shopping” and research online. This has been happening for years, so the birth of Carvana, Vroom and business like them are no surprise. But the traditional dealer can and should be competing with these online retailers. Online selling is the natural progression of car sales in the 21st century.
But then we had a worldwide pandemic. We saw a major reduction in showroom traffic starting in mid-march as consumers became concerned about coronavirus. Fiat-Chrysler reported a 10% drop in US sales in the first quarter. General Motors reported a 7% decrease, and Nissan saw a 30% plummet among declines for other automakers. Edmunds estimates that new car sales fell 34.3% in the second quarter. While everyone is hoping for a better Q3 and Q4, things are looking a bit grim.
It’s our prediction that 15-20% of New England dealers will not survive the year. It won’t be because of the pandemic itself but because of their refusal or inability to become a player in the digital revolution of car sales.
As consumers continue having Covid-19 concerns and take extra precautions, they’re opting for more online retail across the board. Look at Amazon. It brought in $75.4 billion in revenue in Q1, a 26% increase from 2019. More people than ever are taking advantage of Target’s drive-up option, and most grocery stores have added a curbside service to accommodate people during the pandemic. These businesses have re-evaluated budgets to meet the consumers’ needs. Dealers shouldn’t be any different. Now is the time to invest max dollars in internet sales. You have to be willing to meet customers where they want to be met, and right now (and for the foreseeable future), that’s online.
We aren’t talking about having a website or putting your listings on Autotrader. These things should be a part of any dealer’s marketing plan in 2020. We’re talking about creating an online sales model that allows your customers to do everything online, from shopping through finance and service.
People still need cars. Their leases could be ending or their old cars may die. Or they just want to avoid public transportation. Whatever the reason, they’re still submitting information requests and lead forms. The problem is that most dealers aren’t ready to handle the sales process virtually.
Do you have a Business Development Center? If so, it may be time to beef it up, not discontinue it. If not, you need to start one. BDCs are KEY to increasing or at least maintaining "remote" customer contact, increasing customer loyalty, and generating more variable and fixed gross profits. They field customer inquiries. They follow up with leads until they’re truly dead. They call about service reminders and set maintenance appointments. A good BDC could be a dealership’s saving grace and biggest asset. We have heard that some dealers have shut down their BDCs during the pandemic, but they should be doing the exact opposite. Ramp them up! BDCs are vital to setting appointments, whether physically or virtually.
Some dealers may feel apprehensive about going digital, not just because it’s uncharted territory for them, but because they’re worried about losing that personal touch. You can combat this with sales people doing video calls to discuss vehicles with customers or doing vehicle walk-throughs with them like a virtual test drive. Or you can take the test-drive to the customer by delivering the vehicle to their home to take it for a spin before making a final decision.
Take it a step further by doing the whole sales process online and then delivering the sold vehicle to the consumer’s driveway. With today’s technology, it’s possible to sell a vehicle 100% online with virtual contracts, as we’ve seen with Carvana and Vroom.
What about F&I? This is where you make your big money – tire coverage, extended warranties. All of those can still be option. If a customer is uneasy about online contracts, we suggest doing a video call between your F&I employee and the customer. They can still go through all the paperwork and their sales pitches, just as they normally would, except now, it’s online. Or, some dealers are giving customers all the information about “upsells” earlier on in the sales process, helping to reduce the friction of feeling like their getting some last-minute add-on and allowing them time to think and research these options.
There will be winners and losers as the paradigm shifts to digital in the automotive world. The industry as a whole will recover from shutdowns and reduced sales, but not all dealerships will. Those who survive will come through stronger and more focused on the future of the digitalization of the sales process.
Cars.com CEO, Alex Vetter, said it best. “People are willing to engage online now more than ever. I think in every category you’re seeing digital channels grow during this [pandemic.] We just need to recognize that this is where people in our communities are spending time and finding ways to build those relationships online needs to become your superpower during this crisis.”
