Not Just Whether It’s Online or In Person
There is no scarier word for traditional retailers than Amazon, and in Asia at least, add Alibaba to the list. Both e-commerce giants have already dipped their toes – and soon probably much more – into the car-selling business. But if automakers simply focus on the task of how to sell cars online or fighting off e-commerce aggregators, they may fail to address a bigger, more fundamental overhaul that needs to happen in the next several years.
Despite the auto industry’s long history of technological innovation, the car-buying experience has barely evolved since the first car dealership opened more than 100 years ago. Yet, the way people shop and what they expect from retailers is changing. Today, customers demand real-time satisfaction, transparency, control, convenience, and uniqueness in both the experience and product. And just moving more of the sales process online will not be enough to help automakers in a match-up against more-adept e-commerce giants. Nor would it address the new needs of customers for mobility without ownership.
The challenge for automakers and dealers together doesn’t revolve only around selling online, but rather offering ever more flexible and transparent customer solutions that meet consumer expectations – online or offline. These range from easy-to-understand financial and insurance packages, to more advanced driver assistance technologies, to innovative connectivity services that turn cars into yet another mobile device consumers can’t live without. But above all else, they need to figure out how to remove pain points from the car-buying exercise.
How to beat Amazon
Car companies and brands need to capitalize on the strengths they have that, say, an Amazon doesn’t. Thus, the question about the future that the automotive industry should be asking is not whether the dealership model will continue to exist, but rather what role it should play to give automakers an edge in the new, more exacting retail environment. How far do car manufacturers need to go with customization to let consumers make a car purchase unique – and should that customization apply to the models of ownership as well as the buying process itself? In this new environment, the correct metric of success will not necessarily be the percentage of sales completed online, but more likely how much of a customer’s journey is satisfied quickly, easily, and with transparency – regardless of the channel a consumer chooses.
First of all, let’s do a reality-check about online sales: E-commerce in general makes up far less of the global total of retail sales than most people would guess – only about 10 percent in 2017. And even with projections for significant growth, estimates still see it representing less than 20 percent of sales three years from now. Given that a car represents the kind of expensive purchase that customers want to touch and test out before sealing the deal, it’s safe to say that automotive sales will always lag the online transformation of how we purchase such things as clothes and music.
That doesn’t mean, however, that car sales are not digitally influenced through search or that they will never become part of online commerce because they are already both. Most would-be car buyers spend considerable time comparing models and prices on the internet before visiting their first dealer. That is unlikely to change and represents a place where the aggregators, at least on the surface, have an upper hand since consumers see them as being more objective because they aren’t usually pushing a particular brand. But while eventually the greater portion of car transactions will migrate online, there will likely always be an up-close, in-person element to satisfy car buyers’ desire to experience a car before buying it. And it is here where automakers can really start differentiating themselves from aggregators and regain a competitive advantage even online.
Here is where dealers and automakers need to work hand-in-hand to transform a global network of retail dealerships into an experience network ready and able to satisfy the car shopper of today. It could involve scheduling test drives online for wherever and whenever it’s convenient for consumers – instead of dragging them into showrooms for the hard sell. It could be providing a real car buff to take consumers on test drives, or a techie who can take prospective customers through ways to connect new cars to their lives. Or it could be letting a customer do an entire transaction online. The point is to develop a more nuanced, customer-segmented approach that allows the consumer to connect and engage with the car company, the dealer, and the car – and still feel in control.
Tesla has been providing test-drive online scheduling almost since its inception, and now online scheduling is offered by several car makers and even some dealerships – although they almost all require visiting a showroom. There’s very little deviation from a one-size-fits-all solution.
A partnership that showed promise was one announced in 2016 between Hyundai and Amazon, which allowed Amazon Prime customers to go online to schedule test drives with the option of cars being delivered to their home, work, or even a coffee shop. But it was a pilot that at the time was only offered in and around Los Angeles, only for two weekends in August, and only on the Hyundai Elantra. Very recently, Ford and Alibaba opened a large car vending machine in Guangzhou, China called the “Super Test Drive Center.” Using the T-mall app, consumers can schedule a test drive with the car of their choice. Test drives are free for shoppers with a 700 credit score or above, although everyone has to put down a deposit and provide a selfie so the vending machine, which has no staff, will recognize them.
In this new customer-centric world, even small efforts at personalization can make a difference. For instance, based on collection of personal data almost every company engages in these days, should a car company or dealer go the extra mile to make sure the car provided for a test drive has the options a customer has shown interest in during search and is even the right color? Or should they offer an extended test drive – an hour or two rather than the typical 15 or 20 minutes – so the prospective buyer can really experience the car? Looking for ways to differentiate themselves from aggregators will be essential for automakers if they want their customer offerings to resonate and the customer’s time with the car to be memorable.
Many leading automakers have started introducing virtual showrooms, with immersive digital experiences, that allow customers to configure their own unique combination of options. But automakers must realize if they poke the bear they had better be ready to run quickly – meaning that if a car company offers an online experience then it must be an online experience that is updated constantly to match what is being offered and what the consumer expects. An automaker can’t debut a model, offer it to dealers, and then not have its configurator ready to configure for it. Incorporating augmented reality (AR) or virtual reality (VR) and artificial intelligence into marketing solutions is going to be a must-have, but they should remember they are not alone in that realization: Amazon already allows people to see themselves in a piece of clothing, so the potential for them to apply that technology to other industries is great
Most car companies are also experimenting with car ownership alternatives like car sharing or short-term rental. For instance, the Porsche Passport is a car subscription service that launched in 2017 in Atlanta. For $2,000 a month, the pilot program allows subscribers to use Porsche sports cars and SUVs on a schedule that suits them.
The industry also must recognize the potential impact of different models of ownership, which reduce the initial financial commitment. When it’s a decision about a spending $300 instead of $30,000, it’s easier to imagine those being completed online, even if in-person contact still becomes a step in the journey. And while there are still a lot of people who want to buy a car, automakers can’t ignore the need to address this dynamic now before a disruptive start-up steals the turf.
While many of these things are being discussed in automotive circles, they should be the primary strategies moving forward rather than only futuristic pilots. There is no easy fix for the disruptions auto sales are about to endure. The only survival tactic car companies have is to recognize the aspirations of the new customer and make sure they have a journey to offer that speaks to each of them.