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E-commerce Will Drive the Digital Revolution in Auto

Permanent shifts in customer expectations make digital and e-commerce solutions more important than ever—here’s how OEMs can get started

Kris Rawls Laynie Held
Kris Rawls Laynie Held

The auto industry is facing pressure to adapt digitally more than ever as COVID-19 has brought new challenges and intensified the need to shift toward digital solutions. Decisions now about technological adoption will have generational effects on the industry’s winners and losers. The dealers and OEMs who adjust can thrive, while those reluctant to change will fall further behind.

“Digital is not just a nice-to-have enabler of the automotive shopping experience, it is the new core of the auto shopping experience.”
Jen Steele, Global Vice President, Managing Partner at Publicis Sapient

The consumer in the driver’s seat: How expectations have changed

Prior to COVID-19, consumers were increasingly beginning their purchase journey online. Before visiting a dealer, 92 percent of customers researched and compared vehicles online, spending an average of 8.5 hours digitally learning; by the time shoppers arrived to a dealership, they knew the model, make and price range of their choice and were ready to buy.

Integrated digital ecosystem¹

More customers are looking to complete more of the shopping process online before ever visiting a dealer, and 18 percent say they would buy a car sooner if there was an online option.

There are signs that overall consumer demand for autos may see a resurgence in the fall. Many prospects who arranged to buy before the pandemic are still planning to buy cars, though a large portion are considering delaying their purchase until closer to end of year. Additionally, there is new demand from customers who are looking to reduce the risk of COVID-19 exposure on public transportation and from those looking to take advantage of quality offers and attractive financing. These factors mean the public is using personal vehicles now more than ever. Even among all the societal uncertainty and dealership closures, consumers appear eager to engage in the buying process, and the OEMs and dealers who can meet these demands with digital solutions will be best poised to take advantage of the recovery in demand.

However, as consumers weigh greater health concerns, they are more likely to want to complete the end-to-end shopping process virtually, instead of in-person. Before COVID-19, only 32 percent of consumers expressed willingness to buy a vehicle online, but now a majority (61 percent) of consumers are willing to purchase sight unseen. Since February, consumer attitudes have shifted even for "last mile" activities as they increasingly demand virtual services such as contactless test drives, virtual price negotiation, digital financing and signing and contactless purchase/delivery. After experiencing the convenience of the at-home digital shopping experience, it's unlikely customer preferences will revert to pre-COVID-19 norms.

The convergence of OEM/NSC and dealer data

The collaboration between OEMs, NSCs and dealers stands on a foundation of open data – the convergence of which allows all parties to optimize the customer experience for each individual buyer.

The digital fast lane: How OEMs and dealers have responded

Traditionally, "digital retail" in the auto industry implied customers could learn about, research and compare vehicle features on OEM websites and traditional sources like Consumer Reports. More recently, a number of digitally focused disruptors such as Carvana, Carmax and Tesla have entered the market, offering unique, omni-channel experiences like flexible return policies, virtual auctions, home deliveries, online negotiation and virtual trade-in valuations.

These digital leaders recognized a shift in customer expectations and focused on creating seamless user experiences across the entire shopping journey. As traditional OEMs began to take notice, some companies made major investments in digital commerce capabilities, such as Fiat Chrysler’s Online Retail Experience, Honda’s Shop Simple program and Porsche’s Online Retail Pilot. Dealers and OEMs who invested in digital shopping experiences have been able to counteract some of the industry-wide losses from the pandemic and are poised to benefit the most as we move towards recovery. Many digitally enabled OEMs are seeing increased, higher quality leads that are 30 percent more likely to buy and a two to four-fold surge in website traffic compared with pre-COVID-19. These online toolsare, in some instances, responsible for more than 20 percent of new leads during the second quarter of 2020.

Some dealers have been quick to respond, replacing traditionally in-person activities with digital capabilities. In addition to maintaining the sales funnel for dealers, customers are enjoying a truncated sales experience and digital services such as home delivery and e-contracting. Ironically, spending less time with customers in person will allow dealers to unlock higher customer lifetime value down the road. As seen in research, a better, more streamlined user experience increases consumer satisfaction and loyalty, and allows dealers to remain safe, increase conversion rates and garner rich customer insights, all of which further the ability to create personal, authentic relationships with customers in perpetuity.

Digital natives and legacy OEMs who embrace the move towards end-to-end digital commerce capabilities are seeing positive results

Higher gross profits from e-commerce leads

Saved per transaction when digital capabilities enabled

Higher close rate from digital leads

Of consumers are more inclined to purchase F&I products when digital

Financially, companies who invest in digital systems designed to make the sales process more efficient, transparent and customer-focused see positive results, including higher sales, higher average order values, increased gross-profit per vehicle and higher financing and insurance (F&I) purchase likelihood. The bottom line is that market players-—both digital natives and legacy OEMs—who have embraced the move towards end-to-end digital commerce capabilities are performing better, especially in these times of stress and uncertainty.

Near term priorities create long term challenges

In the near term, OEMs need to invest in capabilities that recreate the dealership experience digitally, to generate new value for consumers with experiences like:

  • Unorthodox delivery methods, such as home delivery or curb-side pickup
  • Virtual, 360° video tours of vehicles
  • Virtual 1:1 dealer consultations
  • Non-traditional test drives, either virtually or contact-less
  • Chat and integrated contact systems with dealers
  • Online negotiation tools
  • E-signature and digital contracting

Longer term, the digital experience will evolve beyond the dealership experience and will have far reaching impacts on key business components such as:

  • Sales operations
  • Supply chain optimization
  • Tier 1 integrations
  • CRM/lifecycle messaging
  • Financial services
  • Customer data management and analysis

Navigating the digital future

While the physical dealership experience will eventually return, there is mounting evidence that customers' expectations have shifted permanently. This requires automotive players to be nimble and dedicated to investing in and implementing forward-looking digital solutions.

Launching and maintaining a digital ecosystem is not as simple as investing millions of dollars into new tools. It requires taking a step back to look at how the greater organization is ready for change. With a majority of businesses looking to ecommerce and accelerating plans to launch other digital solutions before end of year, now is the time to think about where and how digital fits across an entire enterprise. In order to effectively create solutions to known customer problems, organizations will have to ask themselves:

  • Is the organization ready for these changes? Are our current digital solutions siloed or integrated? Is there leadership buy in? Who will own the integration and adoption of these tools? What areas of the journey should be focused on first?
  • How do these new tools fit into the greater technology stack? Will major upgrades be needed or is there a way to seamlessly integrate new technologies into the greater technology ecosystem? Should we buy, build, or acquire these capabilities?
  • How do the new solutions work with business and dealer dynamics? With these new tools, how will the end-customer's experience change? Whowill be responsible for owning the full customer journey and how will bothsides of the business work together to service their customers efficiently? Areour dealers prepared for these changes? How will we integrate solutions withour tier three (dealer network) architecture?

What are the first steps you can take as an organization?

While the physical dealership experience will eventually return, there is mounting evidence that customers' expectations have shifted permanently. This requires automotive players to be nimble and dedicated to investing in and implementing forward-looking digital solutions.

Launching and maintaining a digital ecosystem is not as simple as investing millions of dollars into new tools. It requires taking a step back to look at how the greater organization is ready for change. With a majority of businesses looking to ecommerce and accelerating plans to launch other digital solutions before end of year, now is the time to think about where and how digital fits across an entire enterprise. In order to effectively create solutions to known customer problems, organizations will have to ask themselves:

  • Map out the end-to-end customer journey journey, noting the points of hand-off between the digital and physical properties, and between tier one and tier three. Identify who (internally) will own the customer journey across the organization.
  • Develop an “ideal state” vision for the digital retail experience and map which technologies enable each stage in the journey. Create a gap analysis toidentify the need for additional technology solutions or greater investment inexisting ones. Using a competency framework to determine which technologies will be bought, built or acquired.
  • Identify dealer partners that are willing to pilot new digital solutions and act as liaisons to the wider dealer body. Through the frame of the ideal state vision, identify the integration challenges with existing tier three (dealer network) technology platforms, including capabilities and limitations.

Understanding key areas for digitization and creating a plan to scale capabilities for both short-term “quick-wins” and long-term transformation is the first step to meet the digitally enabled future. The road ahead will be long and winding, but it will surely be paved by digital.

Kris Rawls
Kris Rawls
Senior Manager of Consumer Experience & Strategy
Laynie Held
Laynie Held
Senior Associate of Consumer Experience & Strategy

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