Insights

E-commerce Will Drive the Digital Revolution in Auto

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.

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.

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.

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.

• 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?

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.