Next Port of Call — Digitization of Automotive Retail
By IndraStra Global Editorial Team
Image Attribute: Inside a car showroom / Source: Mercedes-Benz of Encino/Flickr
The automotive retailing process is experiencing sensational changes due to the rise of digital natives. Nowadays, car buyers are armed with mobile devices, accessing previously unavailable information (the latest pricing data and reviews) at their fingertips which, in turn, causing them to be more purposeful shoppers who are no longer browsing the showrooms hoping to find their desired match also, it is providing significant leverage in the sales transaction at the auto dealership’s end. However, despite their online enthusiasm, car buyers still seek a personal touch coupled with personal attention. It has been found most of all digital natives visit the dealership more than twice before making an actual purchase.
At the same time, the rise of big data, analytics, cloud computing, and advances in core digital technologies allow original equipment manufacturers (OEMs) and auto dealerships greater insight into customers’ activities and buying behaviors. And, in the midst, a new network of vendors has emerged to support the data needs of both sides of the transaction.
In a recent survey by Cox Automotive, 2,550 consumers who are or were in the market for a vehicle revealed there’s an increasing demand for automotive digital retailing. 83 percent of respondents expressed a desire to complete one or more parts of the car buying process online, while 85 percent said they’re more likely to buy from a dealer that allows them to perform at least one step of the process online.
According to the same survey, the average buyer currently spends three hours at the dealership during a car purchase, with 90 minutes spent on negotiating the financial details. Consumer satisfaction with how long the process takes at the dealership continues to decrease, dropping from 55 percent in 2016 to 46 percent in 2018.
“The results of our study show that the most successful dealers are the ones who offer a connected in-store and online experience, where consumers start car-buying activities online and seamlessly finish them at the dealership,” said Mike Burgiss, vice president of Digital Retailing at Cox Automotive. “Importantly, a more efficient process is not only better for consumers, it’s better for dealers as well.”
Earlier, there used to be just one: the auto dealer. But the growth of digital platforms, tools, and devices significantly increase the number of customer touchpoints on the car-buying journey and all need to be occupied simultaneously. Each touchpoint is an opportunity to create engaging personalized experiences for the consumer based on insights gained from previous interactions. But, what needs to be decided is which will be developed and handled via the OEM, which via the dealer and which, perhaps, by such intermediates as online portals or platforms?
Reinventing the Wheel i.e., Format
In a typical omnichannel world, consumers expect the store to be an extension of their digital experience. Innovative store formats that provide branded experiences and seamless integration across all touchpoints may be needed to respond to these changing consumer needs. Dealerships can create highly immersive digital experiences for shoppers in their stores. The Audi City store in London format has no inventory and only a couple show models on display. Instead, consumers can interact with large digital screens to explore different models and design their perfect car.
Creating such seamless experiences requires foundational technology integrations and data sharing between the OEM and dealer to develop a common view of a customer that is constantly being enriched through each interaction in the digital and physical channel. When a customer customizes, builds, and prices-out a small SUV on the OEM Tier-1 website and later visits a dealer’s website to search inventory, ensure the experiences are consistent and connected. The prior vehicle configuration from the Tier-1 site should inform what the dealer site shows: the current offer on that SUV, available inventory, and customer reviews. Each part of the digital ecosystem, from OEM web and social channels to dealer channels and third-parties, should be connected, and the content should be orchestrated to work together to move customers through the process and build confidence and consideration for their purchase.
Like in the case of intermediaries, third-party service providers have begun to fill gaps in digital services that the existing ecosystem does not provide. This includes transparent pricing services like TrueCar and streamlined, fully-online used car markets like Carvana . Various automotive retail players are recognizing the need to embrace new practices in a competitive market, particularly when considering the digital ecosystem as an important information source and purchase influencer. But, it all starts with the third-party portal’s utility quotient as a sales pushing tool which, in turn, depends on the “neutrality” factor, surgically influencing the prospective car buyer through advice and reviews.
Leveraging on “Digital” Trend
As per the Cox Automotive’s survey, for every retail sale, customers visit the auto dealer only two to three times (at maximum), including to sign the contract and to take the custody of the vehicle. However, the consumers are also taking the unbeaten path — like — initiating the buying process online by “building a vehicle” to their specifications and then searching inventory in a specific geography. The buyer evaluates their current vehicle’s trade-in value based on its model, option content, age, and condition. The financial institution (either traditional bank or newer online lenders) reviews, selects and approves financing and the consumer’s choice of purchase or lease in real time. Then the purchase process shifts from digital to more traditional retail, when the consumer arrives at the dealership to test drive the vehicle and sign the necessary paperwork to take ownership. Some dealers, taking advantage of their close proximity to the customer, further emulate the new online purchasing model by delivering the vehicle directly to the customer’s home at no charge.
Kindly do note, it should not be just about creating an environment where your customer is going to purchase a car without coming to your dealership. And the way to prepare for the customers increased desire to do more than simply engage your inventory comes back to your people and your process. There is no technology that will fix your dealership if either of those two things is broken.
“Connected Car”: The Concept becoming a Reality
An On-board Diagnostic-II (OBD-II) device, connected to a vehicle over a well-defined mobile network, would enable capturing of data like driving behaviour events (mileage, hard break threshold exceeded), safety events (airbag deployed, part replacement warning), service events (annual service, part replaced), etc., and get sent to a shared-services system that all parties had access to, including the owner/leaseholder/auto dealer/OEM. This, in turn, would enable the stakeholders to provide tailored services than would otherwise be possible.
With the rise in Blockchain technologies, the future is about a dedicated multi-tier interconnected Blockchain platform based on the fundamentals of scalability and interoperability can benefit many stakeholders, like — a shared ledger — between automotive manufacturers, automotive dealerships, regulators, auto finance-cum-insurance companies, vehicle leasing companies, buyers, sellers and even garages, providing a higher degree transparency and trust in all kind of vehicular transactions, preventing disputes and lowering the overall cost of maintenance and services by tracking ownership, sale, and accident history . With an always-on data pipe, it will be now possible to leverage above-mentioned datasets to tailor customer recommendations and improve the vehicle ownership experience.
For all the stakeholders, a digital approach brings more transparency, which, in turn, makes it possible to more efficiently manage respective markets and sales operations. This transparency with respect to market potential also provides support for retail investment decisions. At the same time, “Going Digital” will directly challenge existing paradigms and will force the OEMs along with the dealerships to adopt new ways of working; attracting and retaining talent, developing new business models and adapting to a more agile, experimental, and disruptive culture.
 2018 Car Buyer Journey Study
 2016 Car Buyer Journey Study
 2018 Car Buyer Journey Study
 “Disrupting Auto Finance.” Forbes. October 31, 2014.
 Boutellier, R. and Heinzen, M. “Growth through Innovation: Managing Technology-Driven Enterprise”, Cham: Springer Verlag, 2014, pp. 209–10.
 Guhathakurta, R. (2018). The Age of Blockchain: A Collection of Articles. 1st ed. New York: IndraStra Global, pp.17–20.