The internet is changing everything around us, and the car dealership industry is no exception. There are increasing reports of car dealerships moving online, even being able to buy a car online without speaking to a single person. But how accurate is this? Can the car dealership industry move completely online?
Firstly, we must analyse the way that shopping habits are changing. Within the car industry, more people are doing their research online before going to their local car dealership. In fact, a study conducted by CarKeys.co.uk found that 97% of new car buyers arrive at the dealership having already conducted online research that informs their buying intentions.1
The top five activities conducted online by car shoppers include researching car prices (71%), finding actual cars listed for sale (68%), comparing different models (64%), finding out what their current car is worth (63%), and locating a dealer or getting dealer info (46%).2 However, over two-thirds ask the dealer for advice before making a purchase, so even if most of their research has been done online, they still trust and interact with car dealerships.
Importantly, most of the research which is done by the consumer is done on a mobile device, with as much as 84% of consumers using their mobile for research.
- 57% browsed for car inspiration on their mobile
- 59% researched and compared prices/specifications on their mobile
- 61% searched for nearby dealerships, requested brochures, and booked test drives on their mobile and
- a massive 9% purchased a car on their mobile.3
This makes not only having a strong online presence essential for car dealerships but also having a good mobile site crucial.
Although many people are still going through their local car dealership to make a purchase, this may not always be the case, as 23% of consumers are likely to buy their next car online without ever entering a dealership.
Thus, it is clear that much of the research process is being done online rather than at a dealership, and now more than ever, people are using their mobiles to do this research. We can also see some changes in the future with the whole process moving online.
Around the world
Furthermore, we can see the pattern of buying cars online increasing across the world. America has several online-only car dealerships, such as Request Your Car which promotes itself with: “Request Your Car offers a unique all-inclusive car buying program that confirms the vehicle you want at the dealer’s very best price. Our no hassle promise means we don’t share your information. Save time and money by having our AuotPro Advisors coordinate all the details. We make purchasing your next car easy by providing you the dealer’s bottom-line price, finance & lease options, and coordinating final delivery on the vehicle you want.”4 Other examples include Carvana, AutoNation, Penske, and Sonic.
We can see why these online dealerships are gaining steam from this promotion. Offering the best prices with none of the hassles that many people want to avoid at a traditional dealership. There’s also the convenience of doing everything from your own home, and having the car delivered to your front door.
Volvo is leading the way in online sales. A consumer can order a Volvo online, submit a down payment using a credit card, which is then forwarded by Volvo to a local dealer who then contacts the consumer. A buyer can get a refund if they and the dealer can’t agree on a price, delivery date or other particulars. About 30% of the leads end up in sales, a higher percentage than sales that come from traditional walk-in shoppers.5
When asked about newer car buying alternatives, 54% said they would “love” being able to sell or buy a car from home and 42% were fine buying a car without a test drive, as long as there was some form of guarantee. It is clear that the car industry is changing and moving online. This is partly due to many people not liking the current car buying process, and looking for an easier alternative. For example, of the 4,002 consumers polled, only 17 said they liked the current car buying process just as it is. The rest said they “want significant changes, particularly in the test drive, deal structuring, financing paperwork and service phases.”6 We can see that many people want the ease of buying online, and if car dealerships don’t at least have an online presence or perhaps help the consumer in doing some of the car buying process online, then traditional dealerships may be in trouble.
In the UK
Within the UK, we can see these changes being put into place, Volvo again being the frontrunner. The new Volvo partnership with Amazon means that customers can book a test drive via Prime and have a Volvo V40 hatchback delivered directly to their door alongside a Volvo specialist. This is currently being tested and is available in London, Manchester, and Edinburgh throughout June and July. As the Volvo chief states, some 80% of Volvo customers already shop online for other goods, and research suggests many will do the same for cars in the future.7 However, it’s not all bad news for car dealerships. “We don’t see a car distribution network without dealers in the foreseeable future, [vehicles sold online] will still pass through the dealer network” the chief states.
The Volvo and Amazon partnership is similar to that of Mazda’s MyWay test drive which was initially trialled within the M25 and saw 10 “brand champions” deliver cars to customers for a test drive. Mazda’s MyWay scheme attracted around 230 sales-generating leads in the two years after its 2015 launch, according to Thomson.8 Therefore, even within the UK, the car dealership industry is changing. Although car dealerships are not directly under threat at the moment, they will need to adapt to continue engaging consumers or the consumer will find an ‘easier’ option.
How each Generation differs
It is important to look at the different generations, and how shopping habits differ for each of them. As of now, there are four major generational demographics that economists have recognized as distinct markets:
- Baby Boomers (1946-1964)
- Gen X (1961-1981)
- Gen Y (more popularly known as Millennials, 1980-2000) and
- Gen Z (1995-2010)
Each group is unique in their perspectives on marketing tactics and purchasing preferences.9
To begin, Baby Boomers are very comfortable browsing and shopping online, as many as 85% of those surveyed reported researching products on their web browser. Somewhat surprisingly, Baby Boomers also aren’t opposed to purchasing online, with 66% of those surveyed making regular purchases on web devices.
Gen Xers are a large proportion of overall consumers, within the US they make up just 25% of the population while producing 31% of total US income. This group also spend the most time browsing online, with an average of 100.3 minutes per week, compared with an average of 89.4 minutes for respondents aged 18 and older.10 In the US, Gen Xers spend 63% of their digital time on mobile, not far from the 69% that millennials spend.11 Thus, making them a big online audience.
Millennials highly value the convenience of omnichannel accessibility during their shopping, being able to effortlessly transition from their smartphone to laptop, to local store and back again.12 Millennials are in particular changing the car dealership industry, with millennials being four times more likely to buy a car via the internet than Baby Boomers. So if car dealerships want to keep selling to millennials, in particular, they will need to find a way to move at least some of the buying process online.
Gen Z is the generation of digital natives that don’t know life before the internet, which is shown in their buying habits. Gen Zers are particularly selective when they make a purchase, using price-checking tools and often only buying products when they are on sale or even delaying gratification by waiting for newer products to become available. However, Gen Zers do find shopping instore preferable, particularly for big-ticket items such as cars. From all these generations, however, we can see how they have taken to online shopping and browsing, and having a strong online presence will be the first step in attracting these customers.
To summarise, it is clear that the car buying process is changing. With some online-only car dealerships gaining popularity in America, and Volvo cutting out much of the process by delivering cars with Amazon Prime. Much of the research is now being done online, although many people would still go to a car dealership and trust a professional.
From analysing the shopping habits from the different generations, we can see that people are browsing and buying more online than ever before, many using different devices to do so. Although car dealerships are needed, and many people enjoy going to see and test drive a car, it is unlikely that many people will go to a car dealership in the future without knowing what car they want. And some, such as Millennials who value convenience and ease, may choose instead to simply buy online with some guarantee. Therefore, the car industry is changing and car dealerships have to move with it in order to survive.
In our next blog, we will give car dealerships a breakdown on how they can adapt and get a step ahead of their competitors in the new process of car buying.