We are truly living in the age of the Internet. We hang out with our friends via videoconference, email our bosses about work, use search engines to answer every question we don’t immediately know the answer to, and buy just about everything online. For some reason, however, car sales have remained staunchly, stubbornly offline. As an article in Digital Commerce 360 put it, “not much has changed in the retail automotive space for nearly 121 years since the first car dealership opened near Cleveland in 1898.” While of course some dealerships have been ahead of the curve and adopted online automotive shopping tools, most have held onto their traditional brick and mortar, in-person sales practices for decades. However, recently, that all began to change. Read on to learn more about the rise of digital automotive retailing from Carzato.
Early Adopters Lead the Way
While the automotive industry has by and large lagged behind other businesses when it comes to digital retailing, some tech-savvy dealerships have already begun implementing online car shopping techniques. As Digital Commerce 360 notes, “automotive eCommerce is already a sizable market that will generate estimated online sales of $14.6 billion in 2018…but that still represents only about 1 percent of U.S. vehicle sales, which totaled about $1.1 trillion last year, according to the U.S. Department of Commerce.” Digital retailing is clearly lucrative, but it could be about 100 times more profitable if American dealerships began adopting it widely.
Furthermore, even though it accounts for just a small fraction of overall vehicle sales, digital retailing in the automotive industry is growing fast. According to Digital Commerce 360, “the 2019 Ecommerce Report shows that the compound annual growth of digital sales was 7.61 percent from 2015-19 versus 1.73 percent for total sales.” Not only is online car shopping a viable option for your dealership – it’s becoming a necessity if you want to maximize your sales. Since the Internet likely isn’t going away anytime soon, these trends are projected to become even sharper over time: “as soon as 2035, consumers may purchase as many as 1.3 million vehicles annually online, says the research firm, Frost & Sullivan.” If you’ve been waiting for solid evidence that digital retailing is here to stay before you invest in it, you now have more than enough to decide that it’s right for your dealership.
Go Where Your Customers Are: Online
It’s a common marketing maxim: “go where your customers are.” If you found out that many of your prospective car buyers were attending the local state fair, you’d probably try to buy advertising there, or even set up a booth. Similarly, you might buy a billboard on one of the busiest highways near your dealership, since many of your potential clients are sure to pass it.
The same logic goes for car shopping, and the fact of the matter is that many Americans shop for cars online today. They conduct their research and make their choices through their digital devices, not by walking into your dealership, reading postcards, or staring at billboards.
As reported in an article in Talk Business & Politics, “most consumers (98 percent) want to be able to do some part of the car shopping and buying process online, ‘suggesting that dealers should incorporate at least some aspect of digital retailing into their offerings,’ according to [a] customer survey by vehicle shopping website Autotrader.” The survey also found that “consumers (86 percent) want to be able to take a 360-degree tour of a vehicle, reserve a vehicle for a test drive (59 percent) and negotiate online (57 percent).” Your prospective buyers increasingly want to interact with your dealership online.
In fact, according to the “Innovating automotive retail” report from McKinsey & Company, “more than one-third of customers would consider buying a car online,” essentially never interacting with the dealership in person. Trends are already headed this way, since “the number of customer visits to a dealer before the purchasing decision is made has tumbled: dealers often get just one chance to strike lucky,” and “dealers need to fight an online battle to earn the right to get that one chance.” Even when car shoppers consent to come to a dealership in person, this is after much online research.
In addition, a recent study from Automotive Management Online revealed that “the number of drivers buying cars which they haven’t set their eyes on in person now stands at a…one in 10 (11 percent) as more people place their faith in online portals.” Basically, it appears that customers want to spend as little time in your physical dealership as possible – and some want to spend zero time in your offices. Since this is the case, you need to go where they actually want to learn more about cars and make purchasing choices: online.
What Tesla Teaches Us
Tesla is one of the most successful car brands on the planet. Its extremely popular electric cars regularly make headlines and have inspired more car manufacturers to offer
environmentally-friendly models. Since Tesla’s brand revolves around forward-thinking automotive technology, it may come as no surprise that the company recently transitioned to a completely online sales model.
In February 2019, Business Insider reported that “Tesla announced it would eliminate most of its stores and move to an online-only ordering model.” The brand announced, “you can now buy a Tesla in North America via your phone in about one minute.” Tesla’s CEO summed up his decision to shift to an Internet car shopping experience: “‘This is 2019… People want to buy things online.’” Based on recent customer surveys, this certainly seems to be true.
So, now that it’s been over a year since Tesla made the bold decision to take its sales online, how is the company doing? According to The Verge, “Tesla sold more cars in 2019 than the previous two years combined. Tesla sold 367,500 cars in 2019, a new record for the company.” Clearly, its online-only car shopping framework appears to have worked out.
Of course, not every dealership can or should be exactly like Tesla, but you can certainly emulate certain aspects of its business strategy. You can learn (and therefore profit!) from Tesla simply by recognizing that “people want to buy things online” and prioritizing digital retailing accordingly.
Want to Discover More About Digital Automotive Retail?
Do you want your dealership to take advantage of the burgeoning online car shopping movement? With customers increasingly wanting digital retail experiences and industry leaders shifting their sales online, chances are, you’ll either be a part of this profitable trend, or you’ll be left far behind. To make sure you’re familiar with all the latest online car shopping insights, follow us on LinkedIn, like us on Facebook, and subscribe to our channel on YouTube.