There’s a big push for digital retailing and “online storefronts” in today’s automobile market. But why? Do consumers think buying online is the only logical choice? Are dealers looking to cut costs and scale-down their brick-and-mortar operations?
It’s true—car shoppers (on average) visit only 1.6 dealerships before signing by the X. But this is mainly due to the massive amount of information available on the internet.
Savvy auto buyers quickly become just as knowledgeable about the car they’re considering as the dealership selling it to them. And that’s a good thing.
Dealers feel that informed customers have realistic expectations and are more decisive regarding their purchase.
So why the big push? For starters, blame it on the digital marketing gold rush. Everyone from well-funded California startups to billion-dollar digital media outlets are flooding the market trying to find the next best way to sell a car over the internet.
Reinventing the Car Buying Process
These programs promise to revolutionize the sales process, and many succeed in convincing retail dealers that their way is the future. However, these programs can cost upwards of $2,000 per month and often lock the dealer into long-term commitments (which may include hefty set-up costs).
Who can blame them for trying though? The websites and graphics are slick, and the vendor sales processes are amazing.
But let’s take a step back for a moment and talk about the e-commerce sales model. Whenever something is sold online, the customer has two critical tasks.
- Selecting the product - figuring out the right solution that best matches their needs.
- Finding the absolute lowest price - after all, no one wants to pay more than necessary.
While this all sounds good, there’s more to the story. Because when it comes to buying cars over the internet, here’s an important point to keep in mind.
When a car shopper can conduct a transaction, or at least begin the process online, they are focused simply on price.
The dealer loses the ability to build value into their product, dealership, and—most importantly—their staff. At this point in time, most customers using digital retailing tools are still coming to the dealership and completing the transaction.
Except now they have the dealer’s stripped-out sale price, a trade value, and pricing on everything sold in the finance office.
Balancing Service and Profitability in Car Buying
In today’s competitive price environment, dealers rely on the finance office and customers trade-in to potentially make a reasonable profit. The website engagement for many of these digital storefronts is overwhelmingly positive but the results on the bottom line are still up in the air.
However, the odds of shunning profitability are high.
Let’s face it—customers love the idea of buying a car online.
Selecting a make and model, choosing a color, and then simply adding it to the shopping cart.
But wait, I can’t use PayPal? Or just put it on my debit card?
The problem is, buying a car isn’t like ordering a computer. Fixed-pricing isn’t an option when so many variables come into play.
Think about the complexities of loans and the trade-in process. Positive and negative trade equity can impact the financing options for a new car. There may also be a list of stipulations required by the lender (especially if the customer has less than perfect credit).
Even for people with excellent credit, financing can be complicated and requires the assistance of a professional.
And let’s not forget about the test drive.
Who wants to make a massive financial commitment without getting behind the wheel?
So, until the financing process is revolutionized—and cars become completely self-driving—customer expectations will continue to remain unmet.
Despite the facts outlined above, digital retailing is the future of car buying (alongside electric vehicles and autonomous driving). But the future isn’t now—and based on current market conditions—it won’t be anytime soon.
New car sales and dealer profitability are continuing to rise in the present environment. Digital vendors are creating fascinating new technology and dealers have a better understanding of data and market analytics.
New products now bridge the gap between “old-school” websites and digital storefronts. Many of these solutions involve less risk to the dealership’s bottom line, don’t require a completely new sales process, and have similar and sometimes even better results than trying to sell a car over the internet.
In the end—shopping online is a great way to start the car buying experience. But working with a local dealership is still the best way to finish it.
AutoAPR is a tech company specializing in the improvement of the online car shopping experience—without disrupting the dealership’s sales process. Our apps connect dealers and customers together, resulting in increased website conversions, customer engagement, and dealer profitability.
Contact us today to learn more about our services.