11 June 2020
As coronavirus (COVID-19) sees online retail enjoying increased attention, what does this mean for dealerships and the more traditional methods of vehicle purchase? Daily brief journalist Tom Geggus consults some of Autovista Group’s industry experts.
Online retail is undoubtedly enjoying a moment in the sun. While dealerships shut up shop during the COVID-19 crisis, the need to reach people in their homes became vital. While online platforms could not fill the massive void left by more traditional means of sales, they provided the opportunity for a continued relationship between brands and consumers. But how will this affect the relationship between retailers and internet-based services?
During April, Autovista Group surveyed more than 400 of its customers from across Europe, to find out how COVID-19 had impacted their companies. In the first article highlighting the results, respondents didn’t expect any lasting change to consumers’ online purchasing behaviour. Only 27% considered it ‘likely’ that people would prefer to buy their next car online rather than visit a showroom. This figure dropped to 15% for Austria and 14% for Germany.
The trend was slightly different in the UK with 35% of respondents considering it likely, suggesting that dealers in the country are improving their digital readiness in response to COVD-19. The continued lockdown in the UK could be partly responsible for this, whereas Austria and Germany are now seeing lifted restrictions.
Meanwhile, a separate post-lockdown survey of about 30 dealers and importers in Switzerland, revealed a slightly different picture. Over 60% of respondents said online sales conversations had been used regularly for new-car sales. With regards to used-car sales, 55% said that online sales conversations had been used regularly. The majority of respondents then reported that these online conversations resulted in sales.
What do we mean by online retail?
When considering the influence of online retail platforms, Andreas Geilenbrügge, head of valuations and insights at Autovista group’s Schwacke, points out the importance of clearly defining what online portals are. The current online offerings are essentially specialised search engines that provide information and generate leads to either the portal owner or a neutral platform of listed partners like dealerships.
‘A real online sales portal with an integrated sales process covering all steps digitally is barely existent for a broad audience at the moment, as far as I know’, Geilenbrügge said. ‘At least in Germany, it lacks legal and technical provisions for what we call digitale Vertragsstrecke [digital contract route]’. Usually at a certain point in the sales process, a contract needs to be signed or identifying documents need to be produced.
While there has been work to reduce these steps, there is still some way to go. According to Autohaus, Europe’s biggest dealer group Emil Frey Gruppe recently launched its online car dealership. The platform bundles are drawn from all the company’s 80 plus retail branches in Germany. Software provider Pixleconcept is presenting dealerships with the ability to complete contracts with their customers digitally, without the need for paper.
‘In my opinion, we will see at first very few innovative portals – mainly third-party and dealer groups - that will pave the way and “motivate” others to follow soon,’ said Geilenbrügge. This process of digitalisation looks like it is accelerating and has certainly received a push from the COVID-19 crisis.
If this acceleration continues, it could mean a lasting change in the relationship between OEMs and dealerships. In a bid to increase interest and sales, OEMs may look to offer larger discounts, but this will need to be balanced against margin preservation. Selling directly to the consumer could then become a mainstay for manufacturers as they try to achieve this balance by cutting out intermediaries.
‘In the last months, more and more OEMs in France developed sales directly to customers through their online platforms,’ said Yoann Taitz, operations director at Autovista France. ‘As a result, tensions between OEMs and their network are more and more common.’
At present, there appears to be a race between big dealer groups, OEMs, finance and leasing companies as well as their party brokers. However, the amount of tension is totally dependant on how comfortable consumers are using online tools. In Germany, for example, Geilenbrügge outlines his belief that new cars alongside financing, leasing and subscription contracts actually represent the best chances for the success of online platforms.
However, there will still be challenges in the form of conservative attitudes towards modern payment systems. Geilenbrügge explains that in Germany many still insist on paying in cash, wanting to avoid transferring large amounts digitally as would be required for a car purchase. This can be coupled with car buyers often being older, showing disinterest in adopting totally online tools.
‘I do not expect a full purchase process to be done through online platforms, especially for new cars, as in the end, a customer will require a test drive,’ said Taitz. ‘For the used-car purchase process, some customers are only using the internet, however, this is still very limited.’
So while COVID-19 has pushed online tools as a necessity, demand to see a car in person, to test drive it and to speak face-to-face with the person holding the keys, might be too difficult to digitally replicate. But this isn’t to say that the online trends have not changed the way cars are sold, from the point of initiating a sale to facilitating sales in times of social distancing.
‘In the end, although automotive distribution still needs a point of sale, it has to improve and use digital applications and online platforms to sell better and to improve the customer experience. Online platforms will be more an evolution rather than a revolution,’ concluded Taitz.
Contributors to this article include: Andreas Geilenbrügge, head of valuations and insights at Autovista group’s Schwacke, Yoann Taitz, operations director at Autovista France and Robert Madas, valuations and insights manager for Austria and Switzerland at Autovista Group’s Eurotax.
Autovista Group’s latest thinking, insight, and data on the coronavirus pandemic and its impact on the automotive industry can be found here. Be the first to know when we publish something new - sign up to the Autovista Group Daily Brief.