Digital retailing has been around for what seems like forever. But industry adoption has been less than brisk — at least, until now. As with every other industry the world over, the pandemic changed the way the automotive industry conducts business, mostly accelerating trends already present and in some other ways that are still to be determined. One way the automotive industry has changed has been the explosive importance and adoption of digital retailing, which for many introduced new challenges to their day-to-day workflows.
One way the automotive industry has changed has been the explosive importance and adoption of digital retailing, which for many introduced new challenges to their day-to-day workflows.
Prior to 2020, many dealers struggled with the “why” of digital retailing. Some had introduced a few lightweight digital tools for appointment setting or monitoring of showroom traffic, but they did not see the need to embrace investing in a full digital experience. Again, COVID changed that mindset. Faced with various forms of lockdowns and social restrictions, dealers rushed to onboard digital tools as a means to survive. Many industry analysts have suggested that we made 10 years progress in as many months when it comes to digital retailing. However, it is not just as simple as buying a product, flipping a switch and sitting back, as dealerships quickly found out. There are many obstacles or barriers to be overcome in this transformation to digital, but I believe they can be largely overcome with a two-part interdependent strategy.
1. Develop a Plan
Like everything we do in business and particularly when it requires a significant investment of both time and capital, we need to develop a plan — one with defined objectives, guiding principles, and a well-considered strategy. This the first barrier to overcome — to create a true digital experience for a customer who is comparing their car shopping experience with an “Amazon-like experience.” This requires identifying and customizing all of the customer touch points as they work their way through the digital sales funnel. The plan must focus on the areas of transparency and flexibility from a customer perspective and it must anticipate their needs with every click of the mouse. In addition, your strategy must make sure that all of the digital components in use work well together to provide a seamless experience for the customer, especially when there may be two or more vendors involved on the back end. While time consuming and somewhat daunting, developing a plan is the necessary first step in truly transforming the sales and F&I process.
2. Change the Dealership Retail Model
The second and perhaps more difficult barrier to fully embracing an end-to-end digital platform is changing your retail model. Dealers need to examine sales processes and employee roles, bringing each in line with this new digital platform. We must accept a new mindset that allows the customer to negotiate prices online. In similar fashion, financing options and F&I product choices must be a part of that process. This is a difficult change for many, but we have to keep in mind that we cannot depend on what worked in years past. The world has changed and so too have customers’ expectations when it comes to purchasing an automobile. The ultimate goal should continue to be a platform where the customer and the salesperson work the deal together, but in a virtual environment.
While this two-part strategy presents a lot of challenges for dealerships, the end result is known. Customer satisfaction rates with regards to automobile purchases were higher in 2020 despite record retail profits. Customers were also more likely to buy F&I products, 20% more likely according to JD Power, while conducting purchase transactions digitally. With this knowledge, you can develop your strategy and implementation with confidence and create a business model that will thrive when digital retailing becomes known as just retailing.
Paul McCarthy is AUL Corp.’s senior vice president of agency and dealer sales.