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Retail collapses as auto industry accelerates

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Why have the auto industry and dealers been able to pivot and not retail?

Thinking back to before COVID-19, I think it’s safe to say that buying a car was perhaps one of the most archaic experiences around.

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While much of retailing has gone more digital over the past two decades, with the exception of the ability to search for cars online, much of the buying of cars was still done ‘home’. ‘old’: in person, from shopping to test drives. funding.

At the onset of the pandemic, many car dealerships closed and car buying paused, forcing the hand of many dealers who had been slow to integrate digital options for customers. A McKinsey report found that in April, in the United States, car purchases had fallen by 47%.

However, in the months that followed, cars began to matter even more to consumers than before COVID-19, as drivers said they extended their use to travel in order to “connect with the outside world in a safe manner. “, according to the study.

AXIOS reported US factory orders rose 6.2% in June, after gaining 7.7% in May, more than expected and spurred by a surge in demand for motor vehicles. Used car sales have also exploded, with JD Power report car dealers sold 2.1 million used vehicles in May and June, 9% more than in the same two months in 2019. Edmunds found that franchised car dealers sold 1.2 million used cars and trucks in June alone, which was more than in any month since. 2007.

The nature of consumer expectations in the pandemic world has prompted dealers to quickly embrace a digital, socially distanced, and contactless approach in order not only to survive, but also to thrive. In this second in a series of articles on how COVID-19 has fueled innovations, I will examine the approaches taken by online and physical car dealerships to shed light on what retailers need to do better.

In my last itemI noted that despite a similar growing demand in digital retail during COVID-19, there has been very little innovation when it comes to targeting and personalizing experiences for customers who have been driven by line out of necessity. In contrast, car dealerships and online car sales websites have embraced the new kind of buyer and found ways to meet their short and long term expectations.

Paul Hennessy, CEO of Vroom, an online car sales platform, caught it best when it mentionned that serving consumers digitally goes beyond just having a website, and that auto dealers need to “break out of their old paradigm of thinking about profitability first and starting by understanding end-to-end omnichannel journeys. bout their customers to buy cars ”.

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Invest in upgrading online research

The coronavirus has fueled a shift in the desire to buy vehicles online. While online sales still represent only about 1% of the roughly $ 840 billion Americans spend on used cars annually, a investigation by CarGurus Inc, an online marketplace for new and used cars, found that 61% of people buying cars were ready to buy online. This compares to 32% before the pandemic. According to at Dealer.com 82% of car buyers interact with search results on a dealership’s website.

In response to the changing needs of consumers due to the pandemic, online marketplaces have invested to make the process faster, easier, and more intuitive, while expanding inventory. Dealer.com recently ad an improved search experience that better guides buyers through inventory with autocomplete suggestions, larger photos, responsive listings and personalized pageviews, making it easier for buyers to find the car they want. ‘they search, from any device, anywhere. Rival Vroum ad it had spent around $ 1 billion on its online platform and inventory so far, and plans to sell auto parts or insurance, or serve as a marketplace for small auto retailers. Carvana has spent $ 2 billion since 2013 to roll out its digital network which includes technology for valuing trade-in vehicles, financing auto loans, changing car titles in U.S. states, storing and delivering thousands. vehicles to customers’ homes.

Use data to personalize experiences

Personalization is the future of not only automotive retail, but retail as a whole. An UNLOCK key engages customers throughout the entire lifecycle of your product – from inception to checkout. Matthew Gold, chief strategy officer for Cars.com, noted in a interview with McKinsey that as the industry progresses over the next 10 years, the time that customers spend buying a car will decrease, with algorithms doing much of their research, based on data provided by the customer. This will inspire better search engine recommendations and the experience will be personalized for an individual shopper.

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Customer service switches to AI Chat

With many resellers downsizing, chatbots are starting to gain momentum. Cars.com noted in a recent Release that Dealer Inspire has seen significant increases in its AI-powered chat tool, Conversations. According to the article, the chatbot answers basic questions like opening a dealership, how to make an appointment, and even offers vehicle trade-in values ​​before turning the conversation over to a dealership employee for questions. more detailed information. On a month-over-month basis, online chat conversations between buyers and resellers increased 23% in April and 38% in May, and the company expects increased demand from buyers for instant and real-time communication tools that allow them to collect the necessary information at home and on the move. faster and deeper into the buying process in a simplified and frictionless way. the The key point to remember now is to ELEVATE your employees by leveraging technology to perform repetitive heavy lifting.

Social distancing road tests

Cars have become another form of PPE, allowing homeowners to get out of the house safely. However, that meant finding new ways to provide buyers with a positive experience while meeting safety requirements. According to this CNBC history, dealerships began bringing cars to potential buyers at no cost so they could take a test drive from their homes, clean the car before the driver entered, and socialize. CarMax, the # 1 used car retail chain, has launched “contactless” curbside pickup during the pandemic, a popular choice for online shoppers. It also offers free home delivery up to 60 miles (97 km) from a dealership. But home delivery can be expensive, and some state regulations don’t allow it, according to at CarMax.

Perhaps this is the reason why more and more dealers have started offering virtual tours and test drives online. According to at Automotive News, through virtual tours and test drives, dealers are embracing a single point of connection with buyers, adding an interactive element to online research. Panoramic videos allow viewers to navigate the booths on their mobile devices or computers during presentations and gain insight into how technologies such as adaptive cruise control work in real conditions.

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Make an offer and online financing

The pandemic has also changed the sales process for buying a car. What was once an in-person process starting with a price haggling and ending with a lengthy finance conversation, endless paperwork, and approvals that could keep you at the dealership for hours, is moving all online. .

Karl Brauer, executive editor for Autotrader and Kelley Blue Book, recently Explain at CNBC that once a car buyer has the market value range in mind, it is entirely possible to reach out to the dealers who have the car you are interested in and are offering the price they want. “As long as you’re clear on the price you want to pay, it doesn’t really matter how you communicate: you can email them, you can text them, you can call them.” Your conversation can be as simple as, “I know the market value of this car is $ 28,700. I’m talking to a few dealers. I am prepared to pay $ 27,000, ”he explains.

He noted that when it comes to buying the car, much, if not all, of the transaction can be done online. A buyer can now apply for financing online and even go through the trade-in process online if they are considering trading in their old car. Depending on state laws, you may still need to physically sign some documents, but because a car can be delivered directly to a buyer’s home, the documents can be completed at that time as needed.

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The car buying experience is still a retail experience defined by touchpoints. Unlike traditional retailers, pandemic lockdowns have forced car dealerships to adapt to the convenience, speed, safety and personalization of the car buying experience, integrating new digital technologies.

Like auto retailers, retailers as a whole need to understand customers’ expectations for the shopping experience and invest in new technologies that give them better control in a convenient, intuitive, frictionless and, in a way. a predictable, more secure future.