Frequent articles point to pandemic selling pushing more customers online and seeking touch-free transactions. It seems each week a new brand is launching an online version of “click to buy”. In some cases entire inventories are going online with a view to create transparency for customers.
But are we really transacting online or just getting better at advertising new cars?
Let’s address the elephant in the room. We have taught generations of customers that if you visit a showroom and you are ready to buy, then you can haggle a great “deal” with a car salesperson.
We have conditioned customers to pretend disinterest so they don’t appear too emotionally attached and to visit three dealerships to get the best price; there are even books and videos on how to negotiate a better car deal. Your job as a customer is to not only find a new car but to save thousands of dollars.
Conversely, dealers have been taught to hold stock lists and discounts as hostage in order to achieve a visit from a customer and gain commitment to hopefully be able to convert them to a sale.
Finally, OEMs have locked new car pricing online to RRP in order to protect the brand and try toavoid a race to the bottom on pricing.
These are all valid strategies and have been the mode of operating for decades so do we really think a pandemic is going to change all of this overnight?
Ultimately for a customer today to achieve a “buy price” they have to go off-line. In recent advances in online, a customer can configure a new car, price in options and even search stock. Online trade in tools exist to handle a firm valuation price and they can even secure a new vehicle with a deposit.
However, the final transaction is still an old school negotiation between the customer and the dealer. This is the equivalent of ordering home delivery but having to still go to the restaurant to eat.
The only way we can truly go on-line is to move toward a single pricing model and this means a change in distribution model. There are many arguments for and against “agency models” however we cannot move to full e-commerce without it. I am not going to present the “for and against” arguments here however we only have to look at the Tesla model to see it in action.
When you move to single pricing then you open up online vehicle buying in its purest form.
Let me be clear, dealers will be more relevant than ever under a single price model and, rather be the place to play a game to get a better price, they will become experience centres where you can truly immerse yourself in a product.
Think Apple. They will be temples to the brand. The place you go to start looking at a new purchase or a quick visit to validate your decision. After all, there are still a lot of customers that want to deal with a person, not a computer.
Highly effective product presentations and test drives will be more important than ever and the time saved in the negotiation and close can be spent in building value into the product and demonstrating to the customer how this vehicle will truly serve their needs.
We also need to recognise that, as much as we would love every customer to visit our brand temples and to allow us to engage, some would rather research and buy online. We have all had the customer who never test drives but is happy to purchase.
I have read reports that there is a concern that customers will end up paying more under a single pricing model. I do not believe this is the case. Sure, the customer who comes in on 30 June to buy and has spent months shopping dealers against each other may not get as good a deal but, on the whole, the pricing that is set will need to be competitive or customer will not buy
As for Mr 30 June, there is always the demo to sell at a large discount. For those seeking to buy a “discount” rather than a car it may be frustrating; but do we really want that deal anyway?
We need to be asking the right questions:
- Do our customers want to be able to fully transact online? What’s in it for them? Haggle free buying?
- Is there a profitable model for the dealer and the OEM whilst being able to fully transact online? What expenses can be saved?
- Do these answers align with a shift of distribution model?
- Is this current investment I am making online making me more profitable or just making it prettier for our customers to do research?
What is evident is that external parties are looking at our industry and are curious at the way we do things. This is a recipe for disruption and is being accelerated by COVID. Our Motor Industry Services team receives regular inquiries for strategy advisory from external companies wanting to disrupt our industry.
Meanwhile, we congratulate dealers, OEMs, agencies and suppliers for the work done in the online space during COVID. Certainly on-line service levels have increased and the speed at which brands have released website updates to allow deposits etc has been extraordinary.
But my concern is that the online process is still colliding with the “elephant” and undoing a lot of great work.
If we truly want to start selling cars online, OEMs and dealers need to work together towards a new model which will return profit to the new vehicle department and bring delight and joy to customers.
I think it fair to say that almost all new vehicle purchases start online but very few end online.
Joel Shashoua is director, Motor Industry Services at KPMG
By Joel Shashoua