Leasing Professionals

Catherine Hutt warns that auto buyers are turning away from “gym palaces with forecourts”

Hutt Catherine

Are car buyers moving to acquire cars online?

The answer to that question depends on who you ask.

If you ask a car dealer the answer is most likely to be, “No, not for many years.”

If you ask a car manufacturer the majority say, “Yes, we’re developing an online retail platform.”

If you ask me, the answer is, “They already are.”

I recently spent a day at the AM Digital Marketing Conference, which was aimed at car dealers. The conversation often came back to the question “Will people really buy cars online?”

The viewpoints at this event were, at best, varied and at worst, disappointingly out of touch in some cases. During the debates, many dealers expressed the opinion that people would not trust a website enough to commit to their second most valuable purchase online.

I was shocked at how far this opinion was from what the manufacturers are thinking, let alone how far it is from what’s actually happening in the real world.

(At this point I should highlight the few forward thinking dealers who are embracing online sale—well done you and keep doing what you’re doing).

Wise words of caution

Julian Wheway, director of product for Cox Automotive (part of the Manheim Group), gave a highly insightful master class, during which he politely described how dealerships were “better than ever” these days: the flow in store has been carefully thought through, digital technology has been installed to enhance the customer experience, and back office systems are (mostly) integrated so that the purchase process is seamless.

Wheway, however, had some wise words of caution. We should not feel invincible just because we are now operating in these “gym palaces with forecourts”.

Do customers really value these beautiful stores? Will they seek out the opportunity to visit them? Or will we continue to give them little or no choice if they want to buy a car without visiting a physical store?

Some customers may want to visit a dealer. Some may enjoy giving up their Saturday to kick tyres and chat about paint options. Others may not.

The important thing is that the customer should have the choice to shop in whichever way suits them best. For those who have the time and inclination to visit a car dealership, we should provide the first-class experience they expect. Equally, if they prefer to stay at home, we still need to meet their expectations if we are to have any chance of selling to them.

So why don’t dealers think people will buy cars online?

Is it because there were unfulfilled promises in the past?

In 1999, Vauxhall had a TV advert that promoted the fact that you could buy an Astra online. Yet, some 17 years later we are still talking about how online sales are about to take off. Is this why dealers do not believe people will buy cars online?

Even if that’s the case, I do not agree. Just because something did not happen then, does not mean it will not happen now. Times have changed. The world has changed. The way we live, let alone shop, has changed.

Let’s break it down into five things you need in order for an online sale to happen:

• Internet access;

• A device that can connect to the internet;

• Knowledge of how to buy online;

• Trust in the system; and• Websites to buy from.

If we compare the stage these five factors were at in 1999 to where they are today, and then fast forward to the next 17 years, we can see how the building blocks for online retail are evolving.

In 1999, only desktops and a few “mobile cellular devices” were available for the general public to connect to the internet. The iPhone only launched in 2007, followed by the iPad in 2010. The number of internet-enabled devices is now 6.4 billion globally and is projected to be 20.8 billion by 20201.

The number of internet users has also grown, from 4.6% of the global population in 1999 to more than 40% today. This trend seems to be skyrocketing, with mobile internet penetration forecast to reach at least 71% by 20193. So by 2033, I think it’s fair to say “access to the internet” will not be a significant barrier to online retail.

Shopping online has gone through the roof in the past couple of decades. In 1999, e-Commerce accounted for just 0.6% of sales in the US. That figure surged to 7% in 2015. Due to this increase in online shopping habits, the general public has learned how to shop online and built up a level of trust in the system. Yes, there are still sceptics, but the balance has tipped in a positive direction and will only continue thanks to the rise of peer-to-peer reviews and transparent reporting. Peer-to-peer reviews and online communities are commonplace and they reinforce the trust to the point where 90% of the consumers say they would trust an online review.

Last but not least, what about the websites? Have they moved on at all since 1999?

Just a little…..

From very basic functionality and visual effects, web design has grown into a $20.1 billion dollar industry in the US alone. Online retail now gives the customer even more choice and detail than a face-to-face experience could. 3D car configurators, for instance, can demonstrate the stitching options for the interior of a car in far more detail than the naked eye could see. Add in the fact that the customer can now configure the car and buy the finance package, insurance, extended warranty etc. online, and suddenly we can see that websites are now far better equipped to support online sales than ever before.

The used car market has operated with online platforms for some time. Autotrader.co.uk, Motors.co.uk, and eBay.com are just some examples of websites that should be familiar to anyone in the automotive industry. New cars are also being sold online: BMW launched online sales for its entire range in January 201610 and independent websites, aggregators, such as Carwow, which started selling cars online in the United Kingdom in 2013, and will expand to Germany this year, are shaking up the industry. Other aggregators, such as Tootle.co.uk, CarSpring.co.uk, and Beepi.com are moving online retail a step further by adopting a C2C (customer-to-customer or peer-to-peer) approach, and in Tootle’s case C2B (customer to business/dealer).

So we can see the world has moved on since 1999. We have internet access, devices to connect to the internet, knowledge and trust to buy online, and finally there are websites that allow us to purchase online.

And do we expect these trends to do a U-turn between now and 2033? I do not think so.

The trap that dealers are in danger of falling into—which is something all marketers and salespeople should avoid as a golden rule—is to assume that everyone thinks like they do. In fact, anyone over the age of 20 needs to be careful not to assume that they think the same way as the next Generation, Gen Z.

Gen Z were born after 1995. Even if they had been born and could understand the Vauxhall advert in 1999, they might not have been surprised or particularly impressed with the fancy new claims of online sales. They do not know a world without the internet. Most of them do not know life without a mobile phone. In fact, 53% of them would rather lose their sense of smell than their smartphone. They think differently. They live differently. They buy differently.

Gen Z is eligible to drive now, or soon will be. Yet are they choosing to? The number of 17-20 year olds applying for a driving licence in the UK fell from 41% in 1999 to 29% in 2014. If that trend continues, by 2033 we could expect just 12-14% of the 17-20 year olds to apply for a driving licence. And if we want a chance of getting that generation interested in car ownership at all, we need to start now.

Now is the time think ahead. To imagine what the world will look like in 2033. To understand how the next generation thinks. To know what they expect from a car buying experience. To prepare for what we think is a couple of decades away… because it might just happen far, far sooner than we think.

So will people buy cars online?

They already are and will continue to do so, more and more frequently.

We live in a world where technology and the consumer dictate what happens next. All we can do is listen, learn, and respond as swiftly as possible… if we want to survive.

Catherine Hutt is a principal consultant at Frost & Sullivan