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Fuel for Thought: Retail revolution – Real or not?

18 May 2021

Automotive Monthly Newsletter and Podcast
This month's theme: Retail revolution? - Real or not?

Listen to this podcast

May Podcast: Kristen Balasia, Thomas Libby, Ian McIlravey and our special guest Michelle Denogean; CMO at Roadster, talk about the changing retail model and consumer behaviors accelerated by COVID-19 lockdown.

For decades, the goal of automakers the world over has been to make buying and servicing your vehicle with their network as convenient as possible by building more dealers in the right locations to maximize coverage. The advent of online automotive retailing has called this model into question, and in a 2020 study by IHS Markit of online vehicle purchases during the peak of COVID-19 in the United States, 64% of consumers who bought a car online cited convenience as the primary reason.

Online sales came to the forefront during 2020 out of necessity, but despite the return to normalcy, it appears this trend is only accelerating. Roadster, a leader in e-commerce, conducted a study of 1,008 customers who bought at 304 retailers across six months ending in March 2021. About 86% of buyers had some portion of the transaction take place online, up 42 basis points over September 2020. They also found that online customers are over 50% more likely to add finance and insurance to the deal online compared with in-person shoppers.

So, digital presence matters. It is a growing channel that can drive increased profitability, but does that mean physical locations are now less important or will become obsolete? No, but they must adapt.

It means auto retailers are faced with a unique opportunity to provide the best of both worlds if they can offer convenient digital solutions to shop while adding value to the purchasing experience online and in touchpoints that are done in-person. Roadster notes that 89% of online shoppers still interact with dealer staff via live chats, and 80% of those who bought 100% online were guided in some way during configuration, credit inquiries, etc. Retailers must plan their staffing capacity to account for in-person and online guidance because at the core people still want to buy from people.

Providing a guided experience, even when online, builds trust and creates a personal connection that can be used to drive loyalty. Dealer loyalty in the US is at a five-year low in 2021 at 35.8%, after peaking in 2018 at 37.4%, but vehicle make loyalty remains quite stable. This means intra-brand competition is increasing and dealers must look for opportunities to grow loyalty and monitor for warning signs of defection.

It is becoming increasingly important to create a seamless omni-channel purchasing experience to draw customers in and build trust. Consumers will expect to leverage the convenience of online tools, while getting real value out of time spent visiting the dealership, or having the dealership come to them with mobile test drives and service pickup. Dealer network optimization no longer just means minimizing drive time, it also requires a critical look at the mix of retail formats and functions across the network to bring the greatest value throughout the vehicle buying journey and beyond.

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