It took a pandemic to drag the car-buying process into the 21st century — and consumers are never going back.
Why it matters: After COVID-19, consumers can now buy cars online as they do almost everything else, with the ability to complete the entire transaction digitally and take delivery without ever setting foot in a showroom.
The big picture: While most other commercial transactions — even banking — went digital years ago, car-buying remained a stubbornly low-tech, often aggravating, process.
- But when the public health crisis paralyzed their industry, car dealers had little choice but to embrace the disruptive changes they'd been resisting for decades.
- They scrambled to install new software that would let customers browse inventory, apply for credit and choose a payment schedule.
- And they offered virtual test drives to demonstrate in-car technology and arranged "touchless" vehicle pickup and delivery.
The backstory: Technology entrepreneurs — and sometimes even carmakers themselves — have tried for years to modernize the car-buying process.
- In the early 2000s, Ford even tried (unsuccessfully) to buy and operate dealerships in competition with its independently franchised dealers, thinking it could run them better.
- Since then, newcomers have tried various digital retailing efforts, but none with any great success.
- Car dealers, protected by state franchise laws, often were the biggest obstacles to change.
- Tesla's direct-to-consumer sales model, for example, met fierce resistance from dealers in many states, requiring lengthy court battles or negotiated settlements with state governments, though Tesla eventually won.
For the record: Some progressive dealers have been exploring online sales initiatives for several years.
- But many worried their profit margins would suffer if they weren't able to upsell buyers with extras like extended warranties or plush floor mats.
- It turns out that dealers are more profitable than ever since shifting to online sales, Krebs noted.
- "The deal happens faster because the consumer knows exactly what they want, and there's not a lot of haggling on the price," she said.
- Yes, but: Prices are high also because inventories are limited due to COVID-related factory shutdowns earlier in the year.
The state of play: Dealers are now touting their "omnichannel" tech strategy to provide consumers a seamless buying experience whether they shop online, in store or both.
- Nissan, for example, just launched a new online shopping platform called Nissan@home that lets prospective buyers schedule a test drive, sign the paperwork and arrange delivery of their new vehicle from their computer or mobile device.
- Sonic Automotive, a large publicly traded dealer group, recently hired its first chief digital officer and vp of e-commerce with the goal of doubling its annual revenue by 2025.
The bottom line: A three or four-hour showroom visit can be compressed into a 15-minute online purchase.