According to the Society of Motor Manufacturers and Traders (SMMT), the UK automotive sector generates approximately £77.5bn in annual turnover, employing 814,000 people.
And while much has changed in the 131 years since Benz patented the automobile, in some ways the transaction experience hasn’t moved on so much. Some people would rather go to the dentist than a car dealer as they are terrified of getting ripped off or pressured.We’ve come a long way and consumer behaviours have changed and expectations have risen. As the iPhone turns ten-years-old, we cannot fathom or underestimate how much smartphones have changes the lives of consumers forever.
Digital is transforming all aspects of automotive
The dealer’s profits are being eroded by digital channels and they do not want the model of car buying to change for fear of change and further diminished profits. However, many startups and manufacturers are embracing change, regardless of the fact certain dealers don’t want change. Hyundai launched ‘Click to Buy’ in January this year, enabling users to purchase a new car online, with no haggling, at fixed prices.
Peugeot ‘Order Online’, which launched at the same time, lets you configure a car, secure a guaranteed part exchange valuation for your existing car, and fund the vehicle using a range of finance package deals, in around 30 minutes.Instant gratification
Carvana in the US has created a giant car vending machine, but this is testament to the fact in the US there is more space to have thousands of cars in stock, and this means you can buy a car and walk out with it nearly instantaneously. In the UK it is still relatively tricky to get a car without the hassle of negotiating, dealing with trade-ins, time spent visiting dealers, completing finance paper work, and then you need to come back later or on another day to get your car.
Profits are being squeezed from every angle
From a marketing point of view, Auto Trader and Google own the front door to used car sales in the UK. Auto Trader has an 83% share of time spent in its category, and has just reported a 19% increase in profits in its most recent results, making it clear it has a near monopoly on used car listings. According to ComScore, it is six times bigger than Gumtree and 18 times bigger than Motors.co.uk and RAC Cars combined, with over 250m advert views per month and 58.5m visits per month. It is more than three times the size of its nearest competitor, makes a massive £1,546 per month from each forecourt, and keeps putting up its prices.
One car dealer calls Google “gangsters”, because “you have to pay them”. However, an effective and co-ordinated approach to PPC can see big returns for those dealers wise enough to invest and be smart (a great example is Peugeot in Germany increasing traffic by 20% by ensuring Google PPC ads were relevant to location, click to call was leveraged and that it was co-ordinated across 140 dealer sites).
How do we feel about dealers?
The model of how users go about buying cars has to change to suit an era of ‘I want to know’, ‘I want to go’, ‘I want to do’ and ‘I want to buy’ moments (Google’s four key mobile moments).That things needs to change is not new thinking though. In 2015, Accenture surveyed 10,000 people in the US and a handful of other countries about buying cars. Results showed that, given the opportunity, they would consider making their entire purchasing process, from discovery through to finance, paperwork and delivery, all online.
In a world where the phone we carry in our pocket is more powerful than the computers that sent the first man to the moon, it’s amazing that these tasks are not more widely adapted for the online mindset.
As mentioned above, one company looking to capitalise on these behavioural changes is Carvana. It will now deliver purchased vehicles straight to your door and has changed its dealerships into life-size vending machines. These types of experiences, where dealers are being removed from the equation, are not yet widely adopted. I have no doubt that extrinsic factors and technologies are going to completely change the way that dealers operate and may threaten their role in the ecosystem, but for now, their place in a car buyer ’s purchasing process feels cemented in.
Change in store
The dealership experience has largely been unchanged for decades. Audi has VR units gathering dust. Some showrooms have nice digital displays, or touch screen experiences. The test drive is still pretty dumb. You give your driving license over and nothing happens with that data. You personalise and configure a car, and then pretty much have to repeat the process when in the showroom. If you say you want a used car at a luxury car dealer, you may be pointed towards a rainy forecourt.
Car buying and research has fundamentally shifted the journey into digital. BMW recently announced the average number of dealer visits per transaction is down to just 1.2, where previously it was three. People arrive fully armed with their spec, their facts and figures, and the want to transact more over electronic comms. The physical experience and time in-store whereby a dealer/sales person can upsell to ‘gap insurance’ or ‘paint protection’ is being diminished, and this will also squeeze profits. Building trust and enriching the car buying experience through tools and services is going to be key.With digital confidence from users at an all-time high, it will be interesting to see what further developments will happen in the automotive industry around digital disruption in both the physical and digital spaces. One thing is for certain. Change is coming.
David Skerrett is managing partner at Nimbletank. This article was originally published in The Drum Network's Auto Special.
This article is about: World, Auto Trader, Bmw, Peugeot, Audi, Hyundai, Marketing, Mobile, Digital, Auto, Agency
The full article can be found here.