Industries, in general, are aware of the need to address a variety of challenges presented by the digital world in which we now live, not least the vehicle retailing sector where Covid-19 has disrupted the world faster, and to a greater extent, than any technology possibly could have done.
Globally, as lockdowns wax and wane, there have been strong moves to online working and shopping, as well as online meetings. We are also consuming information as never before, with the online space allowing anyone access to instant mass data. A general fear of going out in the world has also positioned online as a safe haven for some people
With the move to digital for all kinds of information and purchases, it is no surprise then that searches and enquiries for cars on the internet have followed suit. Engaging online eliminates inefficiencies, such as a potential car buyer needing to go to 10 dealers to see different models of vehicles or to obtain relevant brochures.
However, digital transactions are not finding nearly as much favour in rural areas compared to the metros. One of our rural dealers estimates that 90% of their physical interactions are not pre-empted by any digital engagement whatsoever. Furthermore, physical face-to-face interaction is important for the first-time buyer. Digital will be more relevant in repeat purchases.
Digital is definitely a new and relevant foundation for any sales transaction and is being embraced by the automotive sector. Data from a pre-Covid-19 NADA survey in the US showed that online research accounted for 73% of all initial client vehicle purchasing activities across all buying groups, with Facebook leading from Google with other peer-to-peer reviews a close second.
Based on US data, consumers however not only want to be able to select a vehicle and ‘build to order’ but also want a human interface to reply to queries within two hours. The same applies in South Africa.
Because a vehicle is an expensive purchase and means a large commitment, customers ideally want a person to walk them through the various aspects of the purchasing transaction, such as options, vehicle availability, finance, insurance (F&I) and other matters. They also generally want to touch and feel what they are buying. It is these things that separates buying a vehicle from buying other items online.
This is particularly true with the latest high-tech models, such as electrified vehicles. They are generally expensive, and buyers want to see them in the metal first. You cannot just buy a car like that online and expect to have it delivered to your door. There are many layers to the vehicle buying process, especially with the complication of recent technology. It will be a customer satisfaction disaster if it is not physically shopped and here the dealer channel has a critical role to play
A car and its accessories, funding and protection have become unique packages that require effective managing in the digital space, and this is where the biggest challenge lies in completing a full transaction online.
A vehicle is different from most items on Amazon or Takealot, in that it has almost limitless options in terms of accessories and value-adding items for safety and investment protection. There is also the need for workshops, parts departments, viewing of vehicles and arranging of finance and insurance (F&I) in the motor retailing space. It is also most likely to be a financed item, and this is where additional complications and difficulties arise.
Aspirational choices are often limited by what a finance house will approve in terms of finance, with each bank having different qualifying criteria and each customer being unique in how they may be scored to obtain loan approval. There is often a great deal of back-and-forth between F&I and sales to rework the deal in the traditional dealer setting. A deal can be restructured five to 100 times before it is finalised, and the entire process is almost impossible to create seamlessly online.
With all this in mind, bricks and mortar dealerships will highly likely be part of the vehicle retailing scene in South Africa for many years to come, although dealers will become omnichannel and offer consumers on- and off-line solutions. Malls are reporting comparatively low vacancy rates and high footfall, even in the ongoing pandemic, while globally there is a steady move to bring previously online-only businesses such as Casper, Bonobos, Warby Parker and even Amazon and Google in the US into the offline world.
What is likely to change is the need for overly lavish premises, except possibly for luxury vehicle brands, and the layout of dealerships will likely change with the move to electric vehicles and as other technologies gain momentum.
Importantly, there is also a challenge in meeting the requirements of the Electronic Communications and Transaction Act (ECTA) which makes it difficult to finalise a deal in its entirety online. This will require changes to the ECTA.
Digitalisation for vehicle retailing is inevitable, and it will be incorporated in future developments of dealer networks. Embraced in the right way, by understanding how online can improve and aid offline activities, will be the key to the sustainability of retail motor businesses.
Ignoring it, or alternatively trying to switch all activities to digital, will be a big mistake and one of the biggest threats to the survival of dealerships in the future.
However, selling new cars is only one element of what a dealership provides to its customers. There are so many more parts to the whole of what a dealer offers.