New Report Asks: In the Post-Pandemic New Normal, Where Does Digital Retailing End?
New survey shows auto dealers offering digital retailing a warm, but partial, embrace – with ongoing challenges to full acceptance of an end-to-end digital path-to-purchase
There Is No Going Back!
Adoption of Digital Retailing (DR) continues to accelerate in US auto dealerships as the industry moves into a
new post-pandemic normal. While COVID related lockdowns and restrictions forced dealers to offer remote and ‘contactless’ buying experiences, today, it appears dealers are choosing to continue reinventing how they sell cars and improving their digital-path-to purchase experiences.
Indeed, their higher PVRs and Customer Satisfaction Scores for DR-initiated transactions, versus 2020, have no doubt helped spur the advancing evolution. But, as a new survey fielded by eLEND Solutions among dealers in Q3-2021 reveals, dealers are not yet ready to embrace the full digitization of the transaction. Despite the fact that most dealers allow customers to perform the initial car purchasing steps remotely, there is a significant drop off in ‘offered’ digital capabilities as the buyer moves closer to ‘the’ deal, i.e., digital F&I. Dealers remain hesitant to move F&I online, a major speed bump in the realization of ‘transactional’ digital retailing.
Also hindering DR’s potential, are the ongoing people/staffing challenges related to the operational changes required for a successful DR transformation. And, there is ongoing evidence that dealers have mixed views of the role of DR: 53% view it as the start of the deal (i.e., deal generation), while 47% view it as simply enhanced lead generation.
Despite the growing pains for dealers, consumers’ preference for digital buying experiences shows no signs of slowing down: almost 80% of dealers report that over 20% of their retailed unit sales were initiated via a DR tool or platform – and this is well past the height of the pandemic.
The survey results offer compelling evidence that dealers are bullish on the future of Digital Retailing, with nearly one in three dealers predicting that in just 3 years, 25% of all retail vehicle sales will be completed partially or fully online. The question, however, remains: when will dealers accept the inevitable evolution to an increasingly digital buying experience?
Digital Retailing Marches On – For the Most Part
The survey confirms that the accelerated adoption of digital path-to-purchase experiences brought on by the pandemic has not only continued, but also expanded. Over 84% of dealer respondents are embracing digital capabilities: they are either adding to (40%) or maintaining (22%) the DR capabilities/tools they offered during pandemic, have completed their digital transformation (10%) – or are starting out, currently adding DR capabilities after choosing not to offer any during the pandemic (12%).
Of the remaining 16%, 8% report that they are pulling back DR capabilities, with another 8% saying they never added DR capabilities during the pandemic and have no plans to add.
While it is key to note the positives, it is of interest that the 16% of dealers choosing not to evolve, extrapolated to the universe of Franchise dealers, directionally suggests ~2,700 new car dealers1 in the US offer very few, if any, digital buying capabilities or tools.
Gaps and Speed Bumps
Approximately two-thirds of dealers are allowing their customers to complete many steps of the car buying process online (e.g., appointment scheduling, price negotiation, calculate estimated payment, receive a trade-in estimate, applying for financing); but, for the more complex steps of the transaction, (e.g., F&I product selection, fundable finance term options, penny perfect deal structuring and contracting), the majority of dealers are still forcing/requiring a dealership visit.
The Surprise News?
Approximately one-third of responding dealers reported not offering some of the most basic buying conveniences online… shopping cart (select/save vehicles of interest), payment calculators, credit app w/ instant credit decisions, appointment scheduling, trade tools, etc.
Not offering the digital capabilities to perform some of the buying basics highlights an opportunity for dealers to think about the consumer and what they want to accomplish. How do they get from point A to B to C? – and then digitally enable those steps to be accomplished.
The Good News?
Nearly 1 in every 2 dealer respondents (46%) report moving their DR ‘end point’ further down funnel since COVID-19 lockdowns and restrictions have eased – and 41% report no change in the digital buying capabilities they offer. Only 13% of dealers reported reducing the number of buying steps able to be completed online – an indication the majority of the industry has been permanently changed with no going back.
However, that advance is hitting a major speed bump in terms of achieving a true end-to-end buying experience. While over one-third of respondents report that their relative finish (end point of digital transaction process) runs through F&I (including lender selection and F&I product selection), 17% of dealers stop their digital path at a fundable, transactable deal structure; 23% finish at a ‘qualified’ deal structure; and 24% finish their digital path-to-purchase experience at the very first pencil. Only 9% continue the digital journey through vehicle pick-up/delivery.
If the longer-term end goal for the retail automotive industry is true eCommerce, the industry will need to find technologies and re-engineer business models in ways that make it easier for consumers to complete 100% of the transaction without having to visit a dealership.
It’s the People, People!!
The biggest barriers to a successful DR transformation, as reported by dealers in the survey, are people issues i.e., lack of leadership, resistance to change, staffing mismatches, recruitment issues. Technology comes in second, followed by process changes, specifically re-engineering operations and workflows.
For OEMs and dealers, selecting and onboarding the necessary digital retail technology to deliver a frictionless experience that doesn’t require a visit to the dealership is also a massive undertaking, and this is reflected in the survey responses. Finding the right technology to power the entire transaction online is the single biggest ‘technology’ challenge cited: 73% say it is the, or one of the, top issues with technology, while 56% cite missing or problematic online to in-store integrations and/or workflows as one of or the top issues.
Elevated Buying Experiences Pay Off
Because DR makes the process easier and more efficient for both buyers and dealers, it is no surprise that transaction times are improved. DR’s efficiency means less time spent at the dealership for consumers, contributing to higher CSIs, and, for the dealers, it means increased sales throughput, reduced costs and increased closing ratios – possibly contributing to this year’s record dealership profits.
Hardcore Resisters: the More Things Change, the More they Stay the Same?
The split between dealers thinking that DR is lead gen versus deal gen is exactly the same as in 2020 – 53% think it is the start of the deal, 47% see it as just another kind of lead gen.
So, what does this indicate? One half of dealers view DR as a means to drive sales online. The other half use their website solely as a tool to drive consumers to the dealership/showroom.
Endgame? Dealers can be slow to evolve, and weaning them off their addiction to, and obsession with, lead generation will take a minute.
It took hardcore resisters decades to come to terms with the Internet and those who were unwilling to evolve were left behind. This likely will not be true of DR. Nearly 80% of dealers report that past the height of the pandemic, DR-initiated transactions represented over 20% of their total retailed units, with 30% saying that DR-initiated deals represented at least 50% of their sales – a striking number.
When asked to look into the future, the majority of dealers (57%) believe that at least 20% of all vehicle transactions will be completed partially or fully online by 2025, with nearly a third saying over 25% of all transactions will be digital. Pre-pandemic, online car sales share was about 4.2%.2
As the survey results underscore, the majority of dealers are realizing the pain of not changing is greater than the pain of changing. They are accepting that now is the time to reinvent the way cars are sold, and are embracing the inevitable evolution to an increasingly digital and customer-centric sales experience – one that will, and must, include advancing further down the digital path to purchase.
About eLEND Solutions
eLEND SolutionsTM (DealerCentric rebranded) is an automotive FinTech company focused on providing a simplified vehicle purchase process for the retail automotive industry. The platform specializes in online and in-store digital credit, identity and finance solutions – enabling a more efficient, faster moving sales and finance workflow that sells more cars at higher profits in less time – benefiting dealers, lenders and consumers. For more information, please visit www.elendsolutions.com.
1 That indicates that nearly 1/5 of the industry could be unwilling to evolve, even in a pandemic. Assuming a universe of ~17,000 franchise dealers, that equates to roughly 2,700 new car dealers who offer little or NO DR tools.
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