LEAPING INTO DIGITAL RETAIL
Post-COVID-19 customer journey
Falling in line with the ‘new normal’
Dealer attitudes pre-COVID-19
Looking back to the start of the year, more than half (54%) of dealers in the February Cox Automotive sentiment survey said they expected conditions to toughen in 2020. Fewer than one in five (18%) expressed confidence that margins would improve. While almost two thirds (60%) had been confident in economic improvement in January, just under a quarter (24%) felt the same way in the second month of 2020.
The Modix sentiment survey saw three fifths (59%) of dealers highlight an increase in online activity in January compared with the previous year, with nearly two fifths (36%) suggesting the channel had increased in February as Covid-19 started to make itself felt in the UK market. In addition, the NextGear Capital sentiment survey in March 2020 highlighted more than half of dealers planned to invest in additional stock, marketing, and social media tools to support their business plans.
Looking at the market, the NFDA Dealer Attitude Survey for Winter 2019/20 highlighted several key themes including concerns around profit return and return on capital. Broadly speaking, relationships with manufacturers were seen in positive terms, with an increase in score over the same survey in mid-2019.
Overall, results suggested an optimistic relationship between dealers and manufacturers, with a perception that the views and experience of the networks was being considered when manufacturers were planning for the coming year.
Review the NFDA Dealer Attitude Survey Winter 2019/2020 (opens in PDF).
In March 2020, the UK market was turned upside down, with lockdown measures closing dealerships fully for the following two months, and with staggered openings and regional measures after that point. A further English lockdown in November 2020, bookended by regional restrictions, has impacted further on physical dealership environments.
"A healthy relationship between dealers and manufacturers is vital to the success of our industry. It is imperative that manufacturers and dealers maintain an open channel of communication to discuss the main issues affecting businesses and continue to cooperate to allow the automotive sector to thrive through a period of changes and challenges."
Sue Robinson, Chief Executive of the NFDA - March 2020
The impact of COVID-19, so far
In late May 2020, as dealers prepared to open following an easing of the first set of national lockdown measures, they were invited to provide their thoughts through the Cox Automotive sentiment survey. The results paint a picture of changing consumer behaviour and a shift in both the retail and wholesale markets to embrace more digital options. Three quarters of those polled (74%) felt there would be a fundamental change in how consumers use and choose their cars in the short-term.
During the same period, data from Auto Trader UK and other online listings sites, showed a rapid acceleration in consumer web traffic. In the short term, at least, and with the introduction of click and collect as well as delivery, consumers were willing to purchase their vehicle online. Indeed, the roll-out of sophisticated e-commerce platforms, video walkarounds and more integrated customer communication tools, prompted increased confidence in buying cars from the comfort and safety of home.
According to data from the NFDA, during the first two weeks following the initial lockdown, most dealers saw an increase in online sales enquiries (80.2%), as well as online sales (66.7%). By August, 58.1% of dealers saw an increase in new car online enquiries, with 60% stating a marginal or relevant increase in new car sales conversions.
Review the full results of the NFDA Post-Lockdown Automotive Retail Survey - June and July (opens as PDF) and NFDA Post-Lockdown Automotive Retail Survey – August (opens as web page).
"It’s clear that the offline to online purchasing journey for consumers has accelerated during 2020 and at Cazoo we have seen the benefit of this directly. This has allowed us to strengthen our relationships with our purchasing partners and this will continue as we look to grow throughout 2021."
Rishi Patel, Head of Purchasing at Cazoo
Behaviour change: a perspective from the US
Although digital retailing is a more established feature of the market in the US compared to the UK the team at Cox Automotive in the US has highlighted three areas of change.
First, the pandemic has accelerated the adoption of online retailing. Almost half (47%) of car buyers surveyed during the pandemic completed more of the process online than the last time they bought a vehicle. Three fifths (60%) want to do more purchase steps online and 80% of franchise dealers in the US expect to see more consumers buy vehicles online in the future.
Second, the shift to digital retailing requires different staffing. Between May and September 2020, there was a 10-percentage point increase in the number of dealers placing emphasis on hiring digital or tech-savvy members of staff, reaching almost three fifths of the total (57%). A third of dealers (33%) made changes to staffing to better align to the new online model.
Third, and linked to the previous two, the pandemic created new ways of doing business. Three fifths (60%) of dealers offered Service Pick-up and Delivery (SPUD), with around half (48%) of consumers who took up the option having more work completed than they would have done otherwise. Nine in ten vehicle owners were satisfied with their SPUD experience, suggesting opportunity for dealers to innovate in the future.
"Change had been coming down the track anyway, but recent events have made the whole industry look and say, ‘are we behaving in the right way to support our customers?’ Many dealers continued to sell cars through lockdown through successful use of e-commerce tools and remote selling. That has been a real catalyst for change."
Paul Humphreys, Managing Director of Car Buying and Mobility at Cox Automotive
A view from Darren Sinclair, Managing Director of Modix
“The impact of the COVID-19 pandemic has been to propel manufacturer focus towards an accelerated digital transformation – what that looks like today and how it might evolve beyond the pandemic.
“We already operate in an era of growing consumer demand for a better and more transparent car buying journey. Today's automotive consumer demands a superior experience, online and offline, and they are more open to new ways of buying a vehicle than ever before.
“Innovative digital strategies will transform and challenge today’s business models. Success will come from partnerships and collaborative working between the automotive sector and the digital retail providers and future technology businesses that can scale globally.
“The direction of travel is towards a convenient, frictionless customer experience built on collaborative and innovative business models that can be scaled and monetised. Data is key; with organisations throughout the supply chain needing to access and respond to dynamic consumer insight to make the most of the opportunities which arise.”