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Why traditional car dealerships need to embrace digital transformation

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There are very few industries that have been affected by digital transformation as much as the automotive industry. However, whilst a lot of focus is placed on the ongoing race to design and build mass-produced electric and autonomous vehicles, customers’ buying habits and expectations are also changing, as we’re seeing a fundamental increase in online car research and buying.

Today’s consumers have more options than ever when it comes to the way they research, choose and purchase the car of their choice. In the UK, Europe's second-largest market and the test country for many manufacturers’ online sales programmes, 60% of dealers say they will have the ability to offer digital transactions within the next two years, according to a study by Cox Automotive. "It will be the normal way of selling in 10 or 20 years, no question," said Marion David, Product Director at PSA's high-end DS Automobiles brand.

The shift in customer buying habits and expectations has unearthed some key challenges for traditional dealerships, with the potential to threaten their existence. The ever-expanding digital market has not only allowed customers to compare models at their leisure, it has almost entirely eradicated the need for an in-dealership sales pitch. The ability to research the specifics of a vehicle prior to purchase means that there is no need to ‘sell’ it to the customer. The purpose of dealerships is changing, and more and more customers are turning to online sources to avoid the key pain points experienced within the physical spaces. The long queues. The annoying feeling of being sold to. The complete lack of transparency. It’s no longer about selling – it’s about how you can enhance what they already know, and how you can make the experience memorable.

Research shows the vast majority of the consumer market strongly prefers a direct sale, something easily provided by purchasing online. The inability to provide this directness of sale proves to be a threatening change in the dealership market. The ever-expanding ways of making payment and ownership has also created its own challenges. For example, the rise of cryptocurrency, while not prevalent in car buying today, will be something that may well need to be considered in the future. 

Well known innovative leaders such as Tesla have almost entirely removed the need for a dealership by selling their vehicles directly to customers online. Traditional brands such as BMW and Lexus have developed long-term lease-like services, similar to that of a subscription service, almost removing the need to buy or lease a car at all.  A number of traditional dealerships and manufacturers have started to transform their digital and customer experience offering to ensure they keep up with the ongoing changes. Hyundai partnered with Rockar, a no-pressure system that likens the process of buying a car to shopping for groceries, clothes or any other item that you might purchase on the Internet. Rockar's website is simple and easy to navigate, featuring sections where users can browse for a vehicle, find prices, book servicing or even test drive a car online. As well as existing in the form of a website, physical Rockar Hyundai locations also feature touchscreen technology, so that shoppers can browse at their leisure without a dealer looming over them, hoping to make a sale. When time comes to actually put through an order, Rockar enables shoppers to make a car purchase totally online, or "click and collect" in-store.

A number of dealerships are also getting more creative to ensure that their customer experience at a dealership tempts them away from a totally online experience. The Mercedes-Benz Burlington Dealership in Ontario, Canada, is revolutionising the car shopping experience. The first dealership in the world to offer an on-site salon and spa, Mercedes-Benz Burlington offers customers free manicures and hairstyling while they wait for their car to be serviced in their high-tech luxury car spa. It also features a golf simulator and a full-service cafe, with employees trained as baristas.

Whilst there are signs of dealerships catching onto the shifting customer habits and expectations, there is still a fundamental gap in customer perceptions of the dealership. Over 90% of consumers begin their purchase journey expecting it to be a “hassle” – driven in large part by their experience, and that of friends/family – with dealerships seeking to control the buying process and link it to their own objectives.

This distrust puts the consumer on a trigger as they engage with the dealer. 50% will walk out of a dealership if the dealer requires a test drive before providing a price, and 43% if personal information is required. 56% of consumers said they would buy more often if the dealership process was not so difficult – the impact of this retail aversion was quantified at a potential increase in sales volume of 24%.

It is key that dealerships continue to recognise the changes and adapt through digital transformation. A recent AutoTrader.com study found that new and used car buyers spend 75% of their research time online, and here at Somo we are sure that trend will only increase.

Somo designs, builds and delivers digital products and experiences. We know the automotive sector inside out with over 10 years' experience working with brands including Audi, Cinch, Jardine Motors Group and ŠKODA.