Social Distance and the Car Buyer

This post was written by Louis Tuchman

We are living in uncertain times, as the novel Coronavirus continues to disrupt our way of life. While the safety precautions taken by the government, health organizations, and citizens on the ground have helped slow the spread of the virus, they have severely threatened our business models. The contactless world that Covid-19 has created has left nearly 17,000 showrooms across the country virtually empty for the past 3 months. 

As cars are still a necessity for most families, car sales have not come to a complete stop. However, the way in which people are shopping is drastically changing. A recent survey taken by CapGemini showed that nearly 64% of potential buyers prefer to complete the entire transaction process online, a momentous spike from the 39% before the pandemic. 

How have dealerships, rooted in face-to-face interaction, responded to unprecedented trends in customer behavior? Can online shopping really compensate for the lack of traffic in showrooms?

In order to meet the needs of today’s customers to shop more online and less in person, many dealerships are making massive investments in online infrastructure, implementing digital retailing on their websites. However, despite the significant investment in new technology and ads, online sales have not been able to make up for the loss generated by slow and empty showrooms.

Why hasn’t the car industry exploded online, like many other industries, over the course of the pandemic?

When it comes to car buying, eCommerce just doesn’t do the job.  So while overall internet shopping has increased in the past few months – fire pits, wifi extenders, above ground pools, books, etc- when it comes to buying a car, it is much harder for people to just click a button. Many people are uncomfortable paying for their second largest lifetime purchase without even seeing the car in person. Similar to buying a house, people want to feel the energy of the purchase before pulling the trigger. In addition to the price, there is also an emotional aspect to buying a car that is totally lost when shopping online. Purchasing a car is a gateway to freedom and independence, and when people are choosing their car, ironically, the hands on experience helps them make a decision.

 

Would the economy be able to handle a fully online automotive retail industry?

As seen through the events of this pandemic, a completely online shopping experience is not a viable option for the automotive retail industry. Not only is online shopping devastating to the car buying industry, but it would also have massive consequences on the status of the economy at whole. Car dealerships play a big role in today’s economy. According to NADA, new car dealerships employ 1.1M Americans and pay over 60B in payroll, generating over 17B in federal and state income taxes and over 90.1B in state sales tax revenue in 2019. The industry is a vital component of the American economy, and its continued success is partly dependent on how the industry can adapt to the new social behaviors brought about by the Coronavirus. 

How can dealerships survive this reality of social distancing and the necessity of online shopping, while also maintaining the human touch that gives customers a sense of confidence and comfort when buying cars?

The solution to this problem is found in AI-driven technologies. Dealers will need to adopt technologies to connect data across the shopping experience to identify high-intent buyers and continue to engage them. They will need to test and deploy new messages at scale in order to connect with new buyers and understand what moves the needle in the post Covid-19 era. Combining “man and the machine” will take into account the personal touch of each dealership, while also allowing dealerships to market at scale to each and every emerging buyer.

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