Automotive retailing is undergoing historic changes as a result of the COVID-19 pandemic, a transformation that will rewrite the status quo.
Experts predict a seismic shift in the retail environment that will lead to lead to smaller showrooms and a permanent move to online sales. Dealerships will also need to enhance the after-sales service in this post-pandemic marketplace, experts say, with such features as universal concierge service and at-home car maintenance. While the shift to online shopping was already underway, “COVID-19 may compress the amount of time society is going to take” to change buying habits, said Robert Karwel, senior manager of J.D. Power’s automotive practice in Canada. “This virus situation could provide the impetus for every demographic” to buy online.
Karwel said that dealers, “build these large edifices with cafes and lounges.” But in the aftermath of the pandemic, “There might be some thought to resizing dealerships. How big and comfortable a store do you really need?”
This shift is especially important in large urban centres where real estate prices are high, said Aziz Ahamed, president of the five-dealership Destination Auto Group in Vancouver.
“Showrooms will become smaller,” Ahamed told Automotive News Canada. “Land is a precious commodity.”
Dealers will increasingly experiment with new models, such as small retail outlets in shopping malls, he said.
DIGITAL IN DEMAND
Louis-Yves Cloutier, president of the 360 Agency in Montreal, said that since the pandemic hit, interest in his company’s online-sales software has surged. 360 Agency provides it to about 800 dealerships across Canada.
Other major vendors include Cox Automotive Canada and Edealer of Toronto. Some platforms enable clients to conduct the entire buying process online, including negotiation, financing and insuring the vehicle. Some offer e-signatures that eliminate the need to physically sign documents.
“We’ve been telling dealerships of the need to make the digital transformation for two years,” Cloutier said. Now, his company is seeing a big bump in interest. “We sold 15 [systems] last week,” he said in an interview in early April. “They realize they don’t have a showroom anymore.”
Cox Automotive Canada has seen similar growth in interest, President Maria Soklis said in a statement to Automotive News Canada. “With most Canadians practising social distancing and no clear end in sight, we are also seeing behavioural shifts in how dealers are perceiving the value and importance of the online-to-in-store experience and have seen an increased interest in our digital retail tools,” Soklis said.
This change in consumers’ buying attitudes has accelerated the transformation to online sales by two or three years, Cloutier said.
‘PEOPLE ARE ADAPTING’
Although vehicle sales plunged about 47 per cent in March, according to Scotiabank Economics, Cloutier said online traffic has stabilized at about 65 per cent of pre pandemic levels. Web traffic in Quebec, which has the country’s highest number of COVID-19 cases, is down by half, but Ontario is near 80 per cent of pre-pandemic levels.
“People are adapting,” Cloutier said. “Consumers have a lot of time at home. They’re spending a lot of time on the Internet.”
Vendors of online car-purchasing software are heavily promoting their services, dealers say. Dan Loewen, general manager of Vernon Dodge in the interior of British Columbia, said he has seen a recent “onslaught” of offers from such companies.
Johnston Automotive Group, which owns Vernon Dodge, purchased Roadster software a ew months before the pandemic set in. San Francisco-based Roadster has about 1,000 dealership clients, primarily in the United States and about 15 in Canada.
After an initial spike of consumer Web traffic when the coronavirus emerged, traffic to Roadster’s site is down seven per cent because buyers are nervous about making purchases right now, Chief Marketing Officer Michelle Denogean told Automotive News Canada in a joint interview with CEO Andy Moss.
Soklis of Cox said that while portal traffic has declined, “We are seeing higher buying ratios — meaning that while there appear to be less customers coming to buy a car, those that are in the market are the strongest purchasing intenders.”
Dealership and manufacturer interest in online systems is at an all-time high, Denogean said.
Moss said the market has been trending toward online sales, and Roadster had projected that it would be three to five years before the “bulk of the market” favoured that process over conventional in-dealership sales.
“It flipped overnight,” Moss said. “Now every dealership feels they need to have that capability.”
Added Denogean: “We’ve seen the [online] industry accelerate five years.”
To date, Moss said, the interest has not paid off because his sales staff has been unable to visit dealerships to conduct training. Roadster pricing starts at US $995 a month. In Canada, the price is Cdn $995.
However, Moss thinks COVID-19 is propelling a long-term shift in buying habits.
“I don’t think it will flip back once we get to the other side. Once [dealerships] invest in the new technology, this change will be the new normal.”
THE DIGITAL DEALERSHIP
The short-term strategy of serving customers remotely could also become ingrained, said J.D. Power’s Karwel.
“I think that’s the big implication,” he said. “If people get used to not going to the dealership, then it may become a permanent shift.”
The dilemma for dealers is judging how quickly buying habits might change. “Old habits die hard,” Karwel said. “We are creatures of habit.”
For many consumers, he said, the purchasing process is still emotionally driven by the excitement of picking up a shiny new vehicle from the dealership.
Moss, however, said the convenience of online buying will become the primary sales method as dealers recover from the crisis.
“Every dealership now is looking at online digital sales to get things back on [an] even footing,” he said. Dealerships across Canada have adapted in other ways since the pandemic set in, developing a broad palette of innovations to protect clients and staff from COVID-19.
Destination Auto Group, for example,offers free pickup and drop-off of vehicles at the owners’ homes and offices for sales and service, Ahamed said. He intends to keep the service after the pandemic threat eases because he has read of U.S. dealerships that have seen revenue jump well above the cost of providing the service.
It will be especially valuable, Ahamed said, since the coronavirus threat is expected to last for months.
Karwel can also foresee strong demand for at-home vehicle servicing, such as oil changes and other minor service, in a client’s driveway. But the decision whether to make the large capital investment to fully equip mobile units now is a difficult one, he said.
Cloutier of the 360 Agency said it is a smart time for dealers to review all facets of their operations.
“Those who use the crisis to make changes internally will be the rock stars of the future.”
