The internet has revolutionised the way we live, communicate, consume, and conduct business, and that has only been accelerated by COVID-19. While consumers don’t yet buy cars online to anywhere near the same extent they do books, how close are we to ‘click and buy’ becoming the standard for the retail automotive industry as it has for others?

Research covered in our ‘Car buyers still favour Dealer model’ article in this edition, shows that car-buyers still overwhelmingly prefer to deal in-person with Dealers when purchasing a new vehicle, with 91% saying it was important to test drive a car before buying.

That would suggest we are a fair way off ‘click and buy’, but 29% of respondents to the survey also said they would consider buying a car online rather than at a physical dealership – and less than half (46%) said they wouldn’t consider it.

We know that when it comes to technological developments, there are early adopters, slow movers, and the majority in between. With nearly a third of people willing to at least consider buying online, the shift in paradigm is perhaps already underway.

Certainly, some companies are banking on it. With the pandemic causing a significant increase in online car sales, companies like Cazoo Holdings, an online used car seller in the UK, have taken advantage and are projecting huge growth.

Cazoo is looking to go public in a reported USD $7 billion to $8 billion deal. US billionaire Dan Och’s capital-raising company AJAX I is planning to merge with Cazoo after Cazoo last October raised $310 million, making its total investment at that point USD $580 million.

Dealers will be aware of other online car sales platforms such as Carvana and CarMax. When auto sales began to recover after the initial hit they took due to COVID-19, the online sellers increased their percentage share.

The Wall Street Journal reports that Carvana is building 10 new inspection centres and going on a hiring binge to meet a surge in demand. The company is investing $500 million in new facilities and hiring thousands of employees. That indicates they believe that the shift towards buying cars online will continue.

“A big part of it is the customer preference shift toward more comfort buying online, and that’s something we think will be here to stay,” Chief Financial Officer Mark Jenkins said.

The eight-year-old company sold 244,111 cars in 2020, up 37% on its 2019 results, and in contrast to a 7% decline in the number of used car registrations across the US.

Nonetheless, it is yet to turn a profit and has not announced when it expects to. Its annual net loss rose 27% in 2020 to $462.2 million. Despite the loss, total revenue rose 42% from the previous year, to $5.6 billion in 2020. The main obstacle it faces is finding and training enough technicians and mechanics, while have enough supply to meet demand was also an issue in the last quarter of 2020.

Other online car Dealers are popping up in the US. Vroom Inc. went public in June, and Shift Technologies Inc. obtained a public listing by merging with a special-purpose acquisition company. While smaller than Carvana, they have both invested to expand their capacity.

Pendragon will soon launch its online business as a standalone operation with its own brand. It currently has around 16,000 used cars listed online (compared to Cazoo’s 3400), and the whole process, from choosing, ordering, financing to home delivery can be done sitting at home on a laptop.

Click & Go Already Exists

Meanwhile in England, Snows announced £37m worth of online car sales over the past 18 months. The company operates 50 dealerships in 29 sites across the south of England. Its online model is called Click & Go, and has been in operation since August 2019.

In 2020, Snows expanded its Live Chat capacity, offering video call appointments with personalised walk-arounds, with a small, refundable deposit for its real-time click and collect-style used car sales model.
In the year to January 2021, Snows’ web leads grew by 27%, and its Live Chat leads by 47%, with an 18% increase in conversion. Its website visitor numbers rose by 28%, with a 16% increase in web conversion.

In the nine months from May 2020, Snows conducted over 2700 online transactions, with an average online purchase of £13,700 (roughly AUD $25,000). The value of sales figures quadrupled once the company introduced its £99 (AUD $180) online reservation fee.

Another key point to note is that 30% of transactions (deposits, outright cash purchase, HP and PCP) took place outside normal office hours. Without this ability, such transactions might have been lost to competitors.

More than 60% Snows’ online customers have been using mobile devices to conduct their transactions, highlighting another shift.

Stephen Snow, CEO, Snows, said being a family-owned business didn’t mean that the company couldn’t be innovators.

“Over the years, we have always prided ourselves on the quality of our customer service and we were completely focused on ensuring that our online car solution complemented our traditional showroom and the ability to seek support from our physical team when our customers needed it,” he said.

“It’s vital that our customers enjoy their online experience, as well as feel comfortable using the site and the transaction tools, so that they come back time and again. The results we’ve achieved speak for themselves, but just as importantly, the feedback from our customers has been incredibly positive, long may it continue.”

The digital shift has resulted in US automakers expanding delivery programs, while Dealers have upgraded their websites to provide virtual showroom tours for customers. This allows buyers to conduct at least part of the car-buying process online. With virtual reality (VR) and augmented reality (AR) technology constantly improving, how long until each household has a VR headset with which they can undertake virtual test drives, with a realistic simulation of what it’s like to physically drive the vehicle? How long until buying a car completely online is as commonplace as ordering a book from Amazon?

Cars are a much larger investment than books, of course, so it will take time. But the world is changing. As ever, it will be those who adapt to meet the new paradigm who will flourish.

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