When Seth Berkowitz, president of online automotive research portal Edmunds.com, met with a major franchise dealer in San Francisco, he was greeted with a shocking glimpse into what the future of automotive retailing may hold.

“My store has become meaningless; it’s just a place that houses my employees,” the dealer told Berkowitz. “It could just as well be a warehouse.”  

The dealer, whom Berkowitz didn’t identify, said his commercial presence today is digital, even more so than the actual buildings that still house his fixed operations and other management functions. The digital space is where his business’s “true essence” is to be found, he said.

While most dealers likely would reject such a radical shift in business models, sales today are being increasingly driven by tech-savvy consumers wielding mobile devices, apps and a new shopping mindset.  

This change is evident in the latest WardsAuto e-Dealer 100, which lists 284,514 Internet-enabled new- and used-vehicle sales in 2013, up from 255,898 in 2012 and 82,000 in 2002.

“When today’s consumers, especially Gen Y buyers, are surveyed, they clearly say that given a choice, they’d rather have less physical interaction with the dealership in the car-buying process,” says Dale Pollack, founder of vAuto, an inventory-management firm. “These are kids who have grown up in the Internet age, and buying things online is the norm.”

Foresight Research asked 7,543 new-car buyers in 2013 what changes in the dealership experience they would like to see with their next new-vehicle purchase. Forty-five percent wanted online price negotiation, 40% specified online trade-in negotiation, and 265of the polled buyers said they would like to be able to conduct the entire vehicle purchase process online.

“There was significantly more interest for all of these things for folks under 55, so that may indicate it is the wave of the future,” says Nancy Walter, Foresight vice president-business development.

Regularly appearing are new products and services designed to satisfy evolving customer preferences and introduce dealers to new e-commerce solutions that promise bigger profits.   

General Motors’ Shop-Click-Drive tool lets shoppers select a vehicle from a dealer’s inventory, review incentives, calculate payments and apply for financing – all online. Several third-party lead providers such as Kelley Blue Book, TrueCar and Edmunds have introduced enhanced consumer websites with more functionality.

Toyota Financial Services is using an online automotive-loan origination system. The company says e-contracting lets dealerships phase out paper contracts while increasing accuracy and reducing the time needed to approve and fund loans.