Will Virus Usher in New Age of Digital Auto Retailing?

Complete digital auto retailing has been talked about for years but hasn’t caught on much as a preferred way to sell and buy cars.

The coronavirus crisis may change that. 

While online buying and vehicle delivery services have been relatively modest to date, they may rise, given current stay-at-home conditions, according to J.D. Power.

“We’re expecting that,” Tyson Jominy, a J.D. Power vice president for data and analytics, says of a potential increase in online auto retailing. “Most of the pieces are in place.”

J.D. Power notes most manufacturers and retailers are capable of selling vehicles with minimal in-person interaction. 

Even though consumers can purchase a vehicle online from just about A to Z, few people have opted for that.    

A Cox Automotive study indicates most automotive consumers do plenty of car shopping and research online, but ultimately get offline and go to the dealership at some point.

That was then.

Oddly, the COVID-19 virus crisis might give fully digital auto retailing the traction it’s been looking for.

Previously, the main benefit of online car shopping and buying has been customer convenience. People do preliminary work on the Internet to minimize time later spent at the dealership.

But with the virus spreading and governments restricting public activities, a new, totally unexpected benefit of online car buying centers on public health and safety. Fear has replaced convenience as a motivator for digital auto buying.

In lieu of leaving the shelter of their homes and physically visiting a dealership, more people may rely entirely on the Internet to buy a car. 

Taking a test drive and signing the paperwork have been cited as primary reasons car buyers ultimately go to a dealership.

But advances in e-contracting have made even that visit unnecessary, depending on the automotive brand. For example, Mercedes-Benz Financial offers e-contracting through its dealers.

The virus threat is expected to abate. But speculation is that if consumers get accustomed enough to digital auto retailing during the crisis, they might stick with it after the coast is clear.

“You are talking about behavior changes for customers, dealers and manufacturers,” says Keith Jezkek

Keith Jezek_business_blue background_HIGHRES_Sept 2015 (002)

When it comes to digital auto retailing, “Social distancing could be the catalyst to step into the deep end of the pool and stay there,” he says, adding that it could aid dealership cost structures, too. (Keith Jezek, left)

The pandemic will change behavior, such as a shift to more online car buying and shopping, short-term, says Kevin Filan, Cox’s vice president-marketing, retail solutions.

“Long term remains to be seen,” he adds. “We’ll learn our way through it. I tossed away my crystal ball two years ago.”

Companies that serve the auto industry are rolling out new programs that let consumers carry out car buying with minimum human contact. 

Cox Automotive’s Autotrader announced the rollout of Dealer Home Services. To maintain social distancing, but continue the car-buying process, it offers virtual vehicle walkarounds, test drives at home and local vehicle delivery.

“We’ve had 1,000 dealers sign up for the home deliveries,” Jezek says.

With auto sales down and many dealerships closed by state and local government mandate, dealers are feeling the economic effect.

To address that, Cox has cut many of its dealer service fees by 50% for the next two months. “It was a tough decision, but it gives dealers some relief,” Jezek says. He doesn’t detail how much it is costing Cox. “But divide by two.”

DealerSocket, a dealership software provider, is doing something similar with half-off discounts for many of its products.

kevin Filan

Porsche weighs in, saying it is helping its North American dealers join a growing digital pilot program by reducing participation fees.

The automaker adds that while many of its dealers have offered home delivery of purchased vehicles for some time, the service “has taken on a new level of significance in the current situation.”

To support growing customer demand, Porsche will reimburse dealerships a flat fee for new-vehicle home deliveries through April 30.

Fair, a vehicle subscription app, says it is offering a service that provides free delivery and allows customers to order, sign for and then receive their car at their home.

Fair says consider it as a “contactless” and “touchless delivery” experience.

DriveItAway’s app initially focused on subprime car buyers and ride-share drivers. But it now seems to meet the needs of all potential car buyers and dealers, says company founder and CEO John F. Possumato.

Tied in with dealers, the app allows for remote “touchless” rental contracting, payment and renewal, he says. “No person-to-person close physical interaction is required, and the transaction is engineered to be a rent-to-buy model.” Vehicles are home delivered.

Likewise, TrueCar, an online automotive site, just launched “Buy from Home.” It aims to help client dealers’ customers remotely buy and take delivery of a vehicle while still adhering to social-distancing guidelines.

The initiative offers remote paperwork processing and home delivery of a sanitized vehicle. “We’re in a new world that is rapidly changing,” says TrueCar CEO and President Mike Darrow.

grant feek (2)

“It’s a shock to the system,” he says of the current health crisis. He adds that if digital car buying becomes more established, it won’t be the result of the COVID-19 virus. (Grant Feek, left)

“But you will see a short-term spike because of the virus. However, if you are talking about a sustained, secular shift in the industry because of it, you won’t get a quote from me supporting that,” he says.