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Digital Retailing Landscape 9 Oems Jumping on Board 10

Digital Retailing Landscape 9 Oems Jumping on Board 10

2021 It's Digital or Decline The Future of the Automotive Table of Contents

Introduction 3

Section 1: Where We've Been 4 Brick-and- Rules 4 Digital in its Infancy 5 New Players Driving Change 6

Section 2: 2020, The Year of Digital Acceleration 7 Staying Alive During the Pandemic 7 Navigating the Digital Retailing Landscape 9 OEMs Jumping on Board 10

Section 3: Where We’re Going 11 Improving the -Buying Experience 12 The to Support 12 Competing with New Players 14

Conclusion 15

Revolutionize at your Dealership 16

Appendix 17 Introduction

Buying a car used to be a long, drawn-out process. You would decide it’s time for a different , drive around the city to look at what was on the various lots and converse with the sales reps. After careful consideration, you would narrow down your list, take a few for a test drive, determine which car you wanted and the bells and whistles to be added. Once you haggled over the price and financing, you’d finally get the keys to your new car. It took weeks.

Then came the online experience. You would spend an evening searching and comparing prices and specs before heading out to test drive a few . Then you would haggle over the overall cost and how to finance the purchase, before finally getting the keys to your vehicle. The process took days.

Now, you jump online, compare and contrast vehicles within minutes and find the place nearby that has the vehicle. You take it for a test drive to make sure it’s the right fit, sort out the financing, and take the keys to your new - or new to you - car. It only takes several hours from start to finish.

And with the rapid rate of in the digital automotive industry, that several hours is sure to be cut down even further in the months and years ahead.

The automotive industry But it took the onset of the COVID-19 has made a massive shift pandemic to thrust the industry into the to the digital realm, a shift digital age, where shoppers never have to that many experts have leave the comfort of their home to purchase the exact they are looking for. been expecting for years.

“Sales of other durable demonstrate how changing consumer preferences push car buying online. About two decades ago, e-commerce had barely penetrated the and appliance industries. But over the years, consumers easily transitioned from the online purchase of small items such as to bulky, big-ticket goods, including consumer durables like technology- rich appliances. It is only a matter of time before online car purchases become just as common.” 1

With the rapid transformation now well underway, it’s vital for retailers to understand why the industry is changing, and how to evolve with it.

3 Section 1: Where We've Been

The traditional method for purchasing a vehicle has remained relatively the same for decades, with slight change occurring with the inception of advertising and online research capabilities. Despite decades of advancement in the technology behind the vehicles themselves, little has changed in the car-buying cycle.

Brick-and-Mortar Rules

The dealership used to be the temple. It’s the place where everyone had to go to walk the lot, see the vehicles inside-and- out, learn about the vehicle’s capabilities, go for a test drive and out the financing details.

The old, dealership-centric method of selling has its flaws. A study from Deloitte in the UK Going to a car lot used to be the consumer’s only choice. But suggested that: for most consumers, it wasn’t an enjoyable buying experience.

“Purchasing a new car based on the traditional dealership model remains a low-trust, high- stress and low-transparency exercise. For many, a dealership is an intimidating place to visit. High staff turnover can make it difficult for a consumer to establish a relationship and build trust – especially in the case of repeat purchases. Also, the image of sales people has been tainted over time, and with space at a premium, there is often a sense that unnecessary costs have been added to the car, putting a further strain on the consumer/salesperson relationship.” 2

The team from online automotive news site MotorBiscuit in October 2019 even went so far as to publish an article, 10 Biggest Reasons Why People Hate Car Dealerships3, outlining the litany of reasons people dislike the traditional dealership model to purchase a vehicle.

It was a necessary evil - with no other options to purchase a vehicle, people continued to make their way to the dealership in the hopes of finding their next car.

4 Digital in its Infancy

The automotive industry has not experienced the same level of digital retailing as many other sectors have. Data from the International of Manufacturers shows overall new vehicles sales of 91.36 million4 in 2019, with the online sales accounting for only 825,0005 - less than 1% overall.

In the , digital That number grew exponentially transactions have jumped over the next two years, with 10% of considerably in the past car buyers saying they made their purchase online in March 2020.6 few years.

Arguably the greatest value to car buyers, in terms of online resources, has been the research tools provided on OEM . Before heading to the dealership for a test drive, most people have accessed the online tools provided by manufacturers, including vehicle specs, available colors, available add-ons and buyer incentives. Armed with that information, potential buyers have been able to narrow down their vehicle choices before leaving home.

Ford, like other OEMs, provides many opportunities to research their vehicles online.

The archive of online tools, including consumer reports, have been beneficial to the used car buyer. They provide the same data as that of the OEMs, but years after the model is the newest, latest and greatest available.

5 New Players Driving Change

The majority of attempts to increase digital retailing initiatives in the auto sector has come from non- traditional players in the industry.

Hundreds of startups, covering all aspects of the online buying experience, have forged their way into the space, providing solutions for dealerships looking to future-proof their . That includes tools for vehicle visualization, F&I technology, software solutions, customer retention systems and more. Virtually every aspect of the car-buying experience has been covered by multiple new trying to carve out their own niche in the sector.

The same goes for new digital retailing platforms in the automotive sector. Companies like Carvana, CarMax and Vroom have established themselves as significant players in the industry, offering a variety of options for customers looking to make their next vehicle purchase entirely online.

The automotive digital retailing world entered 2020 not nearly as robust as other product offerings that people had previously relied on brick-and-mortar stores for.

6 Section 2: 2020 The Year of Digital Acceleration

When 2020 began, not even the experts could have predicted the digital acceleration that would occur in the automotive industry.

The emergence of the COVID-19 pandemic changed that response in a matter of a few short months.

Staying Alive During the Pandemic

When the COVID-19 pandemic struck North America and began shutting down as early as March, millions of people were forced out of jobs. Businesses were forced to close their doors for an undetermined amount of time. It left business-owners scrambling, especially those who had not yet embraced digital retailing solutions. Auto dealerships across the country were among those who had to quickly re-focus to save their businesses.

Consumers expected to be able to go online to shop for cars, much as they had for other products before the pandemic struck.

But, they were left disappointed in most cases, as many local dealerships were ill-prepared on the digital front.

“From groceries to home cleaning supplies, consumers are accustomed to using the web to get everything they need without leaving their homes. Due to the rapid increase in , the industry is scrambling to find solutions to make it easier for consumers to complete 100% of the transaction on the web, without having to visit a dealership. The time to reinvent is now. Traditional thinking no longer works in this dynamically changing marketplace. Now is the time to think different, to completely rethink and reengineer business models and to reinvent retail.” 7

7 The impact that the digital transformation is having on smaller dealerships is already evident. According to a report on digital retailing released by the Advanced Interactive Media Group (AIM Group): “Carvana […] has just 2% share in its first market (Atlanta) after seven years. Its stated ambition is to sell 2 million cars per year in the U.S., i.e. just 5% share. In Atlanta, it’s reported that CarMax (>15% market share in used cars) isn’t losing business to Carvana. Small independent dealers who can’t compete effectively are the dealerships that are being hurt.”

Third-party sites have become the greatest online resource used to shop for vehicles. According to Cox Automotive’s 2019 Car Buyer Journey Study, 80% of new and used car buyers visit third-party sites during the purchase process (65% went there first), with dealership sites trailing far behind at 46%, OEM sites at 27% and 27% conducting Google searches. On average, buyers visited 4.2 sites each.8

With a robust digital infrastructure in place, third-party sites are winning the digital-retailing war as dealerships and OEMs scramble to build a competitive online presence.

8 Navigating the Digital Retailing Landscape

Unfortunately, the switch to digital retailing isn’t as simple as buying a solution. It’s a fundamental change in the way business is conducted, which can be a difficult transition for employees and dealers who have been selling cars the same way for decades.

A June 2019 article from Cox Automotive broke down the value of having a digital retailing solution, and how it must be utilized by the purchaser: “Digital retailing creates a pipeline of information and engagement that can result in highly qualified leads. However, converting those highly-qualified leads into profitable sales doesn’t just happen by virtue of buying a digital retailing solution. It starts with changing your perspective. In essence, dealership sales teams must mentally “flip the script” and think relationship first, moving away from just getting a body into the store.” 9

Building that relationship is vital, From 2017 to 2019, the as consumer purchasing habits numbers of days consumers spent in the market dropped were already leaning heavily by 22, with 41% of buyers now online leading into the pandemic, visiting just a single dealership and have only increased since. during the process.10

The transition also demands a different approach to deliverables, necessitating a strategic approach to digital retailing. The same Cox Automotive article recommends the plan includes:

• “Setting business priorities; • Assessing the dealership’s ability to respond to a significant shift in the sales process; • Identifying resources and staff who will be dedicated to leading the digital retail evolutions (internal champions); • Creating common goals for the dealership to work toward; and • Establishing intended outcomes and results to measure success against.” 11

Embracing digital retailing is a significant change for brick and mortar dealerships, but it’s a necessary one in order to stay alive in a sales landscape that is increasingly moving online.

9 OEMs Jumping on Board

It’s not just dealerships that are recognizing the need for digital retailing solutions to survive in the online sales environment.

As 2020 came to a close, made headlines with the announcement that it was taking the plunge and releasing its own online shopping platform, Nissan@Home, in 2021. This news from Nissan followed word from that it was upgrading its Shop-Click-Drive online sales system.

General Motors’ platform for buying cars online, Shop-Click-Drive, underwent a significant upgrade in 2020, allowing customers a more robust purchasing experience.

The OEMs recognize that digital retailing isn’t just something to tide people over during the pandemic. Purchasing cars online - and the consumers desire to do so - is here to stay.

“The momentum will continue beyond the pandemic. Eighty-two percent of respondents in the National Automobile Dealers Association’s Summer 2020 Dealer Attitude Survey said the digital sales process is here to stay, while 73 percent said home test drives and home delivery will continue.” 12

This past year will be remembered in the automotive industry as when the shift to digital retailing was accelerated by, as many experts have estimated, 5-10 years, making the automobile sector one of the last retail institutions to move to online purchasing.

10 Section 3: Where We’re Going

The journey to digital retailing has been forced into high gear, and even as the calendar turns to 2021, many are having a difficult time catching up.

There are many different elements in play, and dealerships have to decide where to focus their efforts.

In an October 2020 interview with FICO’s Ken Kurtz, Automotive Resource Group President Rich Zellner stated that:

“Just as there is a broad spectrum of dealership sizes, digital transformation is happening in many different ways. Small and midsize dealers have built out their websites to let customers tour their showrooms virtually and complete more steps of the car-buying process online, including test drive drop-offs at the customer’s home. They are reaching out via social media to expand the store’s footprint. During the pandemic automakers are stepping up their promotion of digital offerings that help dealers close sales.” 13

As the pandemic continues to rage on into 2021, auto-makers and auto-retailers must continue to work toward online solutions.

11 Improving the Car-Buying Experience

Even when vaccinations are widespread and people get back to their original shopping routines, the general negativity toward the dealership experience will keep people buying vehicles online.

Before consumers were pushed online by the pandemic, the signals were clear that the push for digital retailing was inevitable, and would be here to stay once it gained momentum. Of the 4,002 surveyed as part of the 2016 AutoTrader Car Buyer of the Future Study, only 17 were satisfied with the current car-buying process. Cox Automotive’s 2019 Car Buyer Journey Study all but verified that moving online was the solution, as 83% of consumers said they want to shop online to save time. Part of the problem is interacting with the dealers themselves, as 43% of auto shoppers wanted to do their entire transaction online without ever visiting a dealer, according to the JD Power 2019 US New Auto Shopper Study.14

Consumers demand a shift to digital, and the numbers suggest that a failure to do so could have a serious impact on dealers.

The Technology to Support

Making the decision to move business online is the easy part. Figuring out how to go about it is the hard part. It isn’t as simple as buying a solution - everyone will do that. Everyone will implement a plan for online sales. How you stand out in the online battle for clicks, eyeballs and purchases is the question.

There are plenty of solutions for The technology is in place dealerships to consider, from to tweak the online sales software and traffic generation to experience, providing multiple conversion and retention. And, in the options to make your digital case of software solutions, there are retailing experience stand out numerous options (depending on the bells and whistles you desire) for against the competition. each part of the sales cycle.

12 One piece of the digital retailing experience that has the most potential for distinguishing a dealership from its competition is the visuals provided for each individual vehicle put up for sale. According to Cox Automotive’s 2019 State of Auto Merchandising report, the difference between single, still photos and enhanced visual options is dramatic. Showing a single custom photo versus a stock photo increases your VDP (vehicle detail page) visits by 193% for used cars and 173% for new. Introducing multiple custom photos versus a single custom photo improves your VDPs by 487% for used cars and 486% for new. Those numbers appear even more drastic when compared to a single stock photo, as multiple custom photos then improve VDPs by 1,622% for used cars and 1,500% for new. Custom images clearly work best. And, not only do they improve the quality of your listing, they boost customer engagement, showing exactly what the customer can expect from the vehicle the dealer is selling.

Studies suggest that multiple custom images of a vehicle can significantly improve traffic to a dealer’s site.

360-degree displays are another visualization tool that is resonating with the online consumer. The 2019 HomeNet 360 Consumer Study stated that 73% of consumers that bought or leased a vehicle after browsing stated that 360-displays were either very or extremely helpful. Consumers in the same study also suggested that offering 360-displays on a dealer is a positive for the dealer’s overall reputation. But not everyone is using the 360 just yet. The 2018 HomeNet Automotive Brand and Product Study noted that 42% of dealers indicated they never merchandise with 360-displays.

In a crowded online landscape, the opportunities to use visuals to enhance vehicle listings has a great potential to help dealers stand out from their local and regional competitors.

13 Competing with New Players

The introduction of digital retailing has brought a lot of new players to the car buying landscape. But, as dealers invest in the tools to allow for the buying journey to start and finish online, there is also an opportunity for greater engagement with their existing customer base.

Rather than having to rely on follow-up phone calls, newsletters, print advertising, and other forms of showcase to keep the business front of mind, dealers can use digital retail solutions like social media, digital advertising and online sponsorship tools to push their products. Making each page of the website instantly shareable through a group of targeted social media channels not only enables the dealer to share online, but also makes it easier for its employees to do the same, thus improving their ability to engage their own client network, friends and even family that may be looking for a new vehicle. Online advertising and live links through digital sponsorship can also be used to direct people to specific pages on a website, be it a featured vehicle for sale or an introduction to the new platform you have invested in for moving the consumer sales journey online.

The introduction of the digital retailing platform allows dealers to create a stronger presence online overall, improving its ability to connect with current and potential customers online.

A robust digital retailing experience is easier, and more effective, for sharing with your existing customer base online.

14 Conclusion

Digital retailing in the automotive industry is here to stay. This isn’t a blip in the radar brought on by the pandemic - the stats show the pandemic was merely a catalyst for speeding up this inevitable transformation.

For many dealers, the focus was still on the brick-and-mortar operations prior to the events of 2020. That can no longer be the case if dealers plan to survive in the new retail climate. Consumers already disliked the in-person buying experience, and now that every part of the process can be done online, people will not return to the ways they didn’t embrace in the first place.

The digital transition is not an easy one, but tools exist to help.

There are companies that have already transitioned, providing an example of what should and can be done. It isn’t as simple as picking a program and installing it either;

Dealerships have to plan differently for this transition, breaking away from how they sold cars in the past.

There are plenty of opportunities to stand out from the crowd, depending on what resources you are willing to put into your transition. Those investments can pay off, and provide greater engagement with the customer base you already have, as well as the community that has supported you year after year.

In this competitive market, the time to buy into digital retailing is now. Digital retailing is throwing dealerships a proverbial life raft - it’s time to grab on.

15 Revolutionize Sales at your Dealership

Where does your dealership stand on digital retailing? As the automotive industry moves online, are you prepared to stand out against the crowd? Consider how implementing digital solutions at your dealership can turn website traffic into customers.

Drive Solutions at Win360

Win360 is a digital merchandising empowering dealerships to accelerate their businesses online. We cover all angles: technology, expertise, data, and product experience so that dealerships can transform their customer engagement, generate more leads and ultimately succeed digitally. Our product utilizes spin technology to enable dealerships to enhance their online presence and provide customers with the information they want.

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16 Appendix

1 ; Will Consumers Finally Be Able to Buy New Cars Online?; September 11, 2020 https://www.bcg.com/en-ca/publications/2020/impact-of-coronavirus-on-purchasing-new-cars-online

2 Deloitte; Disruption in the automotive industry; 2019 https://www2.deloitte.com/content/dam/Deloitte/uk/Documents/consumer-business/deloitte-uk-digital- changing-car-sales.pdf

3 10 Biggest Reasons Why People Hate Car Dealerships; October 8, 2019; Micah Wright https://www.motorbiscuit.com/10-biggest-reasons-people-hate-car-dealerships/

4 International Organization of Motor Vehicle Manufacturers; Sales Statistics https://www.oica.net/category/sales-statistics/

5 Frost & Sullivan http://www.frost.com

6 Google; Think with Google; With car shoppers more willing to buy online, auto marketers must the divide; September 2020; Kyle Keogh, Thomais Zaremba https://www.thinkwithgoogle.com/consumer-insights/consumer-trends/automotive-digital-transformation/

7 Automotive News; 2020 Automotive E-Commerce Report; November 4, 2020; Susan Givens https://www.autonews.com/sponsored/2020-automotive-e-commerce-report-0

Cox Automotive; So You Bought a Digital Retail Solution. Now What?; June 13, 2019 8,10 https://www.coxautoinc.com/learning-center/so-you-bought-a-digital-retail-solution-now-what/

Cox Automotive; 2019 Car Buyer Journey Study; June 4, 2019 9,11 https://www.coxautoinc.com/learning-center/2019-car-buyer-journey-study/

12 TechnoCodex; Nissan’s Online Shopping Platform Arrives In 2021; December 21, 2020; Stephan Roben https://technocodex.com/nissans-online-shopping-platform-arrives-in-2021/

13 FICO; The Pandemic Is Accelerating Auto Dealers’ Digital Transformation; October 21, 2020; Ken Kertz https://www.fico.com/blogs/pandemic-accelerating-auto-dealers-digital-transformation

14 Automotive News: 2020 Automotive E-Commerce Report; November 4, 2020; Susan Givens https://www.autonews.com/sponsored/2020-automotive-e-commerce-report-0

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