The Covid-19 pandemic drove us into quarantine and lockdowns, and if you happened to be in the market for a new or used car, you probably weren’t schlepping to a dealership to make the purchase in-person. Rather, online transactions increased, and some say that’s the direction automotive retail we’ll continue to go.
According to a study by Capital One Auto Navigator, 56 percent of car dealers stepped up their use of digital tools in response to the pandemic. A Think with Google article said 63 percent of auto purchasers would consider ordering their next car online.
Besides Tesla’s online-only sales, online car sales have been around for some time, with various outlets including Cardoor.ca, Canadadrives.ca, Clutch.ca, Carnex.ca, Carvana and Vroom. But the pandemic served “as a catalyst to accelerate this transformation,” said Jessica Stafford, Senior Vice President, Consumer Solutions, Cox Automotive.
A 2022 study from Cox revealed that 81 percent of car shoppers felt that learning about their car online “improved the overall buying experience.” That included locating a dealer, looking up prices, finding vehicle specs, financing qualifications, investigating insurance products, and more.
“Amazon has trained consumers to be accustomed to being able to order whatever they need, not considering where it came from so long as they receive it in a timeframe that suits them, the price is within their budget, and the item is returnable,” she said. “This macro trend is now influencing car purchasing behavior with consumers open to receiving their cars from somewhere beyond their local market, as long as other conditions are favorable. In fact, many consumers now expect this, and are willing to pay a premium for some of these services.”
Cox’s data reveals buyers who complete more than 50 percent of the car shopping journey online were the most satisfied among all buyers. Reinforcing this view, Vog App Developers is expecting web-based apps for car consumers to become more the norm. That’s confirmed in this piece by Semetrical, that said nearly half of consumers are using their mobile devices to research their new car.
Unfortunately, the industry isn’t keeping up. OSF Digital reported that almost eighty per cent of dealerships’ websites lacked the functionality for proper vehicle searches, and just over five per cent had 360-view photographs of their stock.
Michael Carmichael, president and CEO of UpAuto.ca, said that though there’s a big push from auto makers and dealers to develop the online funnel, “there is very little demand. It’s the biggest solution looking for a problem.” He believes “the emotional tie to an auto purchase is reduced dramatically. People want to come to see the car themselves and they want a relationship with the seller.”
On the one hand, the online factor “plays a big role in an educational perspective — people doing their homework, [getting] information, and lots of pictures, and detail.”
On the other hand, however, there are too many drawbacks: “How does my child seat fit in the back? What if it’s a smoker’s car? You can return it, but who wants to go through that hassle? It’s a lot of money,” says Carmichael.
And he may be right: according to a 2021 Carfax Canada survey, only eight percent of Canadian buyers of new or used vehicles want to buy their next vehicle online.
One challenge he has faced is attempted digital fraud — two attempts in recent weeks — an issue he says is rampant. “There still has to be a signature, and someone has to validate that you are who you say you are,” noting that as a lingering problem with online sales. By the end of 2021, digital fraud had been twice the problem in Canada than anywhere else in the world.
Sam Lee, Carnex.ca’s finance manager, sees things differently.
“Purchasing a vehicle online is very straightforward,” he said. “It includes the vehicle’s imperfections and often, a good return policy. “What I see is the best model would be a hybrid system,” or more of an omnichannel approach. “In-person dealerships are time-consuming with pushy salespeople.”
EpicVin has delivered vehicle history reports for car buyers and displays used cars online, while working with hundreds of dealerships. Alex Black, its Chief Marketing Officer, says that photographs of cars have improved over time, as sellers have become more marketing savvy.
“Nowadays, using the VR technologies, one can even create a model of a perfect car and to order it. So we can definitely say that the world of technologies introduced significant changes in the online car selling process.” On this point, the US Automotive Dealership Benchmark Study saw a direct correlation of sales to VR availability.
Zach Klempf, founder and CEO of Selly Automotive, is an automotive market contributor who has been featured in CNBC, Forbes, and other outlets.
“For the part of the industry where there is more wear and tear on the car, it gets hard to sell that entirely online,” he explained. “But if it’s a commodity like a brand new Camry or Corolla under warranty, no major incidents, there is a market for it. Some consumers go into dealerships
and completely change their mind on the car they want to buy once they see it and physically drive it.”
But things are looking a bit shaky for the online car industry, with volatile economic factors, noted Geoff Cudd, the CEO and founder of Find the Best Car Price. “With a diminishing supply of vehicles for sale, and the highest interest rates seen in years, the average price of a car is out of reach for the typical buyer. This is hurting all dealerships, but especially the online dealerships who overpaid to acquire vehicles from customers and they are now being forced to downsize in order to stay afloat.”
Betakit in January confirmed as such, reporting that layoffs have been increasing in the market.
Clutch and Canada Drives recently announced staff cuts, citing poor economic conditions. A representative from Clutch blamed a variety of factors, including “rising rates, supply chain disruptions, and volatile pricing.”
New York Times reported that Carvana took a quarterly loss of more than a half-billion dollars, and laid off four thousand staff. In the past year, used car values have dropped 20 percent, leaving dealers to offload stock for far less than they paid, according to the Times. Cox Automotive said that 2023 sales will likely be half of the year before.
It looks like in-person shopping is here to stay, at least in the foreseeable: “There is still a general resistance by dealerships to complete the entire transaction online. Most dealers still push for an in-person meeting where they are more confident that the sales process will result in additional sales of high-margin items for the dealership,” said Cudd.
The Covid-19 pandemic drove us into quarantine and lockdowns, and if you happened to be in the market for a new or used car, you probably weren’t schlepping to a dealership to make the purchase in-person. Rather, online transactions increased, and some say that’s the direction automotive retail we’ll continue to go.
According to a study by Capital One Auto Navigator, 56 percent of car dealers stepped up their use of digital tools in response to the pandemic. A Think with Google article said 63 percent of auto purchasers would consider ordering their next car online.
Besides Tesla’s online-only sales, online car sales have been around for some time, with various outlets including Cardoor.ca, Canadadrives.ca, Clutch.ca, Carnex.ca, Carvana and Vroom. But the pandemic served “as a catalyst to accelerate this transformation,” said Jessica Stafford, Senior Vice President, Consumer Solutions, Cox Automotive.
A 2022 study from Cox revealed that 81 percent of car shoppers felt that learning about their car online “improved the overall buying experience.” That included locating a dealer, looking up prices, finding vehicle specs, financing qualifications, investigating insurance products, and more.
“Amazon has trained consumers to be accustomed to being able to order whatever they need, not considering where it came from so long as they receive it in a timeframe that suits them, the price is within their budget, and the item is returnable,” she said. “This macro trend is now influencing car purchasing behavior with consumers open to receiving their cars from somewhere beyond their local market, as long as other conditions are favorable. In fact, many consumers now expect this, and are willing to pay a premium for some of these services.”
Cox’s data reveals buyers who complete more than 50 percent of the car shopping journey online were the most satisfied among all buyers. Reinforcing this view, Vog App Developers is expecting web-based apps for car consumers to become more the norm. That’s confirmed in this piece by Semetrical, that said nearly half of consumers are using their mobile devices to research their new car.
Unfortunately, the industry isn’t keeping up. OSF Digital reported that almost eighty per cent of dealerships’ websites lacked the functionality for proper vehicle searches, and just over five per cent had 360-view photographs of their stock.
Michael Carmichael, president and CEO of UpAuto.ca, said that though there’s a big push from auto makers and dealers to develop the online funnel, “there is very little demand. It’s the biggest solution looking for a problem.” He believes “the emotional tie to an auto purchase is reduced dramatically. People want to come to see the car themselves and they want a relationship with the seller.”
On the one hand, the online factor “plays a big role in an educational perspective — people doing their homework, [getting] information, and lots of pictures, and detail.”
On the other hand, however, there are too many drawbacks: “How does my child seat fit in the back? What if it’s a smoker’s car? You can return it, but who wants to go through that hassle? It’s a lot of money,” says Carmichael.
And he may be right: according to a 2021 Carfax Canada survey, only eight percent of Canadian buyers of new or used vehicles want to buy their next vehicle online.
One challenge he has faced is attempted digital fraud — two attempts in recent weeks — an issue he says is rampant. “There still has to be a signature, and someone has to validate that you are who you say you are,” noting that as a lingering problem with online sales. By the end of 2021, digital fraud had been twice the problem in Canada than anywhere else in the world.
Sam Lee, Carnex.ca’s finance manager, sees things differently.
“Purchasing a vehicle online is very straightforward,” he said. “It includes the vehicle’s imperfections and often, a good return policy. “What I see is the best model would be a hybrid system,” or more of an omnichannel approach. “In-person dealerships are time-consuming with pushy salespeople.”
EpicVin has delivered vehicle history reports for car buyers and displays used cars online, while working with hundreds of dealerships. Alex Black, its Chief Marketing Officer, says that photographs of cars have improved over time, as sellers have become more marketing savvy.
“Nowadays, using the VR technologies, one can even create a model of a perfect car and to order it. So we can definitely say that the world of technologies introduced significant changes in the online car selling process.” On this point, the US Automotive Dealership Benchmark Study saw a direct correlation of sales to VR availability.
Zach Klempf, founder and CEO of Selly Automotive, is an automotive market contributor who has been featured in CNBC, Forbes, and other outlets.
“For the part of the industry where there is more wear and tear on the car, it gets hard to sell that entirely online,” he explained. “But if it’s a commodity like a brand new Camry or Corolla under warranty, no major incidents, there is a market for it. Some consumers go into dealerships
and completely change their mind on the car they want to buy once they see it and physically drive it.”
But things are looking a bit shaky for the online car industry, with volatile economic factors, noted Geoff Cudd, the CEO and founder of Find the Best Car Price. “With a diminishing supply of vehicles for sale, and the highest interest rates seen in years, the average price of a car is out of reach for the typical buyer. This is hurting all dealerships, but especially the online dealerships who overpaid to acquire vehicles from customers and they are now being forced to downsize in order to stay afloat.”
Betakit in January confirmed as such, reporting that layoffs have been increasing in the market.
Clutch and Canada Drives recently announced staff cuts, citing poor economic conditions. A representative from Clutch blamed a variety of factors, including “rising rates, supply chain disruptions, and volatile pricing.”
New York Times reported that Carvana took a quarterly loss of more than a half-billion dollars, and laid off four thousand staff. In the past year, used car values have dropped 20 percent, leaving dealers to offload stock for far less than they paid, according to the Times. Cox Automotive said that 2023 sales will likely be half of the year before.
It looks like in-person shopping is here to stay, at least in the foreseeable: “There is still a general resistance by dealerships to complete the entire transaction online. Most dealers still push for an in-person meeting where they are more confident that the sales process will result in additional sales of high-margin items for the dealership,” said Cudd.
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