ON THE ROAD AHEAD
Dealing with Unprecedented Disruption in Automotive Sales: From high touch to high tech
BRUCE CAMERON, BLACK PRESS COLUMNIST
The COVID-19 crisis has changed our lives in unimaginable ways, from creating new social norms (such as elbow bumps instead of handshakes), to disrupting the normal buying patterns for thousands of products, including vehicles. As British Columbia cautiously reopened segments of the economy in June, I examined what the coronavirus crisis has changed in terms of automotive sales, and considered what changes are likely to remain even after the crisis subsides. In the immediate future, opportunities for short-term leases may emerge, as city dwellers that once relied on public transit look for healthier alternatives. A recent University of Toronto survey of over 2,700 public transit users in Toronto indicated that two in three people surveyed have stopped using the service in March 2020, and one in four said they will not return until there is a vaccine developed. Assuming that at least a portion of those transit users has the means to lease a vehicle, once the economy slowly starts to resume, they will be seeking transportation. Mike Jackson, chairman and CEO of Auto Nation, the largest auto retailer in the United States, spoke about the impact of COVID-19 on the automotive industry on May 21, 2020, saying, “This whole disruptive period with the coronavirus is an inflection point from which there is no turning back.” He went on to explain to the CNBC interviewer that from now on, dealers will be forced to offer more flexible options for test drives, appraisal of tradeins, pre-qualifying for financing and even
delivery of vehicles. Despite the huge social, cultural and economic upheaval prompted by the COVID-19 lockdown, there is a school of thought which suggests that rather than initiating wholesale changes, this crisis has simply (albeit dramatically) accelerated the current trajectory of economic and societal trends. Take digital sales and marketing, for instance: for the past 20 years, most sectors of the economy have moved to digitize services and sales, yet the purchasing of high-cost goods and services, such as a new vehicle, have remained steadfastly high-touch experiences.
“This whole disruptive period with the coronavirus is an inflection point from which there is no turning back.” While home delivery of new vehicles tripled in the US this past spring (from just under 5 per cent to 20 per cent and rising), online-generated sales accounted for only 7.3 per cent of total sales activity, up from 2.5 per cent pre-COVID, according to Group 1 Automotive. So while important, digitally generated sales remain a fraction of the overall sales funnel in May 2020. Yet new business models like Tesla and Carvana certainly stand to benefit from increased demand for home delivery. And the role of online product features is definitely increasing, at a rate thought impossible prior to the COVID-19 crisis.
Even before the crisis changed our world in March 2020, consumers were expressing dissatisfaction with the current dealership model and its heavy reliance on salespeople. In Automotive News in January 2020, Sarah Kominek pointed out that consumers were seeking more of a ‘“brand experience centre,” and “six in 10 want help from dealership staff that were not salespeople.” Michelle Krebs, an executive analyst with Autotrader, emphasized that these consumer trends have been emerging for some time: “None of these are all-new kinds of ideas. The process that they want is much more focused on the product than on the deal. They want more of that process online.” Social-distancing polices limiting personal contact have also presented dealerships with significant human resource challenges. The new CADA HR Automation platform described elsewhere in Signals is the latest example of moving some human resource functions online. In addition, the threat of the pandemic has suppressed consumer willingness to visit a showroom or book a test drive, prompting brands and automotive dealerships to prioritize their investments in virtual shopping experiences. Although many things are changing due to the COVID crisis, some things remain the same. Most people need to feel and smell and see their potential new vehicle in person before making a final purchase decision. But if the original goal of digital advertising (to drive consumers into Continued on next page
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Signals Magazine July–September 2020
