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

the showroom) has changed to include choosing options and arranging delivery, where does that leave the showroom and salespeople? The history of Saturn, with its all-new vehicle and sales models, ended badly in 2010, but perhaps the “no haggle” price policies it pioneered (the precursor to the Best Buy no-salespeople approach) were not to blame; a host of manufacturing and economic factors contributed to the demise of the GM experiment.

Looking ahead to 2021, the prospect of social distancing and fear of the coronavirus will likely play a major role in suppressing normal automotive sales processes. But some of the trends that have been emerging for years will continue to accelerate in importance. These include an increasing reliance on a digital-sales funnel to empower buyers to narrow down the vehicle they are considering, arranging test drives and delivery to customer homes, and a deliberate de-emphasis on the sales process in favour of highlighting the product experience.

Buckle up. Change is going to come— and a whole lot faster than we thought a few months ago.

Virtual Vehicle Delivery Made Easy

Developing and implementing social distancing policies and procedures while still maintaining a business is difficult, but First Canadian has introduced an innovative way to assist dealerships.

Interacting remotely with customers presents unique challenges, from ensuring that communications take place seamlessly on multiple platforms (smartphone, tablet, computer) to presenting and finalizing finance agreements without an in-person meeting.

That is where First Canadian’s new Virtual Vehicle Delivery Plan comes in, enabling dealerships to present financing options to customers on multiple platforms, empowering finance departments to make financing and leasing changes in real time, and ensuring the safety of employees and customers.

Darren Johnson, regional manager in BC for First Canadian Financial Group, explains that the system—created to assist dealerships in these challenging times—builds upon a proven industry training and development program called FC Drive.

“We can show you how to successfully install and execute virtual deliveries on a daily basis in your stores. We [can] train and coach your staff to be experts in this new way of doing business.”

The Virtual Vehicle Delivery Plan integrates the needs of customers to receive and understand different financing options, and the internal requirements for finance departments to close deals easily and ultimately maintain or increase profitability. And given the increased costs of making business adjustments to comply with social distancing polices, the good news about the First Canadian virtual offering is that it comes at no additional cost for partners.

Moving to a virtual platform for closing financing deals and delivering vehicles need not be complicated or expensive. First Canadian has the employee training experience and the virtual platform to make this essential transition easier. For more information or to arrange a demonstration of First Canadian’s remote virtual delivery solution, call or email Darren Johnson at 250-217-5955 or djohnson@ firstcanadian.ca.

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John Romfo National Sales Manager • 1.250.308.1112 Darren Johnson Regional Manager • 1.250.217.5955 Get your Finance Department firing on all cylinders. Call us today!