14 minute read
New Study Highlights why a Dealership’s Online Presence is so Important
By Carina Ockedahl, Canadian Auto Dealer
Digital Air Strike released its 9th Annual Automotive Customer Experience Trends study at the 2022 NADA Show in Las Vegas, Nevada, offering dealers, lenders, OEMs and providers information that they can use to improve the vehicle ownership experience.
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The company said its report offers “compelling insights” on the impact of the vehicle inventory shortage, online interactions that help move the customer journey forward, and the importance of the online and digital communication experience for consumers, along with the platforms that they prefer to use.
“The vehicle researching, buying, and ownership processes have changed exponentially since the onset of the COVID pandemic,” said Alexi Venneri, Co-founder and CEO of Digital Air Strike, adding that “the data has consistently proven to be helpful for our dealers and the industry as a whole.”
The report shows that a third of consumers felt significantly impacted by the inventory shortage. Of those that were affected, 21% went to a different dealership, 8% asked the dealer to order a new build from the factory, and 21% had to wait for the vehicle they really wanted.
Of this particular group, 71% waited up to three months, while 27% waited up to a year, and 50% paid a $500 (or more) deposit. Also worth noting is that 20% of consumers said the dealer did not keep them informed about the status of their vehicle. And again, among consumers affected by the vehicle inventory issue, 32% did not get their first-choice vehicle, and 17% bought a used vehicle instead of a new one.
The study advises dealers to present alternative options to consumers, including new and used vehicle options. Some dealers also offered important information in their communication to consumers about the vehicle delivery time, delivery process, and the car’s features.
“Dealers need to ensure their pre-order process includes a plan for ongoing communication to keep their customers updated and to retail vehicle deposits,” said Digital Air Strike in its report.
As for the online environment, some of the main reasons consumers did not contact a dealership when researching their vehicle include a lack of special offers (40%), high prices (35%), a lack of dealership photos (26%), there was no easy way to contact the dealership (11%), bad reviews (8%), and a lack of COVID-19 protocols (3%).
Consumers expect to access accurate information on the first page of their search results—not outdated information, the report notes, adding that dealerships should have an updated Google Business Profile with one place to browse reviews, receive their frequently asked questions, see the store’s photos, and find special offers and announcements. There should also be an easy way to contact the dealer on that page.
“Online sources continue to be the most dominant resource in reaching consumers when making a purchase decision, while ads on streaming networks are close behind traditional media sources,” reads the report. “Without a solid online presence, consumers are more likely to select another dealership for their purchase or service.”
The study shows that consumers select dealerships based mainly on online searches and reviews—at record levels. It notes that 93% of consumers that purchase a vehicle (up from 88% in the previous
year’s study), and 87% of service customers said online review sites helped them select their dealership.
Based on consumer rankings of their top source for dealership research and reviews, Google slots number one with 60% (up from the last study), followed by Kelley Blue Book with 17% (down from the last study), Vehicles.com with 17% (down), VehicleGurus with 13% (down), and Autotrader.com with 13% (down).
“Because of the inventory shortage, consumers don’t have as much time to research because vehicles are being sold quickly. Eighty-six per cent of sales (down from 93% in the prior study) and 51% of service (down from 74% for the previous study), researched a few days or more before selecting a dealership,” said Digital Air Strike in its report.
On reviews, 58% of consumers said the dealership did not ask them to write an online review about their sales experience, while that percentage jumps to 71% for service. Thirty per cent of service customers said a dealership’s response is the “most important” part of a review. For consumers overall, a four or five star rating can impact their decision when selecting a dealership.
It is also worth noting that most reviews written by consumers are positive (81% for sales and 88% for service), and that 58% of consumers find these review sites helpful. 1. Engage in online interactions that can improve the customer journey. 2. Communicate with effective and timely messaging. 3. Increase lead conversion and protect your online presence with reviews. 4. Turbocharge your marketing game. 5. Improve your online experience.
Digital Air Strike surveyed more than 2,300 vehicle buyers and more than 2,700 service consumers from transactions conducted over the last six months for its study. These consumers were between the ages of 25-54, a near-divide of male (57%) and female (43%), had no pre-qualification criteria other than those transactions, and they were not predisposed to be online shoppers. n
The CARLAWYER©
By Eric Johnson, Partner in the law firm of Hudson Cook, LLP, Editor in Chief of CounselorLibrary.com’s Spot Delivery®
Here’s our monthly article on selected legal developments we think might interest the auto sales, finance, and leasing world. This month, the developments involve the Department of Justice, Consumer Financial Protection Bureau, and Federal Trade Commission. As usual, our article features the “Case(s) of the Month” and our “Compliance Tip.” Note that this column does not offer legal advice. Always check with your lawyer to learn how what we report might apply to you or if you have questions.
FEDERAL DEVELOPMENTS
DOJ Settles SCRA Claims Against
Credit Union. On March 11, the DOJ announced that it settled allegations against BayPort Credit Union for violating the Servicemembers Civil Relief Act by improperly refusing or failing to lower the interest rates on retail installment sale contracts entered into by servicemembers prior to entering military service to 6% per year and by repossessing servicemembers’ cars without a required court order. The consent order, if approved by the U.S. District Court for the Eastern District of Virginia, requires BayPort to pay approximately $70,000 to the affected servicemembers, pay a $40,000 civil penalty, revise its policies and procedures to prevent future SCRA violations, and provide SCRA training to its employees.
Federal Bill Addresses LIBOR and Reporting of Cyber Incidents and Ransom
Payments. On March 15, President Biden signed H.R. 2471—the “Consolidated Appropriations Act, 2022”—an omnibus bill that, among other things, allows the Federal Reserve to establish replacement rates for contracts using LIBOR and imposes new requirements on banks and other businesses to report significant cyber incidents and ransom payments to the federal government.
CFPB Updates Examination Procedures
to Address Discriminatory Practices. On March 16, the CFPB announced that it updated its examination procedures for evaluating unfair, deceptive, or abusive acts or practices to address discriminatory practices in connection with consumer financial products or services. The updated exam procedures provide that discrimination may satisfy the criteria for unfairness by causing substantial harm to consumers that they cannot reasonably avoid, where that harm is not outweighed by countervailing benefits to consumers or competition.
FTC Finalizes Settlement with Online Retailer for Allegedly Blocking Negative
Reviews. On March 21, the FTC announced that it finalized an order settling allegations that Fashion Nova, LLC, an online clothing retailer, blocked hundreds of thousands of negative consumer reviews of its products on its website, in violation of the FTC Act. The FTC alleged that Fashion Nova represented that the product reviews on its website accurately reflected the views of all purchasers who submitted reviews of its products, when in fact the company blocked reviews with ratings lower than four stars out of five. The company must pay the FTC a penalty of $4.2 million.
CFPB Issues Compliance Bulletin on
Impeding Consumer Reviews. On March 22, the CFPB issued Compliance Bulletin 2022-05: Unfair and Deceptive Acts or Practices that Impede Consumer Reviews. The bulletin describes certain business practices related to consumer reviews of products and services that may be unlawful under the Consumer Financial Protection Act. Sections 1031 and 1036 of the CFPA prohibit a covered person or service provider from engaging in an “unfair, deceptive, or abusive act or practice” that is “in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service.” The bulletin highlights ways that covered persons or service providers could violate this prohibition by interfering with consumer reviews, including using clauses in form contracts that restrict a consumer from posting reviews, using fake reviews, and suppressing or manipulating negative reviews to trick or confuse consumers.
CFPB Extends Deadline for Submitting
Comments on “Junk Fees.” The comment deadline for the CFPB’s request for public input on so-called “junk fees” charged in connection with consumer financial products and services has been extended to April 11, 2022.
CASE(S) OF THE MONTH
Court Refused to Dismiss Dealership’s Claims Under Unlawful and Unfair Prongs of California’s Unfair Competition Law and Under California’s Unfair Practices Act Against Online Used Car Retailer: A California vehicle dealership sued an online used car retailer for violating California’s Unfair Competition Law, False Advertising Law, and Unfair Practices Act. The defendant is not licensed in California and has no physical location in California, but it advertises throughout the state. The defendant moved to dismiss the complaint, and the U.S. District Court for the Eastern District of California granted the motion in part and denied it in part.
First, the court addressed the claim that the defendant violated the unlawful prong of the UCL. An “unlawful” business practice under the UCL is a practice that violates any other law. The plaintiff alleged that the defendant violated the unlawful prong by violating various California statutes regulating used car sales, including by: (1) failing to have a physical dealership in
California; (2) failing to obtain related used car dealership and salesperson licenses; and (3) failing to comply with a number of other California Vehicle Code provisions related to appropriate advertising and display of information in connection with selling used cars. The court found that the plaintiff adequately alleged that the defendant was a “dealer” engaged in the sale of used cars in California. Specifically, the plaintiff alleged that the defendant engaged in “dealership activities and actions” as defined by the California Vehicle Code. Therefore, the court denied the motion to dismiss the claim under the unlawful prong of the UCL.
Next, the court addressed the claim that the defendant violated the unfair prong of the UCL. To state a claim under the unfair prong, the court noted that the plaintiff must allege that the defendant’s prices are predatory, i.e., that it sells its cars at a price below its own costs. The plaintiff alleged that by operating as a used car dealer, but not complying with applicable California law, the defendant is undermining fair competition for duly licensed California auto dealers. The plaintiff also alleged that the defendant failed “to pay the overhead costs necessary to run and operate a lawful and licensed auto dealership” and that the failure to pay those costs “caus[ed] injury to lawful competitors.” In addition, the plaintiff alleged that the defendant is “placing vehicles for sale under market value because they do not incur all the necessary costs and expenses of running a bona fide dealership in California.” Because the court found that the plaintiff sufficiently alleged that the defendant is a “dealer” under the California Vehicle Code, it concluded that the plaintiff sufficiently alleged that the defendant is selling cars below its own costs by not paying the required costs to be a “dealer.” Therefore, the court denied the motion to dismiss the claim under the unfair prong of the UCL. The court addressed the claim under the fraudulent prong of the UCL together with the FAL claim. Because the plaintiff failed to allege actual reliance on any misrepresentations made by the defendant, the court dismissed the FAL claim and the claim under the fraudulent prong of the UCL. Finally, the court addressed the UPA claim. The UPA prohibits any person doing business in the state from selling or using any article or product as a “loss leader.” A “loss leader” refers to any article or product sold at less than cost where: (1) the purpose is to encourage the purchase of other merchandise; (2) the effect is a tendency to mislead purchasers; or (3) the effect is to divert trade from or otherwise injure competitors. Such claims require a showing of the defendant’s wrongful intent to sell articles below cost for the purpose of injuring competitors or destroying competition. Noting that it already found that the plaintiff sufficiently alleged that the defendant was selling cars below cost, the court concluded that there were sufficient allegations showing that the defendant had a wrongful intent to injure competitors or destroy competition. The plaintiff alleged that, based on its public filings, public statements, press releases, and website, the defendant has expressed an intent to sell vehicles in California without compliance with California laws and regulations governing used car sales. Therefore, the court denied the motion to dismiss the UPA claim. See 2022 U.S. Dist. LEXIS 35198 (E.D. Cal. February 23, 2022). Our Case of the Month highlights some very interesting issues regarding advertising and marketing into a state in which you’re not licensed and don’t have a physical location. By advertising and marketing to consumers in another state, you may be required under that state’s law to have a physical presence or dealership in that state; required to be licensed as a dealer in the state; and even comply with that state’s laws related to advertising and display of information in connection with selling cars into the state. Things get complicated even more quickly if you deliver a car into the other state. If you’re engaged in advertising, marketing or delivering cars into another state in which you’re not licensed, show your friendly compliance lawyer this article and ask them if you have any exposure. n
Eric (ejohnson@hudco.com) is a Partner in the law firm of Hudson Cook, LLP, Editor in Chief of CounselorLibrary.com’s Spot Delivery®, a monthly legal newsletter for auto dealers and a contributing author to the F&I Legal Desk Book. For information, visit www. counselorlibrary.com. ©CounselorLibrary. com 2022, all rights reserved. Single publication rights only to the Association. HC# 4871-4064-2842.
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LOCATIONS TO SERVE DEALERS
THROUGHOUT THE MID-ATLANTIC
KEYSTONE PENNSYLVANIA
488 Firehouse Road Grantville, PA 17028
717-469-7900 | Fax 717-469-2842
Joey Hughes, GM Shirley Kennedy, Office Manager / Dealer Services
Mondays, 11 AM
PENNSYLVANIA
1190 Lancaster Road Manheim, PA 17545
717-665-3571 | Fax 717-665-7521
Joey Hughes, GM Randy Derr, AGM Kevin Gantz, AGM Tim Doyle, AGM Andy Mekulsia, Commercial Accounts Manager Deni Hostsetter, Dealer Services
Exotic Highline Sales every Thursday at 11 AM, Friday is regular sale stating
PITTSBURGH
21095 Route 19 Cranberry Twp., PA 16066
724-452-5555 | Fax 724-452-1310
Tom McDonald, GM Shawn Byers, AGM Zak Hanna, Senior Manager Client Service Justin LaScola, Manager Client Service Dealer
Wednesdays, 9 AM TRA Sale Wednesday, 11:30 AM
PHILADELPHIA
2280 Bethlehem Pike Hatfield, PA 19440
215-822-1935 | Fax 215-822-8140
Charles Polina, GM Scott Mulligan, AGM Gregg Pachik, Dealer Services Manager Troy Moyer, Commercial Accounts Manager
Tuesdays, 9:30 AM TRA Sale, Tuesday 12 PM BALTIMORE-WASHINGTON
7120 Dorsey Run Road Elkridge, MD 21075
410-796-8899 | Fax 410-799-0512
Chad Spearman, GM Audrey England, AGM Steve Soprano, Dealer Sales Manager
Tuesdays, 9:30 AM
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