How the Digital Business Transformation Could Affect Dealers

Digital selling has become a strategy that virtually every dealership has had to quickly implement since March this year. Cox Automotive rolled out Dealer Home Services late in the first quarter to help auto retailers offer the ability to sell cars to customers while they remained safely at home. In April, Volvo launched the ‘Stay Home Store’ in seven European countries to make new car purchases available to those who need them.

In the midst of the pandemic that seems to be surging in the United States once again, the transformation to digital business has begun. It will only be reinforced as a desirable method to sell a car if COVID-19 restrictions are reinstated as cases climb nationally.

But digital business in dealerships, primarily selling online and service valet, probably will only grow going forward. AutoNation CEO Mike Jackson recently told investors, “For digital, this whole disruptive period with corona is an inflection point from which there’s no turning back.”

Considering the dealership’model and the work-from-home trend and other online-centric business, it could affect how dealers function in the coming years. 

Americans Want Cars… For Now

May and June auto sales have been trending towards normal levels. Although year-to-date figures reported by GoodCarBadCar.net show all manufacturers are behind last year’s sales until the end of June, the Cox Automotive Weekly Report from July 6th indicates that SAAR rose again to 13.0 million.

Americans are buying cars in the midst of an uncertain economy, indicating how important the industry is to the United States. They’re shopping habits have changed, though, as most are choosing a vehicle online and completing their purchase in store.

In a CNBC interview, AutoNation’s Jackson said, “In many cases, they do the majority of their shopping online, they may even narrow down the exact vehicle they want prior to coming to the store, but they want to set an appointment, test-drive it and make sure they like it.”

However, more people are working from home, putting fewer miles on their car. As other businesses go digital as well, it may affect how many Americans will want to own a car in the future. Or at least, it may affect how often they replace their vehicle.

The Gig Economy Could Affect Personal Vehicle Ownership

An increasing trend in America is the gig economy that includes 1.6 million workers, and it’s growing. This segment includes people who are employed for a finite time and are typically involved in technological work or paid on tech platforms. What’s notable is that gig economy workers and digital nomads often seek similar transportation methods – temporary and flexible.

Uber and Lyft are two of the largest gig economy platforms and, coincidentally, both have been devastated by COVID-19. But as they return and other gig economy platforms emerge and grow, dealers may find that traditional car ownership becomes a little less desirable.

Keep in mind that gig economy workers only make up around 1 percent of the workforce currently. A less on to take from Tesla, the world’s most valuable carmaker now, is that it pays to watch marginal sectors. It’s possible that the gig economy, including freelancing and contracting, could become a normal practice in the country and play a larger role. 

Is It Time to Pursue Subscriptions Again?

Car subscriptions fell by the wayside for many carmakers and service providers, including dealerships. However, with a digital business transformation in auto retail, it might make sense to make another push for the subscription model.

As ride sharing is still a feared activity along with public transportation, those who need temporary vehicle solutions may find that subscriptions are a model that works for them. Encompassing everything from insurance to maintenance in one fee, it eliminates the need for unnecessary contact with the dealership. Dealers may want to test their local market to discover if subscriptions are a potential source of customers.

The digital business landscape could take any number of twists and turns as the world adjusts to ‘new normals’. Dealers need to stay on their toes and explore all the available options to stay at the height of relevance and profitability.

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Car Biz Today, the official resource of the retail automotive industry.