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Peter Kahn

Peter Kahn Senior Director, Research and Insights

Exclusive Blog Posts

3 Important Factors of Online Retailing

3 Important Factors of Online Retailing

I’m just finalizing the working sessions for President’s Club, and one of the sessions I’m moderating is Online Retailing.  I’…

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The Three Most Interesting Things We Learned About Online Retailing

In 2017, we saw a 16 percent year-over-year increase in online purchases, the highest growth rate since 2011. With stories about Amazon moving grocery shopping online while big box stores shutter across the country, the influence of online retail won’t come as a surprise. However, what this means for the auto industry isn’t clear yet. There are already digital retailing sites for the used market. New car sales laws may mean Amazon, and others like it, aren’t selling new cars yet, but that hasn’t stopped them from creating VDP pages. CDK Global wanted to better understand what shoppers want out of online auto retailing so dealers can stay ahead of the curve. We wanted to know how far online retailing could go, what the role of the dealership is in the car-buying process and how to best blend the online and in-store experience. We surveyed vehicle shoppers across demographics that bought a car within two months or intend to buy a car in the next two months. Below are some of our most interesting findings.

Shoppers prefer to make their finance decisions online.

Financing a vehicle can be one of the most stressful aspects of the car-buying experience. Committing to such a large dollar amount can be intimidating for anyone, but factor in an unfamiliar, long, and often confusing buying process and it’s a recipe for anxiety. When asked about choosing a loan, service package, warranty, and accessories, a majority of shoppers said they preferred making all the choices online. Tools that allow customers to fully understand what they qualify for and what add-on choices they have clarifies the decision-making process. These types of tools make information easy to access and allows consumers to fully evaluate their choices from the comfort of their own home. In addition to convenience, some customers said they appreciated avoiding the potential embarrassment of being denied a loan at the dealership, an experience that can quickly sour a customer/dealer relationship. This can also help increase back-end profits. Seven out of 10 respondents said they would choose add-on accessories from an online menu, a profit point that might be a harder sell in the pressure of the finance office. While they prefer this activity to take place online, the dealer and in-store experience is still important.

66 percent of shoppers feel comfortable having their trade-in evaluated online.

The trade-in is another point of contention between customer and dealer. People become emotionally attached to their cars and attribute value that doesn’t translate to a trade-in valuation. This can lead to a deal falling apart when the offer doesn’t match the customer’s expectations. It’s easy for a customer to overlook a few dings when their vehicle brought their newborn baby home safely, but dealers realize that despite that fact, damage will matter to a potential buyer. Starting the trade-in process online allows consumers to set expectations up front and saves time when they get on the lot. How might dealers start evaluating trade-ins online? Submitting photos and videos of their trade-in was the top choice for shoppers.

Millennials prefer spending more time at the dealership evaluating vehicles over a quick and convenient online process.

In our 2017 study of Millennials we found that 63 percent had an overall negative perception of the auto industry, a nearly 40 percent divide from the much more positive Baby Boomer generation. As this generation of digital natives has become increasingly influential on the market, e-commerce has grown immensely. Yet, when respondents were asked whether they would prefer more time at the dealership learning about and evaluating vehicles or a quick and convenient online process, Millennials preferred the former while 35-65 year-olds preferred the latter. The preference was particularly strong for 18-25 year olds, 70 percent of whom preferred in-store. Their age, more than their generation, might be the reason why. Being younger means they lack experience with cars and the vehicle purchase process. They need more time to get to know the cars, ideally with a salesman acting as a guide to highlight features and help them make the best choice based on their needs. That doesn’t mean online doesn’t matter as well. Our previous Millennial study revealed 77 percent of Millennials prefer starting their deal structuring online.

When shoppers were asked what vehicle shopping methods they would use in the future, 80 percent said online and 78 percent said in-store. Both matter and are likely to be part of the shopping process. Allowing customers to do more online provides the time, convenience and information customers crave from online retailing. It also gives the dealers the power to choose what to display, learn more details about their customers, and help with back-end finance sales. On the lot, it should be all about the vehicle. Shoppers’ biggest concern about starting the process online was not seeing the vehicle in-person first. Even the best virtual displays can’t simulate what it feels like to sit in and drive the car. With the stressful finance and trade-in parts moved online, customers can focus on their excitement about getting a new car – which ultimately means happier customers and dealers.

Amanda Gordon

I find the piece about Millennials interesting because everyone thinks they do not embrace human interaction and I believe that to be quite the contrary. They feed of fof human interaction it just occurs on evolved technological platforms. 

Peter Kahn

I agree, Amanda! Thanks for sharing your thoughts.

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