While many dealers have embraced some form of online sales, or a hybrid model where a lot of the transaction happens before the prospect gets to the dealership, many still resist or completely refuse to allow the entire purchase transaction to take place online or in-app.
The old mantra “get them into the store” still prevails from what I can see, especially for used vehicles. This is not like the old days, where most dealers just used the internet as a floor-traffic generator.
Indeed, more dealers are using online tools to get further down the transaction funnel (financing, trade evaluations, etc.). It’s more of a “I have to see the customer first to write up the deal” kind of mentality, that, I have to say, still prevails among even the most progressive dealers I observe, especially for subprime used-car prospects.
I have seen many recent studies worldwide that indicate yes, lots of folks will never completely transact a used-car deal online or in an app, without a test drive or visiting a dealership, even with generous return policies coaxing prospects to do the deal entirely digitally.
However, there will also be a new generation of consumers who will do the entire transaction this way. Carvana, Vroom and Shift are proving it right before our eyes.
This, plus the traditional dealer’s failure to embrace and accommodate this change, even in the areas most affected by these new entrants where these digital-only sales are happening, is what is powering the positive Wall Street vibes for these Carvana “disruptors.”
The good news, I think, is that the ability to compete and prosper right now against the new entrants is available to almost every dealer in states allowing these transactions.
The bad news is, most tend to not go “all the way” for an online, in-app-type sale, particularly for used-vehicle prospects, where these new companies are taking market share and building traction, although this is entirely in their power to do so. It’s a culture blockage more than any resource or technology “defendable moat” for the new folks, at least right now.
Clearly, it is much easier to “write up a deal” and scale volume sales from a digital perspective, in that all of the stipulations can be captured and verified within the app process (pay stubs, bank account balances, etc.), without a lot of human interaction, which is extremely valuable during a pandemic.
You don’t have to “see the customer” to write up and consummate a deal; technology can take over, if only for a minority of buyers who want it that way at this point (but who may be the majority of buyers in the future).
Open up to new ways of thinking: That’s the only constraint here for dealers to compete and close deals in new ways, free of the constraints currently in the market. Get that incremental sale today that might be mainstream tomorrow.
In fact, this presents the classic “innovator’s dilemma,” set out by Clayton Christensen in his classic book of the same name.
No one needs to do what is clearly “on the fringe” today with a few early adopters, so they miss out on what might be a “mainstream” tidal wave just over the horizon.
Just look at digital photography (Kodak invented it, then dismissed it as a tiny presence in the market) and compact disk drives (the mainframe drive folks completely missed the market).
The retail battle here is truly won or lost in the dealer culture’s willingness and ability to change and accommodate – a confirmation of the quote from Sun Tzu’s The Art of War, that “Every battle is won or lost before it’s ever fought.”
John F. Possumato is an attorney and the founder of DriveItAway, which creates platforms and applications enabling automotive retailers to offer new app-enabled mobility options, including remote rental and rent-to-purchase options.