Reeling From Global Health Crisis, Dealers Embrace Online Sales

Auto dealers and manufacturers around the globe have spent the past several years examining the usefulness of digital car sales, but the practice hasn’t been embraced as warmly in the United States, where state franchise laws often prohibit direct sales from automakers to anybody but a licensed auto dealer. Critics say this allowed retailers to become middlemen that customers are forced to haggle, while advocates explain that the system promotes U.S. jobs and provides a local resource for those needing repairs.

Neither are incorrect, yet dealerships have continued to buck online sales, even after manufacturers attempted to work with them on various pilot programs.

With COVID-19 keeping a large portion of the American population at home, dealers are revisiting online sales as a way to cut their losses. Digital transactions now look to be a necessity if shops hope to survive a prolonged pandemic. While many see this as a temporary measure, once the genie is out of the bottle, he’s difficult to put back inside… and may be far less benevolent than we’d like — even if we’re desperately in need of one of those wishes.

Preliminary results from numerous surveys show dealers anticipate a hard 2020; many expect to see annual revenues decline by over 25 percent. Losses through the next few months are expected to be truly brutal, with the silver lining being a presumed rebound in the late summer or early fall. But that’s speculative, and does nothing to improve the current situation confronting dealers: local governments decreeing shops cannot remain open, automakers producing fewer (or no) cars, and customers who cannot leave their homes.

According to Automotive News, this encouraged loads of auto dealers to swiftly embrace digital sales. The publication launched a survey of 10 retailers last week, noting that nine came back saying they “were likely to increase their use of digital tools to reach customers wary of visiting showrooms amid the social distancing guidelines designed to limit the spread of the COVID-19 virus.” The majority also said they were eager to try at-home deliveries and/or test drives.

On March 27th, New York Gov. Andrew Cuomo said licensed dealerships would be able to sell online — despite the state being more-or-less on a total lockdown. Two NYC-area shops we spoke with indicated they were already working out plans with mobile app developers to make this possible, while others simply plan on strengthening their own websites to make at-home transactions easier (e.g. chat features, clear inventory listings, vehicle delivery services). Some are even attempting to get repair centers certified by the Centers for Disease Control so they can schedule visiting periods for lone customers — though one admitted this may not last if social distancing measures are further strengthened.

From Automotive News:

In some states where dealerships have been temporarily prohibited from selling cars, it’s still unclear whether online or remote sales are allowed. State dealer associations have pressed for clarification from governors about dealerships’ freedom to sell under certain scenarios, including virtually. And as circumstances change daily, retailers and vendors alike have had to quickly adapt to new guideposts.

Yet the virus’ impact may be accelerating the industry’s evolution to digital transactions, albeit out of necessity. The shift has been underway for years, but dealerships have adopted varying elements at different speeds. Now, dealers who spoke to Automotive News about expanding online efforts over the past several weeks say they’re unlikely to drop them once the crisis wanes and business returns to normal.

“I don’t think that the car business is ever going to go back completely to the way it was,” said [Brian Kramer of Germain Toyota of Naples, Florida], whose dealership sold 6,000 new and used vehicles in 2019. “We’re working on building our whole business model around this.”

The heavy discounting currently taking place to tempt customers through a period of economic uncertainty will eventually dissipate, though other changes stemming from the coronavirus outbreak are likely to persist. Cox Automotive reports that over 4,000 U.S. dealership have signed up for a collection of services recently introduced by Autotrader — including virtual walk-arounds, video meetings with sales reps, ways to schedule at-home deliveries and dealer analytics.

While the usefulness of those features will probably fade slightly as COVID-19 does the same, they’ll never be totally useless. Dealers have embraced the new tools and have a few months to figure out how to make them work, so it’d be surprising to see them go back to business as usual after the pandemic ends.

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