Reeling From Global Health Crisis, Dealers Embrace Online Sales

Matt Posky
by Matt Posky

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.

[Image: Image: F8 Studio/Shutterstock]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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  • Gardiner Westbound Gardiner Westbound on Mar 30, 2020

    The world is shifting to online purchasing. Dealers have one chance only to sell an Internet prospect a car. If they monkey around with him he will select an alternate quotation.

  • Gardiner Westbound Gardiner Westbound on Mar 30, 2020

    The world is shifting to online purchasing. Dealers have one chance only to sell an Internet prospect a car. If they monkey around with him he will select an alternate quotation.

    • See 1 previous
    • Hummer Hummer on Mar 30, 2020

      @SCE to AUX Yea I tried the whole clothing thing online, 90% of it went back. Anyone that tells me all jeans of the same size fit the exact same is a damned liar. Now there is one clothing item I have found that does work online, I buy my underwear at city boxers dot com but I’m able to choose size 32 waist, the inseam I want, and 5 other measurement options so they are custom made to my size. Kohl’s? Belks? Peebles? Yea good luck buying standardized sizes without trying them on, too much hassle to send most of it back.

  • Kosmo I, for one, and maybe only one, would buy a 5.0 L, stickshift variant of the sedan/hatchback that is Ford's "Not A Mustang EV" tomorrow.I'd buy the sportwagon version yesterday.
  • Akear I am counting the days when Barra retires. She has been one long nightmare for GM. People don't realize the Malibu outsells all GM EVs combined.
  • Redapple2 you say; most car reviewers would place it behind the segment stalwarts from Honda and Toyota,........................... ME: Always so. Every single day since the Accord / Camry introduction.
  • Akear GM sells only 3000 Hummer EVs annually. It is probably the worst selling vehicle in GM history.
  • Amwhalbi I agree, Ajla. This is theory, not reality - hence my comment that Americans don't like hatchbacks. But one of my neighbors bought one of the last Regal hatchbacks that were available for sae, and it is a darn nice car. I still think the idea makes sense, even if history is proving me wrong. And my sister does have a Legacy, which rides a bit higher than my Sonata, and that also is an excellent driver. Even if the general public doesn't concur with me.