Necessity sparks digital retailing rush

Dealerships' transition to a digital future hasn't been as swift as other retailers.

That may be about to change.

Within a matter of weeks this spring, the coronavirus pandemic accelerated the industry's e-commerce evolution. Dealers, in some states limited to online sales, had to figure out how to allow customers to buy from home if they were to sell any vehicles. They turned on or relied more on digital retailing platforms, delivered vehicles to customers' homes and worked deals over Zoom and FaceTime.

If there's a silver lining to the crisis, some in the industry say it's the speed with which dealers accepted the challenge — and the innovation around the customer experience that the pandemic is likely to unleash once the immediate crisis is over.

"Maybe 10 years of progress will be jammed into the next 18 months," Carvana CEO Ernie Garcia said last month in Automotive News' "Congress Conversations" video series.

Progress "requires that you stop and ask the question of: 'Why am I doing this thing that has become habit, that I do every single day?' " said Garcia, who co-founded the digital used-vehicle retailer with a focus on offering a simple online experience. "I think this is the moment where everyone's questioning their habits, and that doesn't happen that often."

Shoppers' habits have been moving online for years.

In survey after survey, consumers have reported a desire for a faster, more convenient car-buying experience. Dealerships are taking note.

In a survey by Cox Automotive released in May, 79 percent of franchised dealership respondents said they plan to keep using digital retailing tools even when business returns to normal. Nearly two-thirds of franchised respondents said they were just as likely or more likely to expand digital options in the future.

At the same time, dealership vendors also are trying out new product offerings, from remote electronic signatures to livestreaming video and virtual business development centers.

It took 20 years for dealerships to get to this point, said David Kain, president of Kain Automotive, a dealership training company. The next wave of progress will come much faster.

Today, a tiny fraction of consumers complete a digital vehicle transaction in which all but the final paperwork occurs online, said Kain, who also is a partner at Jack Kain Ford in Versailles, Ky. That may be because this is some consumers' first online car-buying experience. In the next few years, as more buyers become familiar with the process, Kain predicted a much larger percentage of customers, perhaps as many as 30 percent, will purchase vehicles online.

"When you become more and more used to buying things online," he added, "your speed of absorption is much greater."

Early adopters of online sales and remote deliveries have long said the practices will make the car-buying process faster and more efficient, drawing comparisons to e-commerce giant Amazon.

The virus brought urgency to that transition. Practically overnight, state and local governments restricted business activity in an effort to slow the spread of COVID-19, the respiratory illness caused by the coronavirus. When the only way to do business is online, dealerships had to adapt. And quickly.

Cox Automotive's Autotrader listings site had about 1,000 dealership customers at the start of the pandemic offering digital features such as remote test drives and vehicle walk-arounds, CEO Sandy Schwartz said in the "Congress Conversations" video series. Today, that number is close to 10,000.

"We've been talking about this for a while. This wasn't like the pandemic came and we told people, 'Hey, you better think about adopting digital tools,' " Schwartz said. "We've been out there selling, educating, looking at this for a long period of time. People know now we're never going back to the way we were."

To adapt to digital sales, dealers need to examine their processes, including employee roles and job descriptions, to make sure they align with new ways of doing business, said John Malishenko, COO of Germain Motor Co., which has 15 dealerships in Ohio, Michigan and Florida. Those conversations are happening at Germain.

"Our biggest liability is what we know. We can't use history as a reference point anymore," Malishenko said. "We just went three years down the road in two months."

Joseph Agresta, president of Benzel-Busch Motor Car Corp., with three franchised dealerships in New York and New Jersey, said the digital retailing acceleration also may become more important as the virus fallout slows public transit and the pace of innovation around ride-hailing and car-sharing as people reconsider being in close proximity to one another.

"Some of the pressures that the industry may have been focused on there may be pushed out," Agresta said. Meanwhile, vehicle ownership and leasing are "going to be more of a factor now."

Sonic Automotive Inc., the nation's sixth-largest new-vehicle retailer as ranked by Automotive News, in April released its CarCash appraisal app nationally. Activity quickly grew on the app, and at the end of April it represented almost 30 percent of the company's appraisal activity, Sonic President Jeff Dyke said.

"We all learn a lot during crisis times," Dyke told Automotive News. "And we sometimes can get in our own way of making everything perfect before we let anything happen."

Nearly three years ago, Wickstrom Auto Group in Barrington, Ill., put together what it calls its mobile showroom of at-home test drives and vehicle deliveries as a convenience for customers of its Ford-Lincoln and Chrysler-Jeep-Dodge-Ram stores.

"We had hoped this would become our big competitive advantage, and now other dealers have been forced to figure it out," said Colin Wickstrom, the group's dealer partner.

Even with fewer overall sales during the pandemic, the percentage of people taking home delivery and test drives grew from about 10 percent of customers before the crisis to more than 30 percent today, Wickstrom said. He doesn't plan to stop either practice once business returns to normal but said he is looking for another way to differentiate his stores. A likely contender: technology to allow customers and sales employees to work a deal side by side in real time — virtually.

"Dealers need to keep coming up with ways to meet people where they're at and different ways to communicate," Wickstrom said.

Schwartz said dealers are more ready to embrace digital changes than ever before, but "this is new territory for some of them."

"We have a lot of innovative dealers," he said. "These people have been innovating for years and years, and they will find a way to do this."

Melissa Burden contributed to this report.