Pandemic accelerates adoption of digital tools

Before the coronavirus crisis, Germain Toyota of Naples didn't provide home delivery to local customers.

The southwestern Florida dealership's rule: Customers had to live 50 miles or more from the store for remote delivery, a "time-consuming and very cumbersome" practice that involved shipping vehicles and arranging notaries to complete the transaction, said Brian Kramer, the store's general manager.

Then came COVID-19. Suddenly, with local customers reluctant to visit a showroom in person, the 50-mile rule no longer made sense.

"Now we [deliver] across the street," Kramer said.

Like Germain Toyota, dealerships across the U.S. are embracing digital sales — using online car-buying platforms, virtual financing tools and remote delivery — to stay afloat as the coronavirus outbreak drags down traffic and sales. It's even more pressing in states that have issued mandates to close nonessential businesses, particularly when dealership showrooms have been placed in that category.

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 Kramer, whose dealership sold 6,000 new and used vehicles in 2019. "We're working on building our whole business model around this."

An Automotive News survey suggests Kramer is not the only dealership executive with that view.

Nearly nine in 10 dealers who responded to the survey, conducted March 18-24, said 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. Another three-quarters of respondents said they were likely to try conducting vehicle walk-arounds, test drives and deliveries at customers' homes.

Joseph Volkswagen of Cincinnati closed its physical showroom, switching to appointments only in response to a stay-at-home order Ohio Gov. Mike DeWine issued last week. The Ohio Automobile Dealers Association said it interprets the order to mean sales and service functions can operate, but store General Manager Bill Cullen said sales employees are working from home, answering phone and Internet leads.

The store launched a three-day return policy a month ago, Cullen said. It was intended to lend more confidence to shopping online through Modal, Joseph Volkswagen's digital retailing platform, after store managers noticed customers abandoning online deals. Today, he said, it's a way to increase confidence around home deliveries. "It's no different than delivering fast food to someone's home," he said.

Jack Kare, digital performance manager at Pat Milliken Ford, in Redford, Mich., said during a March 17 webinar that people want to shop online, regardless of COVID-19 concerns. The virus has made it more important than ever to promote digital processes, he added.

"I'm not going to lie — it's going to be tough. It's going to be an adjustment for a lot of your average salespeople, your average dealerships," he said. "How we do business in this next 90 days ... is going to shape the future of our business. So if we can just accept this, adapt it now, your store is going to be fine."

Digital retailing vendors say they have fielded more calls from dealers looking to install digital tools since the crisis accelerated.

Modal, which offers white-labeled digital retailing tools to dealerships, said average orders per dealership — buyers who complete the entire online checkout process — are up nearly 30 percent in March compared with February.

"What we've heard from our existing dealer partners is that their e-commerce channel is going to become more important to their strategies as a result of the coronavirus," Modal CEO Aaron Krane told Automotive News.

AutoFi, which develops and markets software to automate online vehicle sales and financing, launched a weekly webinar series for dealership employees to seek advice from other dealers who already have gone digital.

Digital retailing provider Roadster has shifted dealership training and activation from in-person to remote to get dealers up and running faster, CEO Andy Moss said.

The thinking around digital retailing has shifted in a matter of days from a concept the industry was slowly accepting to a business continuity solution, he added.

Many vendors are offering help, from discounting fees to rolling out new services. Autotrader, for instance, launched a suite of home services that include virtual walk-arounds, test drives and vehicle delivery. More than 4,000 dealerships signed up within a few days of the rollout, Jessica Stafford, general manager of Cox Automotive's Autotrader and Kelley Blue Book, said in a statement.

Dean Evans, executive vice president at dealership technology company Cars.com, said many digital tools have had transaction capability.

But "the dealerships just weren't using all of that functionality in that orchestrated way," Evans said. "Now that's happening at a much-accelerated rate."

At Germain Toyota, showroom traffic was off by 38 percent through March 24, Kramer said. Internet leads were down 12 percent. But phone leads were flat, and chat leads have more than doubled.

As the outbreak escalated, managers took to using virtual tools to close deals, Kramer said. Finance managers have started to use the Zoom video-conferencing app to connect with customers; they can text a link to a virtual finance-and-insurance menu to a customer so they can discuss the information on the call.

"We've done it with people in their 80s, and they seem to embrace it," he said.

Now that customers have seen the digital options, Kramer said, after the crisis wanes, "I don't know that they're going to want to spend three hours here."

Jackie Charniga contributed to this report.