Silicon Valley is emerging as the biggest competitor—and greatest threat—to traditional auto dealers, offering evidence that it’s time for everyone to wake up, take notice, and take action.
Yet another sign that the auto sales industry is in the midst of a massive sea change is the arrival of a new approach to selling cars—one spearheaded not by traditional auto sales professionals, but by Silicon Valley egghead techies who are seizing the opportunity to make millions while stealing untold numbers of customers from dealers who are guilty of one thing: being asleep at the wheel.
What’s even more astonishing about this recent development is that these industry-inexperienced people are scoring home runs by giving customers what they want: less haggle; transparency in buying; accuracy in financing; and zero in-store wait time. These uniquely 21st-century companies are offering car buyers more flexibility in financing, leasing, and choosing the ancillary products they want. It’s a complete turnkey solution, and it’s shaking up the auto sales industry.
The New Players
Companies like Vroom, Beepi, Shift Technologies, Carlypso, and Tred are among the tech companies who are spearheading the shift to an e-commerce-centric car buying experience. Probably one of the most forward-thinking of the lot is Carvana, an online used car dealer whose “car vending machine” idea looks to some like a gimmick—and to others, like the wave of the future. Recently, Carvana raised $160 million to add more of its car vending machines in cities throughout the country. Vroom’s CEO is Paul Hennesy—and its Executive Chairman is Elie Wurtman, a highly successful entrepreneur who founded three NASDAQ-traded companies. Not exactly the “usual suspects” when it comes to the leaders of the auto sales industry. And that’s precisely the point.
“these industry-inexperienced people are scoring home runs by giving customers what they want: less haggle; transparency in buying; accuracy in financing; and zero in-store wait time.”
Business as Usual No Longer Cuts It
Auto dealers who continue to operate under the “business as usual model” stand the risk of being blindsided by companies with out-of-the-box approaches to selling cars. The tipping point is drawing nearer, pushing traditional dealers to seek out better ways to compete with online providers. Creating an online process that engages customers earlier in the process and offers easy, flexible online financing is critical.
Some dealers will read this and ignore the inevitable. Some may even consider the Silicon Valley interlopers a fad that won’t withstand the test of time. But one thing is for certain: the Internet is not going away. Dealers with websites that lack interactivity and are not user friendly will be deemed too “boring” for customers—leading many of those potential buyers to take their business elsewhere.
Facts are facts. Customers want to be treated fairly and to know that they’re dealing with an auto seller that is upfront and transparent. Providing customers with an online experience that’s fun, credible, and transparent is significantly more likely to attract business than a static page that fails to guide buyers to purchasing. Dealers must also understand that 60 percent of website visits will come by way of iPhone and Android mobile devices, therefore the onus is on them to make dealership websites mobile friendly.
Dealers also have to provide online financing capabilities that go beyond generic, static credit applications. Staff has to respond to questions accurately and quickly as they come in, avoiding the trap of delivering vague, non-specific answers—especially when it comes to financing or leasing terms. If a dealership thinks it can get away with taking the “wait until they come into the dealership” approach to addressing financing terms, that dealership is dead wrong.
411 Equals Sales
Providing information is key. If a customer has to perform an exhaustive search for answers to their questions, they won’t stick around for long. Digital storefronts must be a breeze to negotiate. Dealers have to give control to get control. And those who refuse to face the fact that the industry is changing may wake up to the realization that the party is over. The end won’t come overnight. But the slow bleed of business to online car buying sites will eventually take their toll by way of dwindling sales and sapping revenues.
Rooting for Innovation
The alternative is for dealers to become proactive, today. This begins by taking a long, hard look at your dealership’s existing website and comparing it to those who are raking in the business hand over fist. Consider appealing to a wider customer base by offering free delivery of vehicles, or giving buyers a seven-day money back guarantee. There are plenty of innovative ideas that can spur business, but without the motivation to even try, a dealership could find itself in trouble.
But where to begin? Platforms such as MakeMyDeal provide customers the ability to obtain pre-approval, reducing much of the heavy lifting that has to take place prior to a customer arriving at the dealership to claim delivery. Credit IQ, Autogravity and Autofi offer dealerships the ability to compete with online tech companies by offering customers the ability to finance vehicles entirely online. These services can be used to create a level playing that could result in increased sales.
Websites Bring Customers In-Store
The most important consideration is the fact that in most cases, although customers sign an electronic agreement online, the transaction is not complete until the customer takes possession of the vehicle. This requires them to eventually have a face-to-face meeting with a representative of the dealership to go over final paperwork—and at that time, this gives dealerships a perfect opportunity to upsell additional product offerings.
The fact remains, not all customers will necessarily want to complete the sales transaction online. Believe it or not, even in the era of “car vending machines” many buyers are still more comfortable with dealing face to face, and this is a fact that should be encouraging to traditional dealers who feel like they’re being dragged kicking and screaming into the brave new world of auto sales.
The Three-Pronged Approach
Dealers should consider a three-pronged approach to their online strategy: appealing to customers who prefer to purchase in-store; catering to customers who prefer to shop and obtain financing and pre-approval online; and reassuring subprime customers who are wary of being dragged through the mud to see if they can even qualify. Turning a dealership’s website into a virtual showroom and bringing the finance manager’s expertise to the forefront through interactive chat, or other means, will deliver more sales and more ancillary products sold.
Time to Get On Board
Selling cars is the primary goal of any dealership. Sure, finance is the dealer’s bread and butter—but unless a car is actually sold, the point is moot. Digital storefronts are no longer the future of auto selling. They’re today’s reality. It’s time to get on board.