A Cultural Shift Toward Digital Engagement Emerges as Key Success Imperative for Automotive Retail Sector

By Kim Irwin, Senior Vice President for Smart Digital, J.D. Power & David Paris, Director of Market Insights and Valuation Services, J.D. Power

While the iconic showroom experience that has defined the vehicle purchase experience for generations is not likely to disappear, most leaders with a stake in the automotive retail sector are rapidly concluding that major changes will have to take place to compete effectively in a post-pandemic economy. COVID-19 accelerated a trend toward digital engagement that was already gathering steam before the events that shut down commerce and automotive production in 2020.

Many dealerships are now challenged to reinvent their customer-facing culture by shifting away from a deeply ingrained sales-led process. Instead, they are exploring how to follow the lead of customers tapping into digital tools to initiate their purchasing journey the days, weeks and even months before ever stepping onto a dealership’s lot.

New digital resources have also changed how customers calculate the value and total cost of ownership (TCO) of vehicles they currently own or want to purchase. The enhanced transparency of the digital market provides consumers with a deeper understanding of—and essential insights into—the economic effect of their decisions in the long term.

Change Management

While there is evidence that the dealership community recognizes the shifts that are taking place, the pace at which technology modernization and business transformation initiatives are being implemented is uneven. Some dealers have made progress in changing processes and adopting new engagement strategies by integrating technologies and digital workflows into their sales operations.

For many others, however, significant work remains to be done to make fundamental changes to the culture of dealerships and fully embrace the emerging realities of an increasingly digital marketplace. It is understandable. Overcoming decades of experience in which commissioned-sales staff guided customers through the purchase process through the strength of their knowledge, personality–and charisma–is not an easy model to abandon.

The good news, however, is that the baby does not have to be thrown out with the bathwater. Many of the skills and competencies that have contributed to dealership success in past decades can still be relevant and constructive today. The extent to which staff resistance to digital customer engagement has been documented is often tied to a false narrative that the entire paradigm must change.

The truth is that digital engagement channels should not be viewed in a vacuum. They should be integrated into the overall sales process because, for the majority of consumers who make vehicle purchasing decisions, the showroom is exactly where they end up in their buying journey. There is still an interest and desire to tap into the product expertise of well-informed sales staff who can walk prospective buyers through the intricacies of today’s tech-intensive and feature-rich vehicles.

Caveat Venditor

On the other hand, a failure to deliver an integrated online-to-on-premises experience can be frustrating for consumers who have invested significant time and effort to conduct online research. J.D. Power research shows that dealerships that effectively bridge the digital and showroom experience are far more successful in keeping customers in the dealership environment. The evidence is just as clear that a growing number of customers will choose not to return to a store when their online efforts cannot be leveraged onsite to, for instance, identify the vehicles they want, secure financing or select insurance providers.

Making investments now in developing a culture that can address consumers’ digital desires is not a bad idea. While vehicle prices remain near historic highs, J.D. Power expects the new vehicle production picture to improve—even as we enter uncertain economic times—putting downward pressure on new- and used-vehicle pricing.

As this shift gradually unfolds, we will move beyond the current seller’s market. Dealers would, consequently, be well advised to keep their fingers on the pulse of both the supply and demand sides of the equation. The only way this can take place in the near-real-time nature of today’s business landscape is to invest in—and master—new digital tools.