Digital Retailing: Why should retailers care?

In the first of our weekly blogs revealing the findings of our latest Market Report, Digital car buying, we answered the question “what do buyers really think about buying cars online?”

The short answer is that buyers appetite towards buying a car online is growing (and for the full answer you can read last week’s blog by clicking here) but then this raises questions around what this means for retailers?

It’s important to note that when we talk about retailers and digital retail, we are not saying they all need to become online retailers, rather we are talking about the integration of digital tools to bring all or part of the buying online for buyers.

So lets get to it.

How can digital retailing benefit retailers?

One of the main criticisms that buyers have of the car buying process is that it is often complicated and difficult. That’s why 42% of buyers who are actively looking to purchase a vehicle are unsure if they will continue with the process and 1 in 3 buyers who have just completed a purchase stating that they would of bought sooner if the process was simpler and they didn’t run into any difficulty.

Clearly then the existing process is putting buyers off and slowing down the process.

But by embracing digital car buying, retailers can help buyers by providing them with more options, a simpler and easier process and a more engaging buying experience that can be completed when and where best suits them. By doing this, retailers will attract and more importantly retain buyers.

So embracing digital retailing can increase sales, but it also enables retailers to achieve better efficiencies by moving more of the car buying process online.

The importance of the time saved through adding more of the car buying process can’t be overstated with our research revealing that if the car buying cycle was even 10% quicker than it is today, it would lead to 1 million more car sales overall in a year – a huge boost to retailer’s income.

So to summarise, moving even a small element of the car buying journey online helps to improve the overall process for buyers whilst helping retailers to increase efficiencies and ultimately sell more cars – feels like a win win?

A case study from across the pond

To help further understand the benefits to retailers of digital retailing we’ll take a look at two US based retailers.

Both Carvana and Carmax have increased their market share over the past few years in a highly fragmented market thanks to digital retailing. Carmax remains the largest used car dealer in the US with 2% of the market, and continues to see its market share increase year-on-year. While Carvana’s market share remains small (0.6%), it has seen significant growth recently with analysts predicting it could reach two million units sold over the coming years.

Carvana has focused on providing the best consumer experience by developing a pure online model, consumers can purchase online and choose to have the vehicle delivered or pick it up from one of Carvana’s vending machine. It has successfully scaled operations to cover 70% of the US population.

Carmax began with physical forecourts and has focussed on developing an omni-channel model to ensure its online experience compliments the in-store experience, enabling them to cater to varying consumer needs.  Their proposition enables consumers to buy a car online, in-store, or through a seamless integration of both and provides guidance whenever and wherever customers want, in-person, online or over the phone.

Carmax began with physical forecourts and has focussed on developing an omni-channel model to ensure its online experience compliments the in-store experience, enabling them to cater to varying consumer needs.  Their proposition enables consumers to buy a car online, in-store, or through a seamless integration of both and provides guidance whenever and wherever customers want, in-person, online or over the phone.

These examples then show a clear benefit to digital retailing, whether it be purely online car sales or more of an omnichannel approach, giving the buyer options on how to buy their next car.

Covid and car buying

The outbreak of Covid-19 has forced many retailers to adapt to digital retailing throughout the varying periods of restrictions, with the graph below highlighting with 41% of UK retailers offering home delivery and 33% offering click and collect.

Whilst implementing these services has been necessary for retailers to continue to trade, it has dramatically accelerated the move towards digital retailing among automotive retailers and shown the benefits – with many retailers indicating they will continue to offer these services once the pandemic ends.

Its not hard to see why many retailers will continue to offer these options when you consider the efficiency savings being reported by retailers through Covid with a US Roadster survey showing a 38% year-on-year increase in sales per salesperson in retailers now offering online buying options as a result of Covid-19.

Perhaps most importantly of all though is that Covid-19 has accelerated digital adoption among buyers (need stat). We can therefore expect to see their demand for digital buying options increase in the near future – so now is the time for retailers to get ahead in digital buying and reap the benefits in the years to come.

This blog is based on the findings of our latest Market Report with this iteration focussed on digital car buying. You can view the full report by clicking here.