E-commerce : the future of car sales?

The future of automotive sales will be digital, failing which automotive sales won’t have a future.
As digital is becoming an increasingly important part of the car-buying experience, Manufacturers have already set their new goal for the next decade: grow e-commerce. Boosted by the expectations of emerging countries, brands and dealers are piling into this new sales channel. But before it can establish itself as a bona fide new commercial outlet, the channel needs to remove certain obstacles.

Automotive e-commerce: a trend boosted by emerging countries

Are consumers ready to buy a car online? This question first arose in the early 2000s, when the Internet was still in its infancy. Now, almost 20 years later, nothing has really changed: e-commerce sales for vehicles remain at a standstill. Despite this, OEMs, dealers and web players are convinced that e-commerce is the future of the automotive sector – an opinion that Facebook seems to share with the opening of its Marketplace to dealerships.

This belief in e-commerce is based, in part, on an observation: emerging countries are willing to buy a car online. This is revealed by the Cars Online survey in 2017, conducted by Capgemini among 8000 consumers from 8 countries (Brazil, China, France, Germany, India, Italy, United Kingdom and the United States). According to the survey, 36% of respondents from emerging countries are certain that they will be ready to buy a vehicle online in the future. This gives the brands reason to believe in significant market opportunities to be seized, given that emerging countries already represent the largest markets in terms of volume, such as China, the world’s leading automobile market since 2009.

If online automotive sales have failed to grow faster, much of the blame can be attributed to the developed countries. According to the same 2017 survey, only 15% of respondents from mature markets are certain to buy a car online in the future. A reluctance towards the Internet which can be explained in particular by first, a real history between car brands and motorists and second, by a certain customer/dealer loyalty. Two factors thwarting the growth of e-commerce that emerging countries have never really experienced.

A channel widely invested by automotive players

Faced with the possibilities offered by e-commerce and the new expectations of consumers, OEMs and dealers have decided to invest in the e-commerce niche. There are many examples, such as Volkswagen, which wants to reinvent its commercial strategy by setting up an online sales platform in collaboration with its European dealerships. We can also mention Hyundai (its British customers can) and especially PSA Group which seems the most advanced in this area. After launching its first e-commerce site in 2015 in the Netherlands, PSA Group did the same in Brazil, the United Kingdom and lastly in France in the summer of 2017. In total, nearly 30,000 Peugeot, Citroen and, more recently, DS vehicles, are offered and available at dealerships.  As further proof of the hopes placed in e-commerce, Aramis Auto entered this niche 8 years ago. Now acquired by PSA, Aramis Auto is now selling a hybrid vehicle online for the first time in 2011.

Despite these efforts however, online sales are still a very small part of the PSA Group’s business. If we take the example of 2017, PSA completed only 2000 completely online (100%) orders. This is a drop in the bucket in view of the 3.6 million vehicles sold worldwide. But PSA is convinced of the potential of e-commerce and hopes to complete at least 10% of its sales via the Internet by about 2021.

Cannibalization of sales and growth of GAFA: OEMs face several threats

Far from being afraid that digital will cannibalize sales in dealerships, the automotive industry is convinced that: e-commerce meets the challenges of tomorrow. Not only do they believe that the physical point of sale is now complementary to the Internet (as demonstrated by the new car purchase path) but moreover, it also responds to economic issues. In the interest of profitability, brands seem to want to reduce their physical presence, especially since the number of pre-purchase visits has fallen: Buyers now make only 1.3 visits to dealerships before purchasing a vehicle, compared to 5 in the past. The reason is clear: motorists now use digital media to obtain information before making their purchase at the dealership.
In fact, the main concern of OEMs and dealers comes from the GAFA. Capable of disrupting the automobile sales market, Apple, Google and Facebook represent a growing threat, especially since they do not face the same physical constraints as the historical players. This is a major advantage for offering a complementary offer between online and offline. This fear is reinforced by increasing consumer volatility: according to the Cars Online survey, almost 6 out of 10 people would be willing to buy a car from a new market entrant.

Obstacles to the development of e-commerce

Despite all this, certain obstacles will have to be overcome e-sales in the Automotive sector really start to grow, especially in mature markets, such as France. Whilst car brands and web giants are massively investing in the digital sales niche, counting on the development of emerging markets, the situation would seem to be more complex here in France. We have identified 3 obstacles that online sales would have to be able to overcome.
– To purchase a vehicle is a serious affair: In France, the car is used mainly as a means to go to work. Although Use tends to take precedence over Ownership, the car is still considered indispensable for everyday life. That’s why the act of purchasing a vehicle is seen as a serious matter that requires support.
– Dealerships can be reticent: Concerned that online sales will compete directly with their business, physical outlets do not yet seem ready to participate in this new, half-digital, half-physical purchasing process. However, the dealerships are central to an e-commerce strategy, as they deliver the vehicle and invoice it.
– Services that are difficult to dematerialize: most automobile purchases entail a financing step and a trade-in step. However, even today, it is still difficult for buyers to carry out these two steps without a physical meeting with a contact person.

Become a player in the digital transformation with DATAFIRST
Faced with the emergence of e-commerce, DATAFIRST is convinced that digital represents the commercial future of automotive dealership networks. To enable dealers to become a player in this major change, we offer a range of tailored services to help their digital transformation.   This offer is based on three main points:
The creation of a digital dealership: developed with the NetDirector solution, your future website is specially designed for your dealership activity. The goal? The goal? Increase of the conversion rate by 30%.
Indispensable web modules including online payment: perfectly integrated into the ergonomics of the digital dealership, this tool allows customers to reserve a vehicle by paying a deposit online. Already adopted by many dealerships, this module is directly accessible on the sheet of each vehicle and offers a wide range of possibilities (deduction of the deposit from the total cost, refund in case of cancellation, cash payment, delivery to another site, etc.). – Personalized digital support: market analysis, traffic acquisition, conversion, measurement or optimization: we are at your side every step of the way in your digital transformation.

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