Buying a new car is a very different process from what it used to be. Online shopping sites have not only put retailers out of business, but created new expectations about how we buy cars. In Australia, there are 3,500 dealerships, some owned by families and some by larger businesses. Is there still a role for the dealership?
How we buy
Bain & Co says dealerships are still part of the buying process today, but not all of it:
- 50% of customers start online
- 60% decide on brand, model and price before going to the dealership
- They switch four times between on- and offline channels
- They visit a dealer 2.4 times during the process.
These results suggest customers will be better informed than they used to be, and more aware of availability and price.
Time in the car
New cars today are loaded with autonomous technologies that the average buyer may find perplexing. Salespeople must be able to explain them and demonstrate how they work with a test drive. More companies are offering extended test drives of 24 hours or more, such as Holden. In fact, when buyers have more time in the vehicle, dealers actually quadruple their chances of selling it.
Servicing vehicles is still a big part of the dealer’s business today. This is because 80 to 90% of all new car buyers go to dealerships for servicing for the term of the warranty – up to 7 years of business. After this, over 60% of owners go to an independent. This is usually because the dealership appears more expensive for servicing.
The JD Power 2018 Australia Sales Satisfaction Index surveyed 3,075 recent new car buyers and reveals where dealers could improve. For example, some dealers need to improve their listening skills, drop the pressure to buy, offer longer test drives – and even mark the purchase with a ceremony!
While over 80% of customers took a test drive, half spent 20 minutes or less in the vehicle. Only 12% of customers had a test drive longer than half an hour, but were more satisfied than those who had short drives.
Other ways to buy
Customers spend a lot of their time online so it makes sense to sell there. Tesla recently announced it would close all dealerships to concentrate on online sales but then chose a 3% price increase instead. Buyers of Subaru can customise models, such as Impreza, Liberty and Forester, online before buying at a dealer. BMW allows buyers to build a 3D model of their chosen car, either in the showroom or at home.
Note, Holden recently withdrew its online shopping site because, it said, Australians are not yet embracing online shopping for vehicles.
Selling vehicles in shopping centres is another way to reach customers where they already are. Examples are Subaru Do and Genesis. Genesis is about to open a brand centre in Pitt St Mall, which will also provide servicing. It is not called a dealership. Salespeople will even come from outside the industry and earn bonuses for customer satisfaction scores, rather than sales.
Mercedes Me is a so-called “event space” in Melbourne with no dealers and only one car parked there. The site is part cafe and restaurant and part space for public hire.
Mobile sales and test drives
Subaru’s ‘Test Drive at Yours’ program means you can book a mobile test drive online and test it from your own home. It is currently piloting mobile sales where the salesperson can bring you a car, take you for a test drive and do the transaction in your home.
Part of the picture
In this diverse selling environment, traditional dealerships are only part of the picture. It appears they need to go well beyond the sales transaction to survive. They also rely on a future where people continue to buy cars – even this is no longer assured.
Is there still a place for dealerships? If so, let us know how you would use a dealership.