Exactly two months ago I made a career change that put me back on the front lines of working with car dealers and OEMs again. After six years of working on the data side of the business I’m excited to be back closer to the heartbeat of the industry working at Quantum5.
A few weeks into my new role, a friend asked my opinion on how the car buying process has evolved during my 20+ years in the industry. That’s a tough one to answer because while many things have changed, much of the process has remained unchanged during this time.
Except for Tesla and a few boutique brands, if you want to buy a new car, you need to interface with an independent, franchised dealer. The dealer is going to guide you through a process that involves:
- Some level of vehicle presentation,
- Trade appraisal (if applicable),
- Price negotiation (in normal times),
- Financing options, and
- Delivery of the vehicle where you actually learn how to use all the technology in the car you just bought.
Now, here are the two biggest shifts I’ve witnessed during my time in the industry:
1.) Information accessibility: When I started in the business, the internet had just launched, and Google would not arrive until a few years later. Cars.com came online in 1998 and that’s about the same time that OEM websites became robust enough to house things like vehicle configurators where shoppers could “build” their dream car.
Prior to the internet, if you wanted to get all the details on vehicles, your best bet was to visit a dealership selling each of the brands on your consideration list. You would meet with a salesperson and perhaps take home a brochure that would live on your coffee table for a few weeks. Of course, you would also read the buff books like Motor Trend and Car & Driver to get key comparison data all in one place.
Today, however, shoppers have all the vehicle information they could ever need right on their smartphone. And oddly enough, OEMs and dealerships are not necessarily the "go to" source for product information anymore. Instead, vloggers and social media influencers are pushing out unbiased product reviews on YouTube and TikTok to millions of viewers each month.
The result is that shoppers no longer visit as many dealerships as they used to. In the 1990s and 2000s, the average buyer visited between 4-5 dealerships before deciding. Now, that number is down to somewhere between 1-2 dealerships.
2.) Quality Competition/More Choices: In the mid-1990s, consumer choice was significantly more limited than today. Sure, brands like Pontiac, Oldsmobile, Plymouth, Chrysler still existed but their products were largely redundant variants of each other. Additionally, Hyundai and Kia were not the fierce competitors that they are today. And Tesla wouldn’t launch their first model, the Roadster, until 2008. For anyone counting, they delivered 536K units in the U.S. in 2022 and they are the top volume company in the luxury set!
Not only are there more competitive vehicles in each segment, but shoppers are more willing to extend their radius of dealers they are willing to consider. In the 1990s, shoppers may have considered a dealer 30-45 minutes from their home but for the most part they bought from their local dealer. But by the mid 2000’s you could quickly search for the car of your dreams on any dealer’s lot nationwide. Today, with improved digital retailing tools, you can indeed buy a car entirely online and have it shipped anywhere in the country if you so choose.
So where does that leave us?
I believe that if you want to win in today’s market (cars or otherwise), you’ve got to make it easy. Amazon, Netflix, Uber, and VRBO have won because they innovated regular experiences by reducing friction. And Elon Musk proved that he could do it in Automotive. Today’s customers want simplicity at every turn of the sales and service process. Some customers want to have a deep personal connection with their dealership and some people just want to be transactional.
The dealers I speak to want the process to be easy as well. But to some degree, that’s easier said than done. The fact is the F&I process is tedious. It requires a lot of detailed documents and signatures. Some of it is hard to understand and that can lead to frustration and anxiety for shoppers who only go through the process every few years.
So, who's going to win in the future?
My buddy asked me what I think it takes to be the best in today's environment.
I believe the dealers who can eliminate the most friction in their Sales and Service experiences are the ones who will be the most successful. They will increase sales, customer satisfaction scores, and profitability. And here’s another surprise, if they can eliminate friction across their organization, they will likely reduce employee turnover as well. It’s literally a win for the dealers, a win for dealership employees, and a win for their customers!
