Beginning of the end for showroom haggling?
With carmakers enabling customers to buy new cars online, we explore the emergence of the ‘omni-channel’ business model for manufacturers and the possible ramifications for dealerships.
Consumers in the UK spent £133 billion online last year, an increase of nearly 500% since 2008 and £18 billion more than in 2015, according to the IMRG Capgemini eRetail Sales Index. In respect of online car sales, Capgemini’s Cars Online Trend Study surveyed 756 customers from three global markets and found that 74% of new car customers would consider buying online. Its research suggests that manufacturers cannot overlook the importance of online car sales. Changes to the retail business model are needed to ensure vehicle brands are completely customer-centric. It stated: “In the future, it won’t be enough to produce vehicles and only offer them through the dealer network.”
CDK Global, the world’s largest dealership management system provider, surveyed leading dealer principals and also found that 83% agree that, by 2021, there will have been a material decline in the number of UK dealerships. Networks are expected to consolidate to central hubs or higher-footfall locations, making technology essential to engage with customers and gather valuable consumer intelligence.
In the meantime, Hyundai is the latest manufacturer to launch its online new car portal, joining BMW, Peugeot and SMART, all of which have taken a slightly different approach in terms of payment options, trade-in valuation and delivery. All of these platforms rely on varying degrees of dealer involvement, however. Feedback from customers who have purchased online suggests that the convenience factor of buying a car from the comfort of their armchair at home offsets any savings that could be made from haggling in the showroom. Clearly there’s a way to go yet until car buying online goes the way of white goods, particularly since model line-ups and trim levels are still on the rise.
Most [consumers] dislike the idea of haggling and recent studies suggest they prefer a transparent process.
Manufacturers, however, are at pains to point out that online sales are simply a form of added convenience for the customer, rather than a strategic move to reduce the number of outlets. Industry commentators refer to the rise of an ‘omni-channel’ approach to car buying, similar to other retail sectors.
What impact might this have on car retailers? On the other side of the Atlantic, some dealers in the USA have taken a radical approach. Many have recognised that rather than adding alternative methods of purchase, it’s the need for a more personalised service that is key for customers, where the priority is to assure them that they can be trusted. An extreme example cited at this year’s NADA Conference is one dealership that classed its entire sales team as self-employed with their own marketing budgets. This bold move resulted in a huge surge in both human performance and sales volume. In this market, at least, an evolution in showroom-based sales is good news for manufacturers and it could yet catch on in the UK.
Whilst it’s in a consumer’s DNA to get a perceived ‘deal’, most dislike the idea of haggling and recent studies suggest they prefer a transparent process that’s the same as buying other things. Equally, most buyers appreciate that the dealer is better at haggling because the customer does it once every few years whilst sales staff negotiate every day. Auto Trader’s Market Report last year found that 56% of new and used car buyers paid the asking price. Research by the website Motors.co.uk found that only 25% of customers like to haggle and most of those are men aged 45-65.
Manufacturers have responded to customers’ dislike of haggling, such as Citroën with its ‘fair pricing’ strategy and BMW’s Genius programme, designed to remove the ‘hard sell’ and provide product knowledge, which was the precursor to BMW Retail Online.
It’s the change in which we buy vehicles, though, which has reduced haggling significantly, according to Professor Jim Saker, Director of the Centre for Automotive Management at Loughborough University: “Haggling has always been about reducing the sticker price but when you think that 90% of new cars are now sold by PCP, it becomes more about the finance and the monthly payment. The opportunity to negotiate for accessories is also reduced, so the days when you asked the salesperson to throw in the car mats are coming to an end.”
As part of an ‘omni-channel’ approach, we should expect car makers to roll out more sophisticated online platforms, to include the opportunity to negotiate via Live Chat regarding additional products on offer, such as Autoglym’s LifeShine vehicle protection system. This is where the LifeShine App could come into its own as customers can make an informed decision thanks to all the information being at their fingertips. LifeShine is a compelling proposition not just because of its superior performance but also due to Autoglym’s unrivalled support for dealers. A dedicated Business Manager is on hand to help them achieve increased sales and profitability and independent research shows that switching to LifeShine from other VPS providers results in significant uplift in penetration.
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