Bricks and clicks – can dealerships and online car retail co-exist long term?

A strong online presence is essential, but showrooms continue to play a key role in closing a sale and retaining customers.

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Whilst generally viewed as a barometer for the health of the economy, automotive retail appears to be confounding industry analysts, economists and researchers alike.

Just last year, the findings of KPMG’s Global Automotive Executive Survey of senior car industry managers and bosses suggested, starkly, that up to half of traditional ‘bricks and mortar’ dealerships in the UK could disappear by 2025. Many believed the industry was in a state of flux, as consumers re-evaluated attitudes towards car ownership. This was not, the research stated, as a result of Brexit putting paid to consumer spending but the start of a deeper, socio-economic cultural transformation. Continuing headlines about climate change and the subsequent focus of manufacturers on highlighting their green credentials with the introduction of new electric and hybrid models, has given rise to the concept of Mobility as a Service (MaaS), particularly in light of the popularity of global apps such as Uber and Lyft.

Although a strong online presence is essential, showrooms continue to play a key role in closing a sale and retaining customers.

Such attitudes would appear to reflect the drop-off in dealer footfall as reported in Auto Trader’s Market Report, which claimed showroom visits plummeted from 30 million visits in 2010 to around 4 million in 2018. Adding further weight, the latest research from Close Brothers Motor Finance has shown that the internet has overtaken dealership visits for buyer research, for the first time. Its ‘Under the Bonnet’ report, which surveyed more than 200 dealers and 2,000 drivers, found that 57 per cent of motorists used the internet to help choose a car last year, compared with 40 per cent in 2017.

Despite this, the majority of almost 80 per cent of consumers still buy their cars from a dealership, whilst only two per cent make a purchase online. The study found that all age demographics, except for over 65s, prefer to research online than at a dealership. Of those who bought their car from a dealer, 67 per cent said they did so was because they felt they would be able to negotiate a good deal, while 35 per cent wanted face-to-face help to finalise the decision.

Sue Robinson, director of the National Franchised Dealer Association (NFDA), said that any notion of the permanent demise of dealerships was way off the mark. In fact, she noted that analysis carried out by the ICDP found that visits to dealerships reached a five-year high in 2017. “The automotive industry is resilient and capable of adapting and dealerships are and will remain a central part of the car selling process. Although a strong online presence is essential, showrooms continue to play a key role in closing a sale and retaining customers”.

As if to cement this, the disruptive electric car maker Tesla earlier this year did a U-turn on a strategy to abandon its dealerships in favour of online only purchasing. Only a week earlier, the company had said it planned to close all its stores in order to cut the retail prices of its models, before announcing that it would look at expanding its dealerships instead.

Similarly, a number of high profile motor retail construction projects are underway. This includes Europe’s largest Mercedes-Benz showrooms, which are due to open in Stockport and Birmingham this year, following investment from LSH Auto UK, part of the world’s largest Mercedes-Benz retail group. Kia West London, run by Norton Way Group, is the Korean manufacturer’s biggest site in Europe, and opened in 2016.

Overall, whilst there is acceptance that the industry needs to change, there is also wide acknowledgment that both online and dealership must co-exist for the benefit of consumers. James Hind, chief executive of online only car retailer, carwow, has the final word:

“The growth of carwow and other online car buying services are evidence of the shift in buying behaviours but there is definitely a place for dealerships in the future. A car is a high value purchase and many buyers still want to be able to touch, see, and drive a new car before they commit. What has changed is that rather than visit lots of showrooms, they do their research on the car they want to buy and the dealer they want to buy from, then most choose to visit just one showroom as confirmation that they’re making the right choice.”

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