How Covid-19 Is Affecting Online Car Sales and Car ShipmentsOctober 25, 2020
COVID-19 has been one of the most disruptive events over the last 50 years. No business has been unaffected, but few have been changed the way car dealerships interact with their patrons.
With no way to know when people will be able to resume something closer to life before 2020, odds are that the changes that have occurred over this year will continue well beyond a return to “normal.”
There has been a definite shift in people purchasing cars online, something that was far less common before the pandemic. Car purchases were one of the few products where people preferred to make their purchase in person so that they could test drive their vehicle before committing to it.
Now, that traditional approach to making such a large purchase has been altered, probably permanently. This has not only affected sales, but the mentality to buying a vehicle.
A Quick Look Around the Globe
As of August 2020, many markets saw some positive signs of recovering, but the automotive industry has remained well below its usual sales levels. Some places have seen faster recovery than others, but car sales have largely been noticeably down from previous years.
- In the US, sales between the beginning of the year and the end of August were down roughly 23% for the time of year.
- In Europe, lock downs began to ease by August. Sales did not suffer as much, but were still down by more than 15% than by the same time the previous year. However, there was a significant increase in sales during August 2019 as dealers worked to sell their inventory because of the Worldwide Harmonised Light Vehicles Test Procedure test deadline. The deadline would have required dealers to conduct the testing, so there was more incentive to sell more cars than usually are sold by that time in the year.
- In China, the industry actually saw an improvement with more than 11% increase in shipments for the month of August 2020 compared to August 2019. However, the shipments for the 2020 up to August were down by an estimated 10%. This indicates that car shipments and sales in China are actually on the rise, an improvement that is not occurring at the same rate around the world.
- Japan has seen a roughly 16% decline from the previous August, though the resignation of Prime Minister Shinzo Abe may continue to affect sales and shipments.
With such significant declines in sale and shipments across the globe, car dealerships and shipping companies are looking for ways to better offer the traditional services of a car dealership to improve sales.
The COVID-19 Concerns for In-person Sales
The three primary guidelines for reducing the risk of contracting COVID-19 have significantly hampered dealers’ ability to sell vehicles in a more traditional way.
- Even if people wear masks, many of them pull their masks down. This means potentially spreading contagions to their hands as they put the mask in place before entering a car to test drive it. The germs are then transferred to the vehicle.
- Dealers and customers cannot keep the recommended 6 feet distance recommended for people who do not live together during the test drive.
- Even if customers do wash their hands, they will be touching many surfaces, potentially spreading the illness to the interior of the car or the dealership.
By its very nature, the traditional method of selling a car is incredibly risky. Fewer people are willing to take that risk, particularly as many of them are largely staying home.
With little reason to drive except when it is essential, people are less likely to buy a new car, particularly since there are so many inherent risks.
The Shift to Online Sales
While car sales are largely down across the world, sales have improved since April. This shift has come with a steep learning curve for both buyers and sellers.
Where a lot of businesses have been able to more smoothly transition to online sales, the auto industry has a significantly more difficult task as the product is both larger and more expensive than most products sold online.
This has resulted in the industry needing to find strategies to sell an asset online, with customers largely getting their vehicle without seeing the car in person, let alone with the traditional test drive.
The result has been a huge shift to investing in new online tools to try to make people feel comfortable with their purchase. With such an enormous change in thinking (both in terms of marketing and customer interaction), car dealerships are having to consider how to get around the problem that many other industries have already learned:
- Customers are able to easily leave a discussion. If they do not like what they are seeing, they can either skip over carefully crafted online sales pitches or drop the contact entirely.
- Many customers still want a virtual test driving, similar to how the real estate industry has incorporated virtual walkthroughs into their online offerings.
- Customers have requested more from the dealers in terms of the independent appraisal. It is the dealer’s responsibility to get the car to another shop or to ensure the safety of customers during a trade-in evaluation.
- Similar to all other online shopping, potential buyers want to be able to shop according to their schedule, not a rigid timeframe set by the business.
- Considering the process can be more streamlined, sales may not take as long as people looking online are more likely to agree to something not immediately in front of them.
Over the last two decades, the car dealerships have been one of the few industries to resist online shopping. It is easier to talk people into buying more if they are in person.
That is no longer an option. Either dealerships have to learn to accept that the buyer is in near complete control, or risk a steep drop in sales. Without knowing how long it will take to resume normalcy, those that don’t adapt risk going under.
More Knowledgeable Customers
The days of customers walking into a dealership “just to browse” are all but gone. They are much more savvy about researching products online, and are a lot harder to convince into purchases that don’t meet very specific requirements.
Before 2020, customers were typically less knowledgeable about the cars that they ended up purchasing. Even if they had a specific set of requirements, there was typically wiggle room to make an upgrade or add a few features.
Today, customers typically have done a lot more research prior to talking to a dealership. It is similar to them being able to walk around the parking lot without having to talk to anyone.
When they are ready to talk to someone, they often will not listen to any pitches for upgrades or changes to what they need. Price changes are visible on the screen, making them much easier to decline than when those prices are spoken.
This not only makes them less likely to change their minds, but gives them more control of the conversation.
While there is still some room for salespeople to provide additional details, customers can do research in real time. This means they are fact checking or comparing what is being said against the competition.
The In-Person Components
Unlike many other types of purchases, most states have laws regulating what can be signed electronically and what must be signed in person. As a result, many dealerships are having to consider how to handle the final sale.
Many potential buyers do request a test drive before that final signature. After all, if they are already there in person, they may as well make sure the car drives as they expect.
Customers can go online to reserve a time slot for their test drive, and they will select the specific car at that time. This means that more online and customer support on the phones are required as there are few to no walk-ins now. If a car is reserved for a test drive or purchase, other customers cannot view or test drive it until the first customer has completed their drive.
To speed up the process and reduce the amount of time with customers in person, more is having to be provided online prior to the test drive or purchase. Many dealerships are offering conference calls to walk customers through all of the features and a better look at specific cars.
Customers Have the Upper Hand – And That Probably Won’t Change
One of the reasons that so many dealerships have been willing to spend millions on new online strategies is that the customers are now in nearly full control of the conversation.
- They can cut off the discussion if they don’t like what they are hearing.
- They have information at their fingertips, so they can counter information or cut a sales pitch off before it is finished.
- There is a greater sense of detachment because it is a less personal way of selling such an important asset.
Even when they are able to shop like they used to, customers probably won’t want to return to the traditional method. They are more powerful and knowledgeable now.
They have the convenience of shopping online, just like everything else that they buy. Being able to get most of the process out of the way long before they reach the shop means there probably will not be a return to traditional car sales in the future.
The Ripple Effect to Car Shipments
Any shift at the dealership will ripple out to the shipments of the vehicles. The sudden drop in sales has meant that most dealerships are still not ordering as many cars as they typically would at this time of year.
Car manufacturers are making fewer cars as a result, and there is no definitive time when the sales will resume their typical levels. The longer people have to remain at home for their own protection, the less demand there is for vehicles.
As shipping companies are seeing a steep decline in demand, they are having to address a significant change in worker safety. They have to meet the same guidelines to protect workers:
- Required wear of masks and gloves, often at the expense of the employer
- Strict hand sanitation requirements, including more hand sanitizer in the workplace and in trucks.
- Increased ventilation to reduce spread
- Physical distancing when not in vehicles
Fortunately, these requirements are not as costly as many other types of safety regulations. However, they do need to be enforced to ensure that the workforce does not spread the virus within the company.
An estimated 80% of manufacturers are in China. As the location where the virus originated, the shipping industry was affected nearly from the start as production was reduced as measures were put in place, particularly lockdowns across the nation.
Parts could not be shipped, whether they were the full product or parts. Over the course of 2020, this disruption spread to the rest of the world. This has made it difficult to send cars across international lines, and could hinder shipments even within a nation.
As China began to open, the backed up shipments were able to finally move, but could be halted based on the situation in their destination. This meant that car shipments all but stopped for months.
Currently, shipping companies are recovering from the halt on shipments. They will need to progress slowly as the risk of spreading the disease is still very high, particularly in the northern hemisphere as nations move into the colder, darker months.
COVID-19 has completely changed how cars are bought and sold. Though it took far longer in the car industry, it is very likely that there will be no returning to the older method of car sales.
Customers simply prefer to do most of the work online instead of in person. Now they are getting accustomed to it, and like the workforce, they are going to knot that there is no real justification in returning to the way things were done.
While it has been a painful change for the car industry, it can have some significant positive effects in the long run. From having a greater potential customer pool to being able to showcase products in a more effective, consistent way, the process can be more streamlined online.
Apart from the stricter safety measures, car shipping companies may not see much of a change once sales return to more typical numbers. There is still too much up in the air to predict how things will change for them in the long run.