“Online Sales” of vehicles remains in the headlines of various economic journals and most OEMs (Original Equipment Manufacturers) have this at the top of their agenda; to enable customers to purchase vehicles end-to-end online. Especially the used car market, online sales opens up tremendous opportunities to revive business. The reasons for this are obvious:
As the results of market research by the German Institute for Automotive Business
(“Institut für Automobilwirtschaft (IFA”) have revealed, the business segment of certified pre-owned vehicles is growing disproportionately compared to the overall used car market, with CAGRs of 22.8% vs. 14% between 2010 und 2015.
This is explained by an overall market trend: Customer segments that used to buy new vehicles are increasingly switching to certified pre-owned vehicles, whilst the new car market is increasingly being represented by professional class and fleet customers (including user choosers).
Therefore, the market for certified pre-owned cars is developing into a more important and attractive market segment, between the traditional new and used car segments.
So far so good. But the IFA also points out that at the same time, dealer margins for certified pre-owned cars (6.6%) remain behind the margins in the overall used car market (6.9%).
The reasons for this are uncertainties around the vehicles’ time off the road between purchase and resale, risks associated with the resale, a limited geographical reach of small and medium size dealerships, as well as temporary local oversupply. All these factors make the used car segment predestined for online sales.
Selling used cars on the internet opens up significant opportunities for OEMs, their dealer network and most importantly the end customer.
Provided that sales and distribution systems are fully integrated and an exhaustive delivery logistics network to the end customer is implemented, the product offering can be extended to the full, nationwide dealer and OEM/NSC (National Sales Companies) stock. Offering vehicles whose leasing contracts have expired recently and can be returned to the market bears additional opportunities.
Properly implemented, all of this can result in reduced or eliminated idle times for vehicles on stock waiting to be sold, reducing the average loss in value and significantly lowering the business risk across the value chain.
Simplified logistics and outsourcing the sales process from the dealership to the digital customer bring even more opportunities to lower costs. All of these savings can be used for greater improvements.
For example, subsidizing value-adding services (as after-sales packages) and giving this back to the customer in the form of an online discount. The latter is one of the major arguments for end customers to purchase vehicles through the internet, as the recent Capgemini Cars Trend Study “Automotive Online Sales” revealed.
The ability to browse through an extended vehicle catalogue online, a seamless, 24/7, user friendly end-to-end sales process and convenient delivery options give additional value to the customer experience.
All these factors may be a strong competitive advantage for OEMs and their dealer networks. They would be competing with new purely digital competitors entering the market, which mostly serve as intermediaries at the moment and are not able to offer an integrated end-to end online sales process yet. OEMs can also capitalize on their customers’ confidence and trust in certified, high quality used vehicles that they would have bought offline before
There are still obstacles to overcome...
Don’t try to go the whole nine yards at once
Very few OEMs have managed to launch a truly integrated end-to-end online car sales process yet. The reason for this is probably complexity: Online Sales brings up fundamental business questions; a complete redesign of the customer journey, the related sales processes, responsibilities and dependencies in the value chain, as well as complex technical and legal issues. This is no small feat.
Usually the best way to approach big complex business problems is to start small. Recommendations for OEMs is to develop and launch online sales as a minimum viable product (MVP) in the first phase in a test and learn approach: Start with few pilot dealerships, focus on realising an integrated customer experience and earn the buy-in of your dealer network.
Don’t get caught up with designing fully fledged, automated processes, building fully integrated systems or interfaces or digitalizing all vehicle and service stock at the same time. Speed would be a decisive factor for the MVP, not geographical reach or stock scope.
Once the MVP is successfully implemented and running, learn from the experiences of your dealer network and customers. Identify ways to improve the customer journey, enhance and automate a few processes at a time; building and improving system interfaces and gradually extend your online offering of vehicles and services. Most importantly, extend the MVP by stakeholder priority based on their experiences and actively include them into early phases of the development process. As soon as you have a scalable, online sales service with measurable and proven benefits for all stakeholders in your value chain, you can then start making plans for a larger-scale, geographical roll-out.