Digital Finance SOS – Is Digital Retailing the Answer? (Part 4)
Part Four: Summary – Digital Retailing, Done Right, is the Answer!
The automotive reality in today’s era of ecommerce is that Digital Retailing has become established as a part of the car buyer’s journey – and a requirement for a modernized retailing experience. The popularity of the technology is driven, in part, by consumer demand for information and online tools that reduce the time it takes to complete a vehicle purchase in-store.
By shifting aspects of the deal online, retailers are finding a solution to changes in consumer preferences – shifts caused by todays ‘immediate gratification’ culture and the power and convenience of technology. According to FICO’s 2019 Consumer Survey of Vehicle Financing, 63% of US car buyers opted for dealer financing in 2018 – down from 73% in 2017. And just 40% said dealership financing would be the first choice for their next purchase. So, while dealerships are still the top source, the convenience of technology is eroding that preference. The same study found online financing on the rise: the number of consumers acquiring vehicle financing online more than doubled in 2018 to 13%, up from 5% in 2017 – and 28% say online financing will be their first-choice next time.
Few statistics reflect the reality of Digital Retailing as clearly as the FICO report.
The Reality of Digital Retailing Sinks In
Indeed, just 43% of dealers in our own survey report that they are unable to flip the majority of pre-financed customers into a dealership financing option. Dealers, though, have responded. Today, it’s fair to say that the vast majority of dealerships offer some level of Digital Retailing in order to facilitate the online-to-showroom process. Of dealers we surveyed, most intended to make their website more transactional by adding more digital retailing tools; they agreed that consumers should be able to start and stop parts of the purchase process where they want to online – and pick it up again at the dealership.
Of course, not everyone agrees with that perspective. Just 12% of the dealers we surveyed were opposed to making their website more transactional due to a perceived loss of control over online tools. The consensus view – at least from our survey – is that dealerships who ‘power’ up with technology (e.g. digital retailing tools, e-menus, deal configurators, etc.) are more able to simplify the process to run more volume at higher profits, benefit F&I managers and their customers. The automotive transformation at play here is a literal redefinition of the sales function, in ways that benefit dealer and consumer. As technology allows the customer to move themselves down funnel and closer to the sale, the dealership salesperson becomes a guide in the process.
New Opportunities in Profitability
Ultimately, the desire of consumers to have more control, and speed (According to JD Power, 91% of consumers would consider an instant vehicle loan if that meant they could avoid dealing with a bank or doing extra paperwork) has created a mutually beneficial solution. In fact, our survey revealed that 60% of dealers using Digital Retailing said average profitability of digital retailing-initiated transactions is equal to, or higher than, non-DR initiated transactions. Consumers get speed and transparency, while dealers get speed, greater chances at profit…and transparency as well. After all, technology and data enable both sides of a vehicle transaction to come together more quickly. As a result, deal transparency may increase finance penetration, grow PVR and improve CSI.
Fact is, however, discovering new opportunities in profitability through Digital Retailing is more complicated than flipping a switch or signing a subscription agreement. Digital Retailing done right requires three key areas of focus:
1. Understand Digital Retailing leads are different: Many dealers treat each customer the same. Don’t do this! A digital retail customer is so much more informed – and valuable – than a cold walk-in. In an era of transparency, why would you treat a customer who’s done hours of research and completed steps of the process online as if they had no knowledge or information.? Assume every ‘up’ has done research. Make sure you’re taking advantage of these premium “super leads’ by prioritizing them and adjusting your sales process and style accordingly. Remember, a buyer who has taken the time to do the work for your team will not be happy if the salesperson starts over – or if they miss out on provided details. Eliminate this mistake and your window of sales and profit potential will open wide.
2. Remember, it’s a conversation: More than ever before, consumers are buying into an experience – and each customer and each deal is different. Transactionally motivated sales people are not what your customer wants or needs. Don’t be in the business of ‘selling’ the car. Be in the business of helping your customer buy the car. Your objective should be their objective. They will want unbiased guidance to navigate their many choices in a very complex transaction. Be engaging. Connect authentically. Add unexpected value. Becoming a ‘relationship’ seller creates profit opportunities – and helps you attract/retain customers for life. Customer expectations are higher than ever and word of mouth travels fast! If you want positive word of mouth, be sure the sales/transaction experience you offer stands out.
3. Make Finance information easily available: People buy from people they trust. Remember, 90% of shoppers are payment buyers – so make it easy for them to find the information they are looking for. If Digital Retailing is the beginning of the deal, don’t withhold information. What you want to do is trade information. The “financial candor’ makes the customer more comfortable. And the more comfortable they are, the more willing they are to buy. You want to sell cars. The two-way transparency is a trust multiplier – and a sales accelerant. In our survey, 62% of dealers report that ‘quoting consumer qualified payment terms online’ is the top opportunity to improve the customers online to in-store transition.
More than one-price shopping or direct online transactions, Digital Retailing has made a significant impact to the landscape of automotive retail. Making the deal is different, today, than ever before. And that requires dealership sales and finance teams to adjust, optimize the technology, and find new areas of profitability. In time, Digital Retailing as that first step toward desking and dealing will become as much a part of the retail landscape as test driving.
This is the final installment of Digital Finance SOS – Is Digital Retailing the Answer? For a complete look at the numbers, click here.