A well-connected automobile dealership is more likely to be a successful dealership in the expanding world of online auto sales, according to the “Innovating automotive retail” report by McKinsey & Company consulting firm.
But the personal touch also plays an important part in the auto sales process.
Already about 80 percent of new-car customers and almost 100 percent of used-car customers surveyed go online to begin their vehicle-buying process, said McKinsey.
And while relatively few consumers buy online now, those numbers are expected to rise dramatically. More than one-third surveyed said they would consider buying a car online, McKinsey reported.
“The rise in mobile technologies and social media is redefining interaction and communication patterns, altering customer behavior as a result,” according to the report.
Among the major trends cited by McKinsey as reshaping the automotive retail industry are:
- Changes in customer behavior that call for improved touch-point management.
- New products and technologies that require dealers to upgrade sales and service capabilities.
- Industry pressures that challenge dealers’ current business model.
“The good news for dealers is that most customers still rely on them – especially in the decision phase of the vehicle-purchasing process,” said the McKinsey report. “They want to test drive a vehicle before buying it, and vehicle servicing is still very much an ‘offline necessity.’ Dealerships will, therefore, remain a crucial touch point in the customer decision journey.”
The report noted that more than 80 percent customers take test drives during the auto sales process.
The bad news, according to the report: While around 85 percent of car-buying customers still visit dealerships, one in four is not satisfied with his/her dealer experience. And customer visits to dealers before buying a car on average “has dropped from around five to frequently just one … .”
“Dealers often get just one chance to strike lucky,” said the consulting firm.
“The key to success will be to transforming today’s dealerships into a profitable, modern, multi-format sales channel that combines the opportunities of the online world with the strengths of the traditional dealership channel,” McKinsey said. “This will require the introduction of new retail formats and technologies for communicating with customers and supporting the sales and service process.”
What are the main reasons, car buyers will continue to visit dealerships?
Product expertise and assortment/availability of cars are far and away the most important reasons, as customers expect dealership to provide “information not easily found online.” But customers also appreciate expertise on additional features/services and friendliness of the dealership’s staff.
“Dealerships will remain crucial in the customer decision journey as the personal trust between sales staff and the customer plays a central role, especially in the case of conflicting information or tight trade-off decisions between brands and vehicle models,” the report said.
For more details, download the 25-page report on the McKinsey & Company Web site under “Latest thinking” on the Automotive & Assembly page.