The internet has completely transformed how users acquire most products. First MP3s and now streaming have revolutionised the music industry, while websites like Amazon have changed the nature of the high street, possibly forever.

The used car market hasn’t been unaffected either. Brokers like Zuto and Carfinance247 are primarily online businesses, while millions of car purchases have been made through websites including Auto Trader and Gumtree.

Yet when Motor Finance asked James Hind, chief executive officer at online dealer aggregator Carwow.com, what impact online has had so far on the new car market, his answer was "virtually zero".

Instead, he says: "All that has happened is that brochures and prices have gone online. Very little else has changed."

The reason for this is that the motor industry can generally be very slow moving, he says. In addition, franchised dealers have generally done well using the conventional means for selling cars, and so have not been incentivised to push for a digital transformation in their market.

He says: "There have been a few people who have tried it, who were from the industry themselves, but they’d try to change it a little bit, but not in the optimum way. For some reason no one from outside the industry has looked into it and said ‘how could it be better?’"

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This is where Hind saw a market opportunity in 2010. Carwow provides a platform whereby dealers can compete to sell themselves to consumers over the internet. Hind explains: "Consumers go onto Carwow and build the car they want. Then they put in their email, and they’ll receive a range of offers from franchised dealers that we work with, who give them their best price". Carwow makes its money by charging a flat fee on every car they sell.

The system removes haggling from the process, and also allows consumers to see quickly the best offers from a number of dealers, as well as their locations and reviews of the dealers.

According to Hind, Carwow has observed that these three factors – price, distance and reviews – all play equally important roles in consumer decisions. He says: "It’s a complete factor of all three. So we know if a dealer is really close and really cheap, but horrendous to deal with, then the customer won’t buy. If a dealer is really cheap but a long way away then, even though most dealers will deliver, often the customer won’t buy from them. We’ve found most people actually like to go to the dealer because buying a car is an exciting event.

"So the ideal combination is a competitive price, relatively convenient, and nice to deal with."

A web-based revolution

Although Hind says the internet has had a limited impact on new car sales, this isn’t a state which will last forever. Change will come at some point, and when it does, it will come quickly. Whatever form this change takes, he says, it probably won’t come from existing dealers or manufacturers. Instead it will come from third party companies that will impose it on the industry.

Whether it is through a model like Carwow, or something different, an online revolution is inevitable says Hind because: "Ultimately it’s more efficient for consumers and we think long term it’s more efficient for dealers. If you make car buying an easier, more enjoyable process, then more cars will be sold."

It would actually be incredibly difficult for an individual dealer to become the de facto online car marketplace, as it would be difficult to attract the attention of new car buyers, he says, adding: "People like to be able to have the view of the market on one site. It’s the reason comparison sites and hotel sites are so popular. It’s because you have that view of everything."

A parallel drawn is with TVs. He notes people don’t go to Samsung shops to research and buy a TV. They go to an online shop where they can compare various models and offers.

However Hind is quick to point out that dealers will remain a key part of the equation, and notes: "The dealers are the sellers still, and the experts in what they sell. They’re the ones who do all the transactions and customer services. So dealers play an absolutely integral part for Carwow."

Carwow currently works with approximately 1,000 dealers, and the number is growing. It has lost a few during its time in business, although the vast majority of these were pulled from the site after poor customer reviews, as opposed to dealers choosing to leave.

The reason it has lost so few dealers is because, once dealers start working with Carwow, it can become an extra source of business. Despite this, Hind says the site usually encounters some scepticism from dealers at the start: "The initial perception of Carwow is, for most dealers, quite negative. They think it’s all about price and absolutely nothing else. Once we explain how the system works, and the data we see from who consumers buy from, then they realise pretty quickly that it’s not that.

"So the dealers who work with us really like us. We’ve had a number who’ve hired people just to run Carwow, and handle Carwow enquiries because they can see that it’s a very low-cost, predictable market driver for them."

Hind offers some advice for dealers looking to expand their online offerings: "Think of it in terms of what the customer wants. Don’t overcomplicate, keep it simple. Don’t assume that just because you’re working the car industry that everyone will know what PCP means. Most people don’t have a clue what PCP is or what is means. But the dealers will hit them with "do you want PCP, HP or leasing?" and the customer won’t have a clue what it means. It’s easy to forget that."

The profile of the dealer has also begun to change during the time Carwow has been in existence. Now, a dealer has to know its product inside out and be able to communicate to the customer effectively, and in such a way as to educate them.

The Carwow format is one that Hind thinks could work in other markets, such as the SME fleet market, in some European markets, like Germany and France and also in the used car market.

These are options the company is actively considering. In all cases, it seems likely that Carwow will continue its practise of working with franchised dealers.