The UK motor industry is on the cusp of unprecedented change. Technology is infiltrating all aspects of the car-buying process, as customers seek the most convenient and cheapest way to purchase a vehicle. Chris Lemmon speaks with industry players about what the future may hold.
Motor dealers are facing increasing pressure to digitise their processes to avoid losing customers to new online players, while the number of physical dealership locations is expected to drop significantly in the next five to 10 years.
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“Technology is transforming the retail landscape,” explains Philip Nothard, customer insight and strategy director at Cox Automotive. “Dealers of every shape and size – be they franchised, independent or supermarkets – need to evolve to meet this new retail landscape.”
Nothard points to the influence that companies like Amazon have had on consumer expectations, and its trickle-down effect on the car market.
“Car retailers are beginning to be held to the same level of customer care and delivery. While this change has been much slower to reach the car industry, there is now an expectation that dealers will offer a simpler, more streamlined buying process that combines technology and face-to-face interaction.”
Alphera Financial Services director Spencer Halil acknowledges the importance of a more digital approach to business. “It has been fundamentally important for our business to digitise,” he says.
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By GlobalData“Customers expect to be able to interact with a financial institution in a digital fashion. From the point of view of buying finance and using it as an enabler to purchase a car, the market has moved on so much in recent years. There is a very high expectation for much, if not all, of that to be digitised as well.”
Customer uptake of Alphera’s digital services has been substantial, according to Halil, who also points out that around 80% of all contracts concluded at the business initiated from the e-Sign platform, which enables customers to manage their documentation digitally.
The continued success of digital platforms offers an insight into changing customer behaviours in the market and provides businesses with a blueprint for future success.
“Obviously in a digital environment, you need to be able to have a single view of the customer and all of your interactions with them,” continues Halil.
“It should matter whether they come in online, walk in a dealership or pick up the phone. All of these interactions need to be drawn together in the same place to become an omnichannel firm.”
Mat Moakes, chief executive at online used car sales platform Heycar, agrees that moving to a more digital approach will have many benefits for firms as well as customers.
“OEMs have wanted to be able to sell their used cars in a different way for a while,” he says. “A different style of engagement and a different, fresh approach have gone down really well with the dealers we’re partnered with, focusing on a data-led approach based on conversions.
“Mobility and the automotive space is going through such a substantial change, and with the advent of digital, I believe we will start to see models emerging that reduce the influence that dealers have over their end-time sales process.”
Online Platforms
To get an idea of the impact that technology is having in the motor sales and finance space, one just needs to look at the number of digital-only platforms that have sprung up in the last few years.
“Digital-only is certainly a growing market,” notes Northard. “The recent launches of businesses like Cazoo and Heycar, as well as the acquisition of Motors.co.uk by eBay, prove that businesses are aiming to capitalise on the growing demand for online car retailers.”
Moakes believes investment in the online market has been long overdue. “Customers have been underserved for a long, long time in terms of helping make it really clear and transparent,” he explains. “It has been an opaque and nervy experience, and a bit of a lottery. There is always the fear of the unknown as well.
“Maybe it’s because this is not a purchase that is happening every week. If people were buying used cars at the same frequency as ordering food from JustEat or UberEats, then maybe we would see a different level of experience for customers.”
Discussing the future role of the dealer, Moakes says the emergence of online players will help to encourage better practices across the board. “Digital platforms are helping to take away a lot of the issues around transparency up front. Gone are the days of dealers just spread-betting with advertising agencies to get people to come and look at their cars.”
Physical Experience
Recent research from Cox Automotive found that more than 90% of motor dealers expect to see a decline in the number of UK dealerships over the next five years, with 72% of dealers believing outlets will reduce by between 5% and 15%. A fifth of respondents predict it could be in excess of 20%. No respondents indicated that the number of dealerships would increase.
There is a consensus among industry participants that the market will have a fresh feel to it in the coming years. Nothard believes this is because consumers are looking to interact with the automotive retail sector in a variety of ways – notably via a wide range of digital platforms.
“Our analysis clearly shows it is not simply a case of replicating the retail experience via the internet; those dealers that are leading the retail evolution are embracing technology to improve the customer experience and bring more flexibility into the car buying process,” he says.
Halil adds that, in his opinion, very little of the sale will be contracted in the showroom in the future, but nonetheless believes that dealerships will remain critical in the sales process. “The brand experience delivered in the showroom will become more important in the future. I think it’s really underestimated how impactful that change will be when it eventually does happen.”
When this change is likely to happen has also split opinion among industry experts. Halil says: “There have been a lot of people in the industry talking about change within two to five years. In reality, I believe we will see that it is going to take longer – but we are already beginning to see signs that when it eventually does happen, it is going to be utterly transformative.”
Moakes agrees that the physical offering will remain a key factor in the sales process, due to the complexities and price points when it comes to car ownership.
“Buying something new is a very different experience from online. Customers still want to go to stores and try stuff on or engage with their potential purchase – particularly with cars,” he says. “Buying a car is a very significant purchase. It’s the second-largest purchase in monetary firms for most consumers. People feel uncomfortable buying sofas online end to end – imagine how they will feel buying a £15,000 used car. We think there is a nice halfway house where digital meets physical and that’s where Heycar fits in, because that’s where we think dealers still have a lot to add in this market.”
Staying Competitive
There is a clear sense among those active in the industry of not wanting to be left behind during a critical period of transformation. Halil also cautions that those lenders that do not adapt to changing customer needs face being overtaken by more accommodating businesses.
He explains: “An open-minded, innovative, creative lender will find ways to work with these models. Potentially, the lenders could actually speed up some of this change if they open their minds to doing things a little bit differently.”
Nothard notes that there is a growing appetite for manufacturers and dealers to embrace e-commerce capabilities, adding: “Our own research indicates that, currently, just one in five dealers have a full online sales transaction option, while 61% say they will have one within the next two years.”
Nothard concludes: “Dealers need to consider how they can embrace all of the different ways to interact with customers, whether that’s live chat, phone or face to face. An omnichannel approach to marketing and sales integrates shopping, buying and owning processes across channels to ensure every move is part of one holistic strategy.”
