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Research from both the Auto Retail Network and GfK has suggested car dealers need to adapt to technological innovations within the market in order to prosper.

Work by Auto Retail Network on behalf of the Royal Bank of Scotland has predicted any move by the automotive industry toward cost efficiency measures and an easier, more personalised shopping experience will increase business reliance on technology.

While the trend is towards increasingly high-tech measures, with independent lender MotoNovo Finance expecting technology to reduce the physical ‘clutter’ of the showroom and Mercedes-Benz launching an in-car finance app, the majority of retailers still believe old methods will hold firm.

The Auto Retail Network report found 35% of car dealers thought the majority of new car sales will be online in 10 years’ time, 47.5% said showrooms will be largely ‘virtual’ and 56% believed full-service offerings of new, used and repair work is where the benefit of franchised dealerships can be found.

Electronic prosperity

The report supposes dealerships will have to become more adaptable and more flexible in order prosper, by acting more as retailers offering information and delivering test drives at homes or offices; manufacturers will exert more control and back office functions will be centralised, or perhaps shared.

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By GlobalData

Seen in recent trends, manufacturers and their captive finance partners appear to be testing ways to make finance sales uniform and paperless. Nissan has announced an update of its dealer websites, and RCI Financial Services and BMW Group Financial Services have both experimented with electronic systems in the showroom.

Last year Ronnie Denholm, managing director of Barclays Partner Finance and writing in Motor Finance, said finance companies needed to "harness" emerging technologies in order to "gain the edge."

The most common practice of updating the finance aspect in showrooms appears to be electronic signature (e-sig) systems, removing much of the paperwork from loan arrangements while remaining compliant with regulation. Lloyds Banking Group’s lending arm Black Horse was one of the first lenders to use e-sigs in the UK and MotoNovo has also introduced them with the aim of reducing approval times. Tony McCool, UK business development manager at e-sig provider Wacom, told Motor Finance in June the UK market was still in a "demand-creation period" but could prove to be the company’s "strongest market".

Mercedes-Benz also recently announced plans to sell its cars through an online shop, starting with the i3 electric vehicle.

Richard Hill, head of automotive at RBS Corporate & Institutional Bank, said: "Given the pace of change across all aspects of the industry, I firmly believe it is vital to establish a forward view if sustainable success is to be achieved for UK auto retailers."

Consumers open to internet shopping

The second report, by automotive researchers GfK, demonstrated UK consumers’ growing interest in buying a car online.

The research found 31% of consumers under 35, and 28% of those over 35, would buy a car direct from the internet.

Online research by consumers was prevalent, with up to 80% of potential buyers having researched all facets of the car purchase before entering a showroom, and social networks were a popular source of data, with 16% of under 35s and 2% of older drivers using Facebook to glean information.

The prevalence of car buyers’ internet research was postulated at separate Finance & Leasing Association events in 2012. In the summer, Jamie Dixon, sales director at GForces, said 94% of consumers visit a website to research car purchases, with 71% using mobile technology to do so. In the autumn, Mark Squires, chief executive of Benfield Motor Group, quoted Google research which found the average purchase came after visiting only 1.3 dealerships but 18 websites.

GfK said manufacturers were responding to recent trends, with Audi, Nissan and Vauxhall launching virtual showrooms and demonstration centres.

Joe Vaughan, research manager at GfK Automotive, said while the motor industry hadn’t yet capitalised on "the transactional benefits the internet has offered other sectors", it’s now at "a tipping point where the auto industry is revisiting the principle of leveraging the web as a sales channel. The signs look a lot more promising this time."