E-commerce is finally coming to cars2 min read . Updated: 17 May 2020, 06:21 PM IST
But it is unlikely to stir up the same kind of industry turmoil that Amazon has unleashed on other consumer sectors
You might buy your next car online, but don’t expect that to upend the car industry.
Consultants have expected the disruptive power of e-commerce to spread to vehicles—the most valuable consumer products there are—ever since the dot-com boom more than 20 years ago. But the only significant change to the decades-old structure of U.S. vehicle retail has come from Tesla, which dispenses with independent dealerships in favor of directly controlled showrooms. Could the pandemic be the catalyst the wider industry previously lacked?
The coronavirus crisis will almost certainly push more vehicle sales online. Yet dealerships are such an entrenched part of the industry, particularly in the U.S., that the kind of radical transformation e-commerce has brought to other sectors won’t follow quickly. For manufacturers, this slow pace of change is both frustrating and helpful.
All three Detroit auto makers emphasized online sales in their recent first-quarter results. General Motors and Fiat Chrysler talked up e-commerce tools that guide dealers through the sales process. Ford said it was learning from the recovery in China, where a “more robust app" had helped increase the share of online sales to roughly a third as shutdowns lifted.
In the U.S., dealers that hadn’t previously embraced digital tools seem to be scrambling to catch up. Even as lockdowns lift, consumers might look to minimize personal contact in the purchase process. In some states, rules requiring wet signatures hold back completely contactless sales, but there is now impetus for this to change.
Carvana, a company that trades secondhand cars online, reported earlier this month that weekly sales were most recently up 20% to 30% year over year—having been down 30% in early April. Co-founder Ernie Garcia III said he expected the boost to fade but not disappear, and investors seem to agree. Carvana stock has rebounded from the coronavirus selloff to trade at an even bigger premium than before to peers with bricks-and-mortar networks, such as CarMax.
Even before infection emerged as a concern, surveys suggested that consumers disliked the haggling and paperwork traditionally involved in buying new wheels—possibly with good reason. Dealerships often make their margins less by selling cars than by selling add-ons during the lengthy car-buying process, says Joern Buss, a partner in the automotive practice of consultancy Oliver Wyman.
None of this implies the kind of digital revolution that has roiled other consumer sectors, though.
For many goods, the internet has given a low-cost distribution and marketing channel to new brands, taking business away from traditional retailers in the process. Tesla plays the challenger role in the auto industry, including through its dealer-free distribution model. Happily for Detroit, however, its approach is anything but low-cost and asset-light in a way other would-be disruptors can easily follow. At the same time, traditional car makers are barred by a mesh of laws from doing much to shake up their own sprawling retail networks.
The best Detroit can hope for is that its new digital tools bring less digitally-savvy dealers up to speed, including with the art of the online upsell. Combined with a likely wave of dealership bankruptcies following the shutdowns, this may in fact help manufacturers exert a bit more of the quality control they crave over their distributors.
For all its focus on speedy products, the car industry is a slow-moving beast. E-commerce probably won’t change that.
This story has been published from a wire agency feed without modifications to the text