How Car Dealers Can Survive During The Coronavirus Outbreak
It's time for car buying to get dragged into this century.
The coronavirus outbreak has already had a drastic impact on our entire way of life. By nearly all accounts, things are likely to get worse before they get better. This extends to a crucial part of the global economy: Car manufacturing and car buying. Many buyers are likely to drop out of the market completely or put their purchases on hold. And this means the dealers who want to get through this mess and save their businesses may have to make changes both short-term and permanent—to close deals.
Wall Street Journal reports some dealers are starting to take a serious look at how they handle customers and transactions at a time where people are being asked (or ordered) not to go out in public or gather in large groups. While used car startups like Carvana and Vroom already offer home delivery and online transactions, they also price their cars on the upper end of the spectrum, so that convenience has a cost (similar to CarMax). And none offer new-car sales.
It’s no secret that most dealers are stuck in the past, married to the retrograde model of relying on people to physically show up at the dealership and haggle for hours until papers are signed. Protected by strong franchise laws, car dealers lag behind other retail sectors in embracing online selling. You still can’t buy a car on the internet the way you’d buy a phone, even though manufacturers all offer spiffy "Build Your Own" model configurators that have the veneer of a one-click order system.
But with the social distancing precautions spreading around the country, lagging behind the virus, I can’t imagine anyone wanting to spend hours at a dealership for at least the next couple months. So dealers need to act, now. A J.D. Power study indicates we could see as much as 3 million fewer new vehicles sold this year—not quite Great Recession levels of bad, but much lower than anticipated. And regardless, any close comparison to the last economic crisis is sure to spook everyone in the industry, which got absolutely hammered a decade ago.
Beating the odds to survive this crisis will require dealers to adapt in a few key ways. We're not talking rocket science here. The biggest one is following the lead of a few higher-end brands that already conduct remote transactions and deliver new cars without the buyer ever needing to step foot in a physical dealership. Right now, that kind of service feels white-glove, reserved for someone buying a $120,000 Mercedes-Benz S-Class. In the future, it can and should become the norm for everyone.
A lot of dealers are resistant to that idea—some even have policies where paperwork must be filled out in the store—and they'll find themselves at a distinct disadvantage in the months to come. But it's going to take more than just a willingness to go the extra mile (or several miles) to bring a car to a customer rather than the other way around. Dealers are also going have to change the way they interact with a customer prior to the sale being closed.
A key component here is getting the internet sales department to respond to customers in both a timely and helpful manner. As a professional car shopper, my team and I are in communication with hundreds of dealers over the course of a year. It never ceases to surprise us how bad at online communication some of these dealers are.
From sending auto-generated boilerplate responses that include “customer name here” at the top, to providing links and details on the wrong vehicle, I regularly see laziness kill easy deals. It should not take three or four emails back and forth for a dealer to finally send a lease payment quote. In addition to negotiating deals, a good chunk of the work I do is explaining to some dealers how to do their jobs correctly. And those issues don’t even touch on the fact that some dealers will give you radio silence only to give you a random phone call months later to see if you are “still in the market.”
As of now the “internet sales departments” at some dealers are a bit of a joke because the purpose of those representatives is just to get a buyer in the door. From there, they can try and upsell you something else. But any store that is serious about moving units in the age of this pandemic and beyond has to have a trained staff that not only can respond to customers quickly, but also effectively.
You would think this process is simple: If a customer asks for a quote, you send them a quote. It seems far too many sales managers haven’t gotten clued into this.
There are a number of tools some dealers have implemented that can help streamline online transactions. Some stores have already adopted platforms integrated with the dealership’s website that allow the customer to conduct the entirety of the transaction online from applying for auto loans to even being able to sign paperwork electronically. Currently, most dealers are not able to conduct transactions online, though I would imagine more will make the shift. But almost every dealer has the ability to send contracts through the mail.
The natural next step to this is to have the vehicle delivered, though buyers should be aware that deliveries are usually only applicable to dealers within their region. Sometimes better pricing can be had elsewhere, and this where partnerships with transport companies, or having car buyers arrange this on their own, would come in to play.
In the past week or so I have probably received about 200 emails from various dealers all discussing the same adjustments to the Covid-19 situation: no more handshakes, a lot of deep cleaning, and encouraging their employees many of whom only make money on commissioned sales to stay home if they are ill. Those are good measures.
For a lot of dealerships, it’s going to take more than some surface policies and precautions if they expect to survive what is predicted to be a massive drop in car sales over the next few months. Evolving their internet tactics can't completely counter uncertainty, pay cuts, layoffs and the other negative economic effects we'll feel in the wake of the virus.
But if dealers manage to get through this crisis by learning to sell cars online like it’s actually the year 2020, they may be much stronger going forward.
Tom McParland runs Automatch Consulting. His writing about car buying has appeared on The Drive, Jalopnik and more.