The global automotive industry was already facing a prolonged slowdown before the pandemic: fewer vehicles sold across major global markets (90 million units in 2019, versus a record 95 million in 2017) during an era of ride-sharing emergence and sales saturation in wealthy markets has industry leaders eyeing direct to consumer automotive.
During the current crisis, however, the auto-selling game has been completely disrupted.
Besides its effect on sales and the selling process, the pandemic has shifted consumer behaviors and attitudes as social distancing and safety concerns persist. Younger generations, which had moved towards ride-sharing in recent years, now say they’re ready to buy a car, perhaps to gain health-related peace of mind — reversing decades-long trends around car ownership. In fact, 45% of people under 35 are considering buying a car in 2020.
In addition, consumers crave a digital car-buying experience now more than ever. Close to half (46%) of consumers want to search for and purchase cars online rather than visit dealerships, a trend that was already brewing before the pandemic but has accelerated now that contactless and touchless experiences are prevalent.
This would seem like a ripe opportunity to evolve a direct-to-consumer (DTC) channel based on e-commerce and visibility into customer data. After all, native DTC e-commerce companies, selling products from mattresses to eyeglasses, have seen considerable success over the past decade.
But the automotive industry is particularly challenged when it comes to selling directly to the consumer. Most states have legal requirements that constrain auto manufacturers from selling directly to consumers and require buyer contact with a licensed dealer that can provide ongoing service.
Only digitally native options such as Tesla, which sells its customized cars online, have gotten around these rules, as well as used car options such as Carvana and Carmax.
For traditional original equipment manufacturers (OEM), these laws mean that tech-savvy consumers can’t purchase the way they want. For customers accustomed to Amazon-like experiences, buying a car has become different than every other area of their shopping lives.
It also means that sellers are losing out on a potentially lucrative and growth-producing channel, leaving money on the table.
Step-by-step: Opportunities for direct to consumer automotive
Unfortunately, there is no silver bullet that can overcome the traditional automotive purchase model. But there are still significant opportunities for automobile marketers to get up to speed with direct to consumer automotive in incremental ways:
- One important DTC opportunity may come in selling aftermarket parts, which offers big margins and comes directly from the manufacturer.
- End-user services related to data connectivity or insurance may provide other possibilities.
- Replicating showrooms and sales interactions online.
The digital transformation of some aspects of the buying process is a starting point for OEMs to build and sustain connections directly with consumers. Today’s consumers demand a powerful, best-in-class digital experience throughout the customer journey and across all touchpoints.
OEMs can work to develop sophisticated digital and mobile-first options, which are linchpins of the direct-to-consumer evolution. As these capabilities begin to grow, the end-to-end automotive purchase journey will begin to look a lot more like DTC.
Keep in mind, even if showrooms are open, safety concerns mean buyers still have limited options to explore and experience vehicles in person. To continue to serve customers, auto manufacturers and dealerships need to create a superior and memorable virtual customer experience.
The right digital platforms, emerging technologies like virtual reality, AI and voice interfaces all come into play. And everything that leads into the sales funnel, from websites and mobile apps to social media, needs to be improved.
The legacy framework for car sales isn’t going away anytime soon, at least for traditional manufacturers. In any case, consumers may want a local presence and servicing vehicles remains a big challenge for any manufacturer thinking of a DTC channel.
Adapting to new customer behaviors for DTC success
Still, there’s no doubt that OEMs need to adapt to new customer behaviors, which will likely accelerate the automotive industry’s transformation towards digital.
This will create an opportunity to strongly commit to better DTC engagement online, with innovative solutions and new pricing models that reinforce a more engaging and personalized customer experience.
The car-buying journey doesn’t stop when the consumer purchases the car. With a richer digital ecosystem, OEMs can begin to create a more fluid, seamless experience for consumers even after the car is in the driveway, including long-term affinity programs and integrated commerce around the car — especially as AI and other technologies enable automobiles to become connected, data-driven hubs.
Today’s consumers, particularly younger ones, want a complete digital experience. In the wake of this current pandemic, they also want a car-buying experience that is safe, secure, and as contactless and touchless as possible.
All of these trends point to a big DTC opportunity for automobile manufacturers. The only question now is how much — and how fast — OEMs will be able to take advantage of it.