3 Ways the Auto Industry has Adapted to COVID-19 (and Why You Should Do the Same)

When COVID-19 was first becoming part of our national vernacular back in February, few predicted the massive impact that social distancing, lockdowns, and other management measures would have on the global economy.

The global automotive sector remains among those industries hardest hit, at every level from manufacturing down to the showroom floor. While the first few months predictably resulted in significant downturns in vehicle sales and OEM profitability, the prolonged fight with this coronavirus has spurred many to pivot forward. The early indicators of these efforts from May and June are hopeful, with sales and profitability back on the upswing.

So, what key decisions have helped save an industry which almost experienced a complete undoing? Insiders suggest three (broadly speaking), and those of us living in a burgeoning age of retail-by-distance would do well to pay attention and adopt these winning strategies for ourselves.

Pivot #1: Digitize Everything

Well, maybe not everything, but pretty darn close. A key reason many dealers were able to stay afloat during the initial downturn is due to their ability to push much of the initial sales process outside the walls of the dealership. As Jack Nerad notes in his Forbes article, “the ability to sell vehicles online from inquiry to delivery is quickly transitioning from a “nice-to-have” to a requirement.”[i] Social distancing and an overall hesitancy for prolonged close contact—especially with non-family members—has resulted in a strong market demand for digital tools to replace most of the traditional car-buying sales process. In fact, Nerad cites a NADA study which found that although “total sales volume was markedly down in the month of April, the volume of online deals grew by 49%. The study said online car sales accounted for 27% of total cars sold in April, compared to just 5-10% in the months preceding the COVID-19 crisis.” People aren’t going to car dealerships, but that doesn’t mean they aren’t buying cars.

Instead of kicking tires and perusing brochures, the majority of customers are looking to do as much as possible within the comfort and security of their own homes—even building vehicles and filling out credit applications from their kitchen tables. As Ethan Andrianos, a Senior Sales Analyst for LinkedIn observes, “Smart executives are recognizing that buyer behavior has shifted, perhaps permanently, and are rethinking how they accept payments and deliver services.”[ii] While this shift is felt throughout the entire economy, it holds particularly true within the automotive segment. Customers have changed how they want to buy and if they won’t come to you, you must be able to go to them (literally and figuratively speaking). 

In your industry, what aspects of your customer interactions aren’t digital… but could be? In order to keep up with a market which is developing a strong preference for remote retail, digitization is an essential pivot to keep your products and services top-of-mind in your marketplace.

Pivot #2: Focus on the Customer Experience

Tangentially related to the trend of digitization, dealers have shifted toward a leaner, more efficient customer experience. According to the NADA data, “Of the dealers surveyed, 61% said that digital retailing improved their efficiency and 24% were able to increase the number of cars sold per person.” That increase in efficiency isn’t just good for dealers—it’s fantastic for customers as well. One of the premiere complaints about the traditional automotive sales process has been the absurd amounts of time required at the showroom to find a vehicle, drive it, work the deal, get through F&I, and finally take delivery and leave.

By dramatically reducing the amount of time spent at the dealership, not only are sales staff enjoying greater benefits through increased sales, they are also directly addressing one of the biggest hurdles to the customer experience—making this pivot a major “win-win.” Old-school retail wisdom may have viewed the customer’s experience and the dealer’s profitability as a zero-sum game, but this brave new world of online automotive retail and digital sales is proving otherwise.

Considering your own business model, how can you use digital tools to increase efficiency without sacrificing the experience? Moreover, think about how much of your traditional approach is really necessary from a customer experience perspective. Based on today’s metrics, if it doesn’t need to be there, cut it and streamline the sales process as much as possible. Your customers will thank you.

Pivot #3: Recognize the Future is Your Brand, Not Your Product

In a YouTube interview about the future of digital retailing in the automotive sector, Auto Trader South Africa CEO George Mienie said something truly profound:

“I think that too many car dealers are advertising… and too few car dealers are marketing their dealerships. And I’m not referring to marketing BMW, or Audi, or the car brands, but actually marketing their dealerships. Because at the end of the day, once price transparency happens, once all prices are commoditized because of transparency, and demand and supply becomes transparent… the only thing left standing is going to be the car dealership brand.”[iii] (emphasis added)

If there is a major downside to online sales and ubiquitous digitization, it’s that price and the market forces that drive it will inevitably become more and more transparent to the customer. While that’s an ultimate good, it does pose an existential threat to business models based on undercutting the competition. Invariably, every seller of goods and services has a price floor which they (literally) can’t afford to cross without becoming insolvent. While focusing on price has always been a short-term gain, long-term loss strategy, the digital age is dramatically reducing that strategy’s lifespan. 

So, when it isn’t about price… why should anyone buy from you? Mienie’s insight is clear—the only incentive you can give customers at that point is to treat them better and provide a superior experience compared to everywhere else they could buy that same product for that same price. Here’s a good “gut check” moment for you and your brand.

Is your brand known for great customer service? If it isn’t, now is the time to begin turning that around! If it is, what can you do today to remind your customers that (to borrow a phrase from the great Aretha Franklin), “Ain’t nobody love you like I’m gonna love you.”