Automotive Blog

What's the future for OEM-led digital new car sales channels?

Pascal Blog Jan 16

Online shops are present across all industries and they want a permanent relationship with web savvy customers who intend to search online for product information or purchase goods and services.  For some industries they play already a major role whereas for others, the establishment and integration of this sales channel into the omni-channel strategy is more difficult.  Profitability and cannibalisation effects are the main challenges that must be faced.  However, British people are the most online shopping savvy within the EU-5 markets, 79% of people aged from 16 to 74 purchased goods or services in 2014 for personal use (G 70%, FR 62%, SP 37%, IT 22%).  The EU-28 average remains at 50%, which is an increase of 6% compared to 2012.  Focussing on the automotive industry, ICDP's European Consumer Survey 2015 revealed that approximately 16% of EU-5 customers would be willing to finalise the purchase of a new car online. 

Hence, the question, does a proper online strategy need to include direct sales opportunities?  This issue is discussed frequently amongst automotive industry experts and opinions vary.  Some expect a clear trend towards OEM-controlled online new car sales, whilst others disagree. Let's look at various examples to help see an overall picture.

Several OEMs have already launched online direct sales opportunities for selected models with specified equipment.  Above all, the Swedish brand Volvo was particularly successful - iIn September 2014, all 1,927 units of the flagship model XC90 (limited edition) were sold within 47 hours and that is despite technical issues.  Interestingly, customers were willing to spend more than €100,000 on a click, sometimes even via their smartphone.  This reveals an unexploited potential for online sales, even for the expensive premium cars.

However, this distribution channel still remains underdeveloped.  Recently several OEMs established online sales possibilities for new cars within the EU-5 markets.  Most recently, BMW UK launched ‘BMW Retail Online’ on 27th November 2015.  The manufacturer claims that customers can configure and complete the purchase of the desired car within 10 minutes.  95% of British BMW dealers currently offer this service following a trial with 9 of their UK dealers, including Sytner Group which is Number 2 of ICDP's Top 10 dealer groups ranked by revenue within the EU-5 markets. Generally, the BMW UK approach consists of 6 key elements:

1) Find your perfect BMW: this needs analysis - the customer can select the driving area, the number of passengers, size of storage space and importance of aspects as luxury. Then the configurator proposes preconfigured cars, based on the most popular UK models. 
2) Genius live-chat: it enables personal support via live-chat or email, seven days a week from 8am to 10pm.
3) Vehicle configuration:  full configuration or prebuilt recommendation. 
4) Finance offer: via BMW financial services, including a financing calculator. 
5) Retailer online showroom:  chat with salesmen of selected dealer, arrange test-drive, car valuation, finalise purchase.
6) Online credit check:  feedback within 90 seconds if accepted or not, and payment permitted online or by phone. 

Smart Italy launched its own online platform for the Italian market (www.smartstore.it) on 17th December 2015 and offered an online store for new cars including a virtual showroom.  Customer choice is limited, only the pre-configured edition ‘red & the city’ is available, for both Smart fortwo and Smart forfour.  The cars can be ordered online and will be delivered by participating Italian Smart dealers, which also handle customer support after the purchase.  During the information stage, customers can get in contact with Smart via live chat, email, or the customer contact centre by telephone.  Product experts are available and guide the customer with the help of special camera glasses through the virtual showroom.  Then, a test drive can be fixed. Finally, payment takes place via credit card or bank transfer.

Besides the Smart online store ,since 2013 Daimler has also handled online sales enquiries for their Mercedes models, e.g. in Germany.  Also Citroen Carstore is a new concept present in several markets that enables potential buyers to find OEM-selected new cars.  Customers are steered to the dealers - the whole sales network is involved. 
 
However, Tesla Motors runs another strategy by operating its sales completely online, without any involvement of dealers within the distribution model.  Customers can simply order via credit card with a final confirming 'click'.  Before vehicle delivery, Tesla will contact the customer and offer suggestions for insurance and number plate.  Nevertheless, in Germany, most Tesla sales were generated after being in contact with sales staff in one of the Tesla Stores.  
 
No doubt that the industry needs to respond to changing customers’ requirements but the core question remains: how exactly will the overall process of offering cars online take place?  Who will takes responsibility for each step of the process, beginning with the click to buy and ending with the physical delivery?  At the moment OEM online sales platforms generate low sales numbers, as customers mostly configure online, and then buy from a dealer. 

Currently, OEM let online new car sales channels are not yet widespread in EU-5 markets.  In the future, a rather slow but continuous development can be expected, which might be supported by offering product-combinations with financial services and all-inclusive packages. 

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