Will there be a Covid impact on online sales?

It might seem a bit inappropriate to be thinking about selling cars when Covid-19 is still on a rising trend in many markets, but it is already a topic of discussion during the lockdowns in a number of markets both from the perspective of what is appropriate now, and what might happen when dealerships reopen.  Sales to essential workers remain possible from many dealerships, and a number of others are allowing deposits to be placed on cars for delivery after they reopen.  However, some independent dealers and brokers in Europe are still delivering, and in the US it seems that franchise dealers are being encouraged to conclude sales online and deliver to customers’ homes.  Is this appropriate, could there be longer term reputational damage, and will the online browsing and shopping processes that have been implemented change behaviour in the long term?

There is a long list of examples of different players adopting a range of different approaches.  Manufacturers have launched new services that allow personalised video of new cars on offer, for example Renault and Seat in the UK, but with delivery delayed until after the lockdown has ended.  Others have launched full online platforms, also with deferred deliveries such as Peugeot in France, soon rolling out to Citroen and DS and other markets.  Citroen have also announced a five point plan in France including special promotional offers to allow dealers to continue to sell new cars during the lockdown.  Emil Frey have launched a groupwide online sales channel in Germany, which was under development already, but includes the offer of contactless handover to address the current situation.  In the US, many dealers have turned to online sales, with NADA organising a special webinar for its members last week to explain some of the legal issues around safe process and distance selling.  Cazoo, the online new car channel in the UK, which unlike listings sites and brokers actually owns its own inventory, has restarted deliveries, admitting that only 50% are to essential workers.  Intermediaries are adding functionality to support a safe sales process such as Carwow in Germany and CarGurus in the UK, broadly mirroring the approach adopted by US dealers, whilst at the same time the latter announced that they are dropping plans to expand beyond North America and the UK.

If necessity is the mother of invention, then one might conclude that there must then be a customer need that is driving these upgrades and extensions of online sales processes, but however strong the business need is to move stock and generate cash, it must be balanced against the risks of spreading the virus – to customers or staff.  If a customer who is not in an essential employment role has a new car delivered, are we encouraging them to then ignore the “essential travel only” guidance so that they can enjoy their new purchase?  There is a clear inconsistency in how other forms of online sales by the likes of Amazon are treated, but if car sales are OK with appropriate measures, then why not furniture or houses?  This is not a call that should be made by individual dealers, and it should not be made in a way that treats the motor industry as a special case – that will only open us up to criticism (again) from the anti-car lobby.  Industry trade associations need to work with their peers to get clarity and a level playing field.  The economic need is clear, but in the meantime if feels like the right approach is to try and build an order book for post-lockdown delivery.

However, “post-lockdown” does not mean “back to normal”.  The more time that passes it seems that the less we know about Covid-19 – it may have been around much longer, more people have had it, and you may not gain immunity.  This, also applicable to concerns about future pandemics, may make social distancing the norm, rather than a temporary measure.  A study in the Gulf States from online used car site YallaMotor reported last week that 60% of consumers would now prefer to purchase a car online, compared to 20% in a similar survey last year.  The capabilities that have been launched during the lockdown will not go away and valuable lessons will have been learned that will allow further refinement of the processes and platforms.  Word of mouth will start to build from those buyers who have taken advantage of the new options.  There are also indications that people will favour a personal car over public transport once they are again allowed to travel, so this may create some positive support for the market.  It is unlikely that there will be a mass movement away from omni-channel shopping towards a 100% end-to-end process, but there will probably be some added impetus towards online at each stage, so failing to provide the option will be a disqualifier for these buyers.

But physical networks must also adapt.  If we make more rapid progress towards online options at various stages, what is the right size and shape for the dealer network?  For customers who do enter a dealership, processes will need to change to reassure physical shoppers (and those bringing cars in for service).  In an Italian survey around two thirds of respondents consider it very important that there should in future be sanitisation and social distancing measures in dealerships.  A dealership that ignores this may well find that customers go elsewhere.  An OEM who does not take a fresh look at their network plans is sticking their head in the sand.