Twenty-minute test drives are so 20th century.
Thanks to digital technology and shifting consumer habits and expectations, that longstanding feature of consumer and automotive culture could face extinction, at least in the longer term.
That is by no means certain — more about that in a bit — but that prediction stands as one of the more interesting messages gained from a new PYMNTS discussion that featured Karen Webster and Paul Hennessy, the CEO of an online used car platform called Vroom.
Hennessy is a former CEO of Priceline.com, an early disruptive force for travel services. He talked with Webster about how online platforms could disrupt the automotive sales experience in major ways going forward — even in an automotive world still dominated by dealerships and how they go about the commerce of cars and trucks.
Before drilling down, it’s important to note that Vroom is not an online marketplace for used cars, but a platform. That means Vroom inspects, buys and reconditions the vehicles it offers for sale, assuming all the risk instead of simply matching sellers and buyers. That’s still a pretty new concept in the digital and mobile worlds, but one that could be imitated or innovated within the coming decade of the 2020s.
The platform model also gives Vroom control.
“At the highest level, companies with platforms tend to be able to own the experience and deliver a better experience than a marketplace,” he told Webster.
Indeed, a used car marketplace, he explained, just tends to guide customers back to dealerships (which, of course, sell both new and used vehicles). Hennessy has bigger aims than that. The way he told it, he wants to bring true disruption to the sales of used cars, and that will require an online platform model.
Digital and mobile channels that offer used car sales are spreading, and comfort among consumers to buy vehicles from digital and mobile channels is increasing. But succeeding with such disruption is not going to be easy. Some 43,000 dealerships exist in the U.S., including about 16,000 new car dealerships, according to Hennessy and other sources. And the dealership model has more than just a mild foothold in the economy and the general consumer mindset.
But selling used cars via an online platform can offer ways to nibble away at the dealership advantage over time, at least according to the story Hennessy told. Let’s revisit to test drive for starters. Vroom offers a seven-day period during which the customer — after receiving delivery of the used vehicle via truck — can try out the machine before the return window closes.
“It’s a better experience than driving roughly a mile around the dealership, and then returning to a high-pressure sales situation,” he said. “That’s a really difficult way to experience a car. You should be able to take it to work, drop off the kids, use it on the weekend and see of the golf clubs fit.”
He said customers who return their used cars within seven days are in the “low-single digits” — and 25 percent of them end up buying another vehicle from Vroom.
You have no doubt figured out that one of the big appeals of an online platform for used cars is the absence of the living sales person on the lot — used car sales people carry a less-than-stellar reputation. Vroom also does not burden consumers with price negotiations when they are buying or trying to sell their own vehicles to the platform (it also buys inventory from dealers).
Perils of Negotiation
“Customers are not trained in negotiations,” Hennessy said.
Sure, some consumers are confident enough to try to haggle — some even find it fun — but even then, they often feel sour or resentful at the end of the process.
“Even when they think they got a good deal,” he said, drawing from his experiences at Priceline, “they feel like they left something on the table.”
None of this works without robust data and data analysis. On one level, that applies to the platform’s rule of not buying any vehicle that has been in an accident — all such accidents are supposed to be logged in databases that both sellers and buyers can access.
But it goes well beyond that, Hennessy said. The platform analyzes data about supply and demand, and other factors, on a national scale. Dealerships do too, but dealerships are also keenly focused on their own specific markets, their own assigned geographic areas. That could prove to be a long-term advantage for eCommerce-based car selling companies.
Few things change overnight, especially a culture that has been entrenched in its practices since at least the end of World War II, and arguably earlier than that. But Hennessy — along with other such executives in this space — is determined to disrupt tradition in this new decade about to dawn. He saw it happen in the online travel space, and the way he talked to Webster, you could almost feel his confidence about it happening with used cars.
“The best way to do this is to create a great experience,” he said.