Auto Marketing Will Support The Digital Shift

In a time period dominated by retail sales declines, the hardest hit has been the automotive industry. While March retail sales dropped 8 percent overall, new cars dropped as much as 36.9 percent for some brands as dealerships were shut down due to concerns over the personal contact inherent in the auto sales process. Used cars suffered a similar fate amid the coronavirus pandemic. For the first 12 days of April they dropped tumbled 63 percent vs. 2019.

Online auto sales are the only game in town. That’s good news for consumers who shop for cars online, which they did at an 86 percent rate during 2019. But it’s an obstacle for dealers. A small percentage of car purchases were made online last year.

It would be understandable if the auto business simply waited this crisis out, but that’s not happening. For example, online car buying platform Shift has launched a series of aggressive moves aimed at keeping the business going during the crisis and perhaps setting the stage for an acceleration to digital car buying after the coronavirus crisis clears.

“When you look at the history of retailing you see that some goods and services lend themselves to the standardized experience and market disruption that you’ve seen from the Amazons of the world,” said Shift CEO Toby Russell. “Hard goods like cars are usually late to the game, But my hypothesis is that the current environment is accelerating the shift toward digital.”

Although he was extremely concerned about business volume at the beginning of the crisis, Russell says Shift’s online sales rate has doubled since the COVID-19 crisis started. Its pre-crisis business model consisted of car dealerships and holding lots called hubs, where consumers could check out cars that they’ve already researched. It also operated a concierge service where a car could be driven to a prospective buyer’s home and test driven with the option for purchase from the concierge.

Shift has adapted its model to deal with the COVID-19 pandemic. Last week it announced that it is offering its proprietary software solutions to a limited number of dealership groups that have multiple stores shut down or operations significantly impacted by the nationwide social distancing orders.

“Lack of fully digital transaction capabilities remains a barrier for many dealerships seeking to continue serving their customers, and to potential car buyers who want to purchase a vehicle but are afraid to do so because they can’t do so in a contactless manner,” says Russell. “While some dealerships are able to list their inventory online, few, if any, have the capability to facilitate a fully digital transaction, and even fewer have a way to offer test drives to customers in an environment when stores are either closed or customers are unwilling to go to them.”

Second, it announced a special pricing program for essential California workers who need to travel during the crisis. That kind of flexibility will be critical if the business is to make up lost ground after the crisis passes. Because, post-coronavirus, automotive marketing within the auto industry will most likely change in the following three ways:

First, there will be an acceleration of the shift to digital shopping and purchasing. With the auto business changing its “last mile” of the purchase journey, car companies and car dealers will heavy up on driving consumers to an online purchase. “Even if someone doesn’t buy a car online, they are researching that purchase online,” said Russell. “Consumers will come out of this crisis with an adaptation toward online ordering much more than they did before.”

Second, advertising spend will increase, with companies like Shift, Cars.com and Carvana taking advantage of lower prices available for many media, including TV. Russell says Shift tested its first TV ads in the Bay Area last week because the rates were so favorable. Expect that the messaging behind those ads will be more sensitive to the crisis. “The first thing TV advertisers can and should do in light of the current environment is to retool their creative toward sensitive and effective messaging,” says industry trade AdExchanger. “This is a time to promote helpful information and services and the opportunity to help others. Successful brands will reflect these values and ideas in the tone of their new or updated creative content and seek to avoid the perception of tone-deaf or exploitative brand marketing during this time.”

Third, the entire business will become more collaborative. New classes of service companies will emerge that provide software and eCommerce services to auto dealers. And with consumers potentially apprehensive about an in-person visit due to the virus, some dealers will need to cede control of eCommerce, CRM and some communications functions to larger brokers. For example, a company called Flick Fusion has introduced a video platform for dealers to communicate with customers remotely. “Though there are a large number of stand-alone video communication options, the fact is that most owners and general managers would prefer that all of their communications — including video — originate from their CRM,” said Flick Fusion CEO Tim James.

Even with these changes the industry has a big ditch to drive out of.