How Online Becomes E-Commerce
There have been loads of articles in the automotive media about online car sales and lots of views and some conflicting opinions. In this article, we wanted to provide a hypothetical case study where cars are sold through the omnichannel direct sales model.
First off, let us be brave and offer a view of where we are:
- OEMs, finance companies, retailers and third-party service providers all have strategies that include digital.
- Most have implemented partial online solutions. Retailers have seen unexpected benefits of efficiency and remote sales.
- The OEM direct sales model, or ‘agency’ is prevalent in fleet.
- There are now numerous retail agency examples around the world.
- Some in the retailer community appear comfortable to that approach here in the UK.
- There is a consensus that ‘bricks and clicks’ or ‘omnichannel’ is what customers want.
What Else Do We Know?
The online tools and processes that the industry requires to create a full end to end online experience already exist, are mature and customers are familiar with them. For example:
- Video sales demonstrations and clips of vehicle health checks started life in the mid-2000s, with, for example, CitNOW and AudiCam.
- Skype was launched in 2003, and the use of Teams and Zoom has gone exponential.
- Two-way communications with online platforms via chatbots and smart speakers will be familiar to most car buyers.
- Virtual Reality is an embryonic technology in business but mature in gaming. It is ideal for 3D configurators and virtual demonstrations.
- Many OEMs now have e-commerce platforms that allow the full or partial purchase of a product online.
We also know that many customers are digitally savvy. They are used to:
- Research, configuration, and price checking on the web for lots of products, including for cars.
- Online sales platforms like Argos, John Lewis, Amazon, and Apple, who have physical outlets too.
- Home delivery for large and expensive items.
Customers are also seeing new entrants and how they do things differently:
- New cars from Tesla, with a limited choice in specification and where something like 80% of their sales are online.
- New entrants with electric cars, ecommerce who are fleet of foot because they have no engine plants and can sell direct.
A Hypothetical Case Study
Let us assume this analysis is accurate and that we arrive at a situation where a hypothetical OEM with a hypothetical network migrates to an omnichannel direct sales model. We explained that the technology already exists, and tools are deployed in the sector. But what we have now is not ecommerce yet. There a few more steps.
Price and Direct Sales
For our hypothetical OEM to be able to be able to transact directly with the consumer, they need to be able to set prices. This is achieved through a retail agency model where the OEM invoices the consumer and the hypothetical network receives fees for services such as local marketing, PDI, static demonstration, test drive and handover.
Once an OEM sets the price in their market, then they can deploy dynamic pricing techniques and technology. Again, this is a mature technology starting life with budget airlines and hotels in the 2000s. It is already used in the sector. For example, Ford’s use of Vendavo technologies in their parts operations can be found here ( https://www.vendavo.com/industry/discrete-manufacturing/automotive/).
Dynamic pricing is worthy of an article by itself, but the headline features are that it pulls data from multiple sources to enable the best price to be set. ‘Best’ is defined by parameters set by the business, e.g. min and max prices, frequency of change.
The benefits can be huge. The business can deploy the correct amount of discount to move stock. Conversely, the business can set the right price for products in high demand. For this reason, dynamic pricing supports both ‘push’ supply and ‘pull’ demand models that we see in the sector.
There are several more key hurdles to overcome on the journey to ecommerce. For the purposes of this hypothetical case study, we will identify some of them but they, too, are worthy of their own articles. We do not underestimate the difficulty here, but in this piece, we want to consider the environment with these in place and working.
We have talked about various technologies that need to be in place and the need for retail agency to be implemented. Network buy-in is critical for obvious reasons. There is a legal case load, of course, which must include agreements for data sharing between the network, the national sales company, and the factory.
Any Colour You Like…..
What is not a dependency for ecommerce is product range and sales principles. However, it is part of the overall strategy. For example, the Tesla model range is more Henry Ford than Rolls Royce. Simplification of model range is also a key feature of Volkswagen’s ID3 range.
In the case of Tesla, the breadth of the customer offer was designed for ecommerce in a similar way to other brands, like Apple. It is very simple which delivers benefits back into manufacturing and the supply chain.
The Customer Journey
Moving on to our customer journey, we would argue this is not really hypothetical. We may not use all of these in our industry now, but we are all consumers so they will be familiar. A sample of the most important components is set out here:
- One customer identity across all channels. Think Apple ID.
- Joined up systems and processes in all channels. Think John Lewis.
- The customer chooses their next step, irrespective of whether it is physical or digital, and they can jump between, or back and forth. Think online, click and collect or in store with Tesco.
- Customers have endless resources to help their selections – customer reviews, video, VR, configuration tools, etc. Think any number of online providers.
- Customer retention is a key driver. Think PCP providers and their offers to renew.
- Offers are highly personalised and choices are validated. Think ‘those who bought this also bought that’ with Amazon.
Behind the Scenes
That is how a great ecommerce process supports the customer but how about making some money? We covered dynamic pricing above, but we do need to ensure customers can actually see the offers, and then buy things, to ensure strategic objectives are delivered.
There are practical steps to take. It means that the OEM’s website moves from being a beautiful and clever brochure to becoming a trading platform. There are practical tools and techniques to make quick changes to prices and move offers around. Everything is measured and everything can be tested and trialled to compare alternative approaches.
But the key change is the move in thinking to that of an online retailer. And there is yet another article.
One could argue that car retailers have led the charge since lockdown. They implemented remote customer consultations, contactless document authorisation and click and collect. The challenge comes when they must integrate their systems and processes with the OEMs.
However, they have been with customers right through and will have learned a lot about better service and reduced costs. Let us see how this actually plays out in the real world.
Credit to Stuart Copeland for the article (written with input from Atonic4 Founders), which was first published in the December 2020 edition of www.auto-retail.co.uk