Digitalisation in the car dealership and the used car trade

The car dealership and the used car trade are becoming increasingly digital. People interested in buying a used car have been using the internet for many years and diligently compare offers. When it comes to direct sales, however, it is still the contact with the dealer that counts.

How digitally positioned is the used car trade in 2021?

There are already car dealers who have created online channels to their customers through and through. This starts with the presentation of used cars on their own website and the major car portals such as Autoscout and Mobile.de, continues with their own Facebook presence, contact with fans and followers there and direct mailing to interested parties, and shortly before a sale is concluded, the salesperson sends the customer a final appointment via WhatsApp and even sends a few more pictures of the envisaged dream car.

Speaking of pictures: These are the be-all and end-all in the new and used car trade.
Of course, every car salesman knows the impression a well-photographed car makes. However, perhaps not every car dealer has yet internalised that the pictures trigger the decisive impulse to look at a car in the first place. In view of the abundance of offers, customers click or swipe (on the smartphone display) onwards in two to three seconds if they do not like the picture of a vehicle.

The images have to be absolutely right if the digital used car trade is to work. However, the problem for many car dealerships in 2021 could be: they are completely aware of the necessities, but do not take all the necessary measures to make their used car trade digital. This is quite complex and also requires expertise.

The digital car dealership from the customer's point of view

The expert organisation Dekra , together with the market researchers from Ipsos, conducted a survey among people interested in buying a used car (the absolute majority of all car buyers) about their sources of information. The result is quite interesting:

• Almost 80% of the respondents use internet sources for information. For 68% of prospective buyers, these are sales portals, for 41% the website of the car dealer, for 30% the website of a manufacturer, for 25% a special used car app and for 20% internet forums.
• 60% of all buyers would like to have direct digital contact with the used car dealer or his salesperson when it comes to the purchase transaction.
• To get in touch, 48% of customers use email, 21% WhatsApp, 14% a dedicated retailer app and 8% Facebook.
• Moving images are now the most important or very important source of information for 16% of prospective buyers. Of course, they must be very accessible (for example as a YouTube video) and display additionally prepared information about the vehicle of interest.
• According to all this information, 58% of all customers nevertheless seek additional advice at the car dealership in any case. 14% rely solely on the internet and are therefore also prepared to buy a vehicle online and without a test drive if it comes from the dealership. The rest of the respondents mix their strategy, i.e. inform themselves comprehensively online and still have a (possibly decisive) conversation at the dealership.

What do these figures say? Well, they prove that digitalisation alone does not sell used cars, but that it no longer works without it.

Challenges of the digital used car trade

Digitalisation poses a variety of challenges for the entire automotive ecosystem. On the one hand, it creates high potential for car dealerships, which operate at the interface to the customer, to increase their efficiency. They can significantly accelerate and streamline internal and external processes and make them more cost-effective. In the process, customers are absolutely playing along with their own digitisation efforts.

As the above figures show, they do want to communicate with the retailer using modern online technologies and use them extensively for their information.

On the other hand, car dealerships must install the necessary tools in a functionally reliable and user-friendly manner. There is acute pressure to act here. Nevertheless, the industry shows a rather heterogeneous picture in this respect.

In the meantime, individual businesses have been able to position themselves as pioneers, while others are still almost completely without the core elements of digitalisation even in 2021. At best, they have a meagre website with rudimentary information offers (location, contact details, but hardly any updated offers), and they also tend to phone their prospects and customers to advise and convince them by very conventional means.

This no longer does justice to our modern information world.

Transformation in the used car trade

The age-old business model of trading in used cars had its focus in the analogue trading world for more than 100 years. It is predominantly integrated into the overall concept of a workshop with attached sales, which has admittedly proven itself in practice. At its core, the complete business consists of four areas:

• New car sales
• Used car sales
• Workshop
• Parts and accessories trade

This makes sense because it covers the entire range of customer needs. Service for motorised individual transport can hardly work any other way. This model has existed practically as long as the automotive industry has existed.

Its continuity is due to product-specific characteristics. These include the demanding price level, long procurement intervals and high technical complexity.

Anyone who buys a car likes to have it repaired by the seller - the competent master car mechanic with his workshop. The latter earns money from it, creating a win-win situation for the customer and the car dealership.

This constellation has given rise to a range of services offered by car dealerships that has remained virtually unchanged for many decades. It is based on the process-related interconnections of the individual business areas (trade, workshop, accessories) and on the earnings structure inherent in the system.

This is dominated by the workshop sector, because this is where most of the money is earned, especially after the sale of a used car. This could be one reason why some car dealerships have so far made little progress with the digitalisation of their trading activities.

But that could come back to haunt them, because most customers have their cars repaired where they bought them. The basic principle in the industry is that car buyers become more brand-loyal as they get older and are happy to stay with their trusted workshop with its associated new and used car dealership. Of course, the workshop has to keep up with the times.

Today, even 60- or 70-year-old car buyers look at their next car on the internet. If the dealer he trusts cannot offer him that, the customer looks elsewhere. In fact, digitalisation is increasing customer migration in all sectors because the information is so quickly accessible. No one can escape this effect.