Over the past years the number of consumers that shop online has – driven by the rise of the internet and other large technological innovations – increased dramatically. By 2020, analysts forecast that online transactions could reach 450 billion per day. Although e-commerce first made its introduction in markets for ‘low-priced’ products, such as books and clothes, there is an increasing trend visible that online shopping is rapidly winning ground in more ‘high-priced’ markets, such as for instance the car market. A new report from Capgemini reconfirms this trend, concluding that nearly half of the current generation is likely to buy their car online.
For more than a decade business advisory firm Capgemini studies, in collaboration with research firm ORC International, the key developments in the automotive market. In its latest report – titled ‘Cars Online 2014 – Generation Connected’ – the researchers asked more than 10,000 consumers across 10 countries* for their preferences when purchasing a car. In addition, they looked at how the automotive industry can adapt their business to meet the demands of customers and how they can build stronger connections with them.
In its report, Capgemini calls today’s consumers the ‘Generation Connected’, a generation that considers online as the primary channel for communication and is ‘highly connected’ with other people and brands. As a result of this internet connectivity and the continuous access to accurate information, car consumers in present day are confident about what they want and how they want to purchase this. They feel secure in using technology – such as the internet – to increase their power as car shoppers, says Capgemini.
Against this background, ‘Generation Connected’ consumers are highly willing and likely to purchase a car online. 97% uses the internet for research, concludes the report, and 44% that actually purchased a car over the past year has done so online. The survey also shows that this number is even higher for young consumers and shoppers in growth markets. For instance, only 34% of shoppers in the United States stated that they would buy their car online, while in China this number was as high as 61%.
A key motivator for ‘Generation Connected’ to purchase cars online, in addition to a better price, is the information/knowledge factor. When searching for a car online, consumers can access the needed information anytime they want and anywhere they want. Not only can potential buyers find the specifics of a certain car, they can in addition find satisfaction levels of drivers and dealer reputations, often as part of rankings or through social media. Moreover, an increasing number of consumers trusts user-generated content – the ‘wisdom of the crowd’ – and are themselves eager to share opinions and experiences online.
For car dealers, the rise of the online channel is a potential game changer, state the researchers. Their focus will gradually shift from front-end (i.e. sales) to back-end (i.e. service). “I suspect [in the future] few people will use the person-to-person service offered by a traditional dealer. Online services will be used to configure cars, get the best price, arrange a test drive, and even purchase and arrange delivery. The only time a dealer will be visited will be for servicing,” says a respondent from the United Kingdom. In addition, car dealers will have to rethink their business model, as the margins guaranteed during physical purchase of a car will gradually be eroded by the online channel, the result of among others increased transparency and competition from ‘online-only’ business models.
Yet the online channels does not only bring gloomy news for car dealers – at the same time it offers large new opportunities. It offers them the opportunity to enhance customer relationships through better communication and information, or even create completely new customer contact points through innovative online approaches. From a cost view, the digitisation of operations allows car dealers to boost their efficiency and at the same time improve the performance of key metrics as lead generation, average acquisition costs or service quality.
Key to success
For car dealers, the key to success lies in two factors, state the researchers. Firstly, they will have to embrace the digital reality, adapt their business model to it and work hard to implement a future-proof operational model. Acting quickly is paramount, before “others take a share of the pie”, warns Capgemini. Secondly, they will have to follow an omni-channel approach, ensuring that the ‘Customer Experience’ of clients is reinforced through both offline and online channels.
* Countries represented include Brazil, China, France, Germany, India, Indonesia, Russia, South Korea, the United Kingdom, and the United States.