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Buying cars online

From machine to mindset: Buying cars online and the rise of the online dealership"

Only a decade ago, the prospect of making any major purchase online was practically inconceivable. Online shopping was almost entirely reserved for smaller purchases — clothing, shoes, and simple electronics. Largely due to consumers’ hesitation to put too much trust in online retailers, buying “sight unseen,” the concept of not only researching but ultimately purchasing higher ticket items seemed far-fetched at best and irresponsible at worst.

Fast forward to the modern digital landscape. It’s not just tech-savvy millennials making major purchases online — even Generation X and Baby Boomers are beginning to jump on the e-commerce bandwagon, shopping for appliances, mattresses, and even homes with little more than the click of a button. While retailers used to overcome customer hesitation by building relationships (and consequently trust) in-store, modern consumers are finally coming around to the concept of researching and purchasing high-ticket items online. Especially as online retailers introduce perks like same-day delivery and no-hassle returns, they may even prefer it.

In the United States, which boasts the second largest auto industry in the world, the shift toward making bigger purchases online begs the question: What does this mean for the future of the automotive industry? Car designers and manufacturers have long relied on the physical driving experience to convince buyers to take the plunge on this major purchase — first with the dealership experience and then the test drive itself.

That’s changing quickly, though, as consumers begin to demand faster, more intuitive, and wholly digital alternatives that resemble the seamless digital purchase experiences they’ve become accustomed to.

The decline of the dealership lot

As a recent TNS Global study revealed, although only 2 percent of consumers today purchased their current car online, a whopping 77 percent of prospective car buyers anticipate purchasing their next car online. Why? Because modern consumers just don’t enjoy the dealership shopping experience. According to a recent survey, three-quarters of consumers say they would make their entire car purchase online if given the opportunity. That means taking care of car selection, financing, price negotiation, and paperwork without ever visiting a dealership lot.

Plenty of online car-buying platforms like Carvana and Vroom are already snapping up customer mindshare with the promise of a smoother, less stressful car buying experience that is end-to-end digital—but that isn’t to say that some savvy major brands aren’t also making the transition. Just last year, Hyundai launched an online platform that enabled prospective buyers to do everything from browsing for a new car, talking to a salesperson, and even putting down a deposit without ever visiting a dealership. Fittingly dubbed “Click to Buy,” the campaign aimed to streamline and simplify the car shopping experience for consumers deterred by the traditional car buying process (e.g., millennials).

But dealerships are likely to feel the impact of digital technology as consumers begin to demand more immersive experiences when researching their next vehicle, even if they intend to buy their car at a physical location. A recent consumer survey found that 82 percent of current and potential car buyers want to explore and configure their next vehicle with the help of virtual and artificial reality. Unsurprisingly, these immersive technologies will help consumers narrow their search and decide which vehicles they want to take for a test drive.

“Luxury” in the age of connected cars

Of course, it’s not just the process of researching, test-driving, and purchasing a car that will be affected by digital technology — the same goes for the driver’s very experience during their daily commute. Brands that have established themselves as “premium” or “luxury” will need to deliver increasingly sophisticated digital experiences behind the wheel not just during the test drive, but well beyond the point of sale.

That’s because the same group of consumers largely responsible for the rise of online shopping is also at the center of the shift toward more digitally advanced and connected driving experiences. Millennials rely more heavily on digital and connected technology to meet their entertainment, logistical, and physical needs than any generation before them — and often expect brands to fit seamlessly into their digital lives. As consumers rely more heavily on technology in all aspects of their lives, they’ll expect the same from the cars they drive.

For OEMs and automotive brands, this poses both an opportunity and a challenge. Car manufacturers that have traditionally relied on a car’s handling, interior, and drivability to win over consumers will now need to consider how a vehicle’s digital offering may impact consumers’ perception of what makes a car worth the money. In fact, Morgan Stanley predicts that while hardware currently accounts for 90 percent of a car’s perceived value, that number is likely to drop to just 40 percent as a car’s software takes priority.

From transaction to experience

Now and into the future, drivers will not only expect their vehicles’ connected technology to blend seamlessly into their established digital lives, but also help keep them safer on the road, better informed about their car’s performance and maintenance schedule, and constantly connected to the myriad devices they interact with daily. Since the average American spends roughly 24 hours per week interacting with the internet in some fashion, you can be sure that the next generation of vehicles will need to offer much more than just superior drivability and reliability. Consumers will expect nothing less than a highly advanced digital device on wheels.

In our next article, we’ll explore how these changing expectations around the driver experience will fundamentally redefine what a car means to a consumer — and how this shift will impact other industries directly and indirectly connected to the automotive field. From car maintenance providers to ride-sharing platforms and even media streaming services, the transformation of the driver experience will cause a ripple effect felt in virtually every sphere of business.

For brands in the automotive industry and beyond, the question isn’t whether they’re keeping pace with rapidly advancing technology behind the wheel, but if they’re prepared to lead the way.

Consumers’ expectations regarding the driving experience are already changing — automotive brands today will need to think bigger than behind the wheel. In this multi-installment series, we’ll continue to uncover how transforming expectations about the driving experience will alter both the automotive industry and society as a whole.

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