The business challenges presented by the COVID-19 pandemic and digital disruptors entering the UK market are often cited as accelerating omnichannel retailing and digital innovation, but how far have things really come?

The market is at an interesting inflection point as many original equipment manufacturers (OEMs) are switching their approach to incorporate direct sales online, switching to an agency model or a combination of the two.

According to Deloitte’s 2022 Global Automotive Consumer Study, only 5% of buyers would prefer to purchase their next vehicle using a fully virtual journey. Dealer group Vertu reported last year that just 2% of its cars are sold outright online.

Instead, the majority of customers would ideally choose to follow a hybrid purchasing journey that includes both physical and digital elements. This preference presents traditional motor retailers with two real advantages over online-only retailers – a showroom and experts to help customers in person.

Having a physical presence additionally offers the opportunity for potential buyers to view the vehicle in person, something that online-only retailers are almost uniformly unable to provide (outside of slick 360-degree photography and videos).

This accelerated hybridisation of the carbuying journey is further highlighted as part of the latest business intelligence data from Automotive Transformation Group (ATG). It shows a sharp increase in customer transactions made online. ATG has seen total digital transactions increase by 31.8% year-on-year in January 2023, indicating a 61.1% month-on-month surge.

However, while consumer demand for making transactions digitally has enjoyed healthy growth, the need to maintain a comprehensive omnichannel offering becomes clear when diving deeper into ATG’s data. Of these online transactions in January, 84% were reservations made for vehicles, with a total of 16% representing financed or outright purchase agreements.

Richard Johnston, ATG chief revenue officer, says: “This indicates the majority of customers still wish to complete their purchase through other channels, such as in-showroom.

“Retailers, therefore, need to remain agile in responding to consumer preferences, seamlessly integrating an intelligent online platform with highquality, face-to-face contact to create the best possible experience throughout the purchase journey.

“Typically, our dealers see between 3% and 7% of vehicles purchased exclusively online, dependent on their levels of engagement with omnichannel solutions.”

Further data from ATG’s latest consumer insights show that 43% of transactions in January this year occurred outside of typical working hours, which was a 22.9% increase compared with the same month in 2021.

While an in-showroom customer service offering is instrumental to an effective omnichannel strategy, this need for an “always on” business is crucial to ensure that customers have seamless access to the information they need online at all times of the day.

Auto Trader’s latest data shows twothirds of consumers and more than fourin-five younger car buyers are open to the concept of online retailing. More specifically, car buyers are looking to do more of the jobs necessary to buy their next car online. Whether it’s checking availability, sourcing a valuation, asking questions, booking a test drive, paying a deposit, or organising finance, six-in-10 car buyers do, or want to do, the majority of these key jobs online.

James Tew, iVendi chief executive, says: “The picture is complex, but, fundamentally, consumers are doing more and more online as part of their car-buying journey, something that is very much a result of not just long-term trends towards increased online retail, but the pandemic creating a greater emphasis on digitalisation.”

Tew says that, while digital innovation is essential for automotive retail to stay relevant to customer needs and expectations, there has not been a signal so far that significantly larger numbers of people are buying cars entirely online. Data from iVendi’s own business shows that 65% of car finance applications are still completed in the showroom. It means customers are using digital tools to do everything from carrying out initial research to finding finance to submitting a part exchange for valuation as part of a personalised journey that combines online and physical elements.

Tew says: “This hybrid approach – using both showroom and digital – is now overwhelmingly the consumer norm and the major development over the past few years has been dealers, lenders and technology suppliers moving to enable these journeys.”

A car buyer might start their research online and then visit a dealership to look at a car, sort out their motor finance online, and drive to the dealership to collect the vehicle. Alternatively, they could drive past a dealership and see a car on the forecourt, email the dealer, be given a guided video tour of the vehicle, then visit the showroom to finalise the deal. The permutations are probably infinite.

Tew says: “Our view is that buying cars in this way is probably going to be the standard motor retail model for the foreseeable future.

“Even if you are dealing with the most digitally native of consumers, many will still want to take a good look at a major purchase such as a car before committing to buy, and this is especially true in a market where vehicles are both generally ageing and priced at historically high levels.

“What dealers and their partners need to do is make these hybrid journeys ever easier and more effective.”

Customer habits are also changing around their preferred method of payment. ATG has seen a shift towards smartphone wallet payment technology. ATG data for 2022 shows that 88% of users made payments with a card, with 9% opting for either Apple Pay or Google Pay, compared with 90% and 7% respectively in 2021.

Nearly 41% of all these transactions in 2022 were made on smartphones, as customers are now able to securely store their credit and debit cards on their smartphones to make payments. Online banking can also use smartphones to help verify transactions through fingerprint or biometric recognition.

As a result, retailers and OEMs need to provide a mobile-optimised customer experience to attract buyers and maximise retention. ATG believes harnessing data will also be another key to creating a more efficient customer experience and will help maximise results in the coming years. More efficient dataflow can bring consumers a wide array of benefits – from providing live, fully up-to-date vehicle availability, to offering an intuitive, customised and responsive online user experience.

Johnston adds: “When retailers and car manufacturers optimise dataflow, effectively and compliantly analyse purchase journey data, and deploy it intelligently, they can remain more reactive to customer preferences.

“This will enable them to enhance their offering and give them a competitive edge in an increasingly crowded marketplace.”