A shift from traditional showroom-based car sales to a wholly-online retail solution would cut dealers cost-per-sale by over 40% - saving the sector over £950m a year.
That was the claim made by GForces after it undertook research to establish the potential benefit of wholeheartedly embracing the accelerated digital shift which has swept through the sector during the COVID-19 coronavirus pandemic.
Paul Stokes, head of ecommerce at the automotive ecommerce software provider, said that a change in staffing structure, job roles and skillset would be need to make the shift that would facilitate the shift from a sector-wide £211m cost of sale under traditional sales to £115m with online sales.
'Blended solution' is best
But former dealer Nidd Vale Group and Rockar managing director Stokes said that a GForces’ research had indicated that even a 30% transition towards online could save the sector £47m a year, suggesting a blended approach was still the best solution.
Stokes said: “Retailers can no longer expect to engage successfully with customers if they choose to remain with the same sales model and expect the customer to visit a showroom to conduct every aspect of the sale.
“The middle ground is the key to success. By blending virtual online capability with physical showrooms and combining 'bricks and clicks’, retailers can create an omnichannel experience – a seamless and enjoyable journey for customers to engage with, allied to a robust and profitable business model.”
GForces correlated factors including staff wages and time to establish cost-per-sale data for three sales utilising different levels of digital process.
It found a traditional transaction would cost £314 and would take between 120 and 180 minutes, while a sales which saw certain processes (such as vehicle configuration and finance approval) online would cost £243 and take 60 to 90 minutes to complete.
The wholly online sale would attract a cost of £172 and take around 30 minutes, it said.
COVID-19’s acceleration of online sales could drive a greater volume of low-cost sales, according to GForces, while a shift to agency model retail for some manufacturers would also impact the cost of sales scenarios.
GForces chief commercial officer, Tim Smith, said: "We have already seen how COVID-19 has accelerated the shift to online within the automotive sector.
“New and used car online purchases made through UK franchised retailers using GForces platform – NetDirector® Auto-e – increased by 1,228% during 2020.
“This has been quite rightly hailed as positive news for customers; however, what can get overlooked is the significant cost and efficiency benefits the cultural shift to online buying, and the technology of the digital platforms that facilitate it, can deliver for retailers.”
GForces operates in 96 countries and claims to serve 6,000 car retail rooftops with retail software solutions.
Among the UK-based retailers who shared their successes with GForces' online retail platform during COVID-19 pandemic were AM100 operator Snows Motor Group, which claimed to have completed £37m in online sales over the past 18 months.
Embrace digital to beat disruptors
Smith told AM that the reality of the move to digital sales was that most retailers were currently engaged in a “transition”, with increasing numbers of employees now interacting with digital leads and helping to facilitate online sales.
But he said those that act fast can emerge as market leaders in a sector being disrupted by the likes of Cazoo, cinch and Carzam.
Smith said indicated that an efficient online retail process was essential to leverage traditional car retailer’s strength to tackle the marketing might of sector disruptors like Cazoo, cinch and Carzam.
He said that the majority of car buyers are still searching for cars via the sector’s established marketing channels, ensuring that sales are still channelled towards established retailers.
“Cinch, Cazoo and Carzam are driving a lot of headlines but what they are actually doing is focussing the car buyer into the fact that they can buy online,” said Smith.
“Customers are receiving masses of marketing material and being exposed to stock being advertised through model aggregators. If you find a car you want you go in there and they are then taking the first steps to buying a car online. I think that is helping retailers move towards a more efficient sales mechanism.”
Smith added: “Look at the numbers sold by those companies, it’s not scratching the surface and that is the general consensus. We haven’t even started on the journey yet.
“If you get your store set up correctly now, you’ve got every chance to be a successful online operator.”