Market Report: Online Car Sales

For car buyers the online shopping journey is changing with the influx of challenger brands entering the traditional classified market and this year’s influx of OEMs offering new cars from their websites.

Online marketing is now, arguably, the most important part of a dealer’s sales activities as this is their first point of interaction with prospective customers. For buyers this is where cars are benchmarked and selected according to price, specification and practicality. For dealers this has always been their opportunity to present used and nearly-new stock in front of serious buyers. Now, thanks to the likes of carwow and CarGurus, they can also promote their new car stock.

In tandem with this the OEMs are becoming active in online sales. The concept is not new. Vauxhall launched the first manufacturer online car sales channel a decade ago. It proved to be ahead of its time and was quietly phased out, although the brand has not ruled out a return.

This year kicked off with new online sales services launched by Hyundai, Peugeot and Smart. We can also expect similar launches over the coming months from Citroen and Volvo.

As the first to market, Hyundai’s ambitious Click and Buy has caused a stir with its high profile TV and national advertising campaign showing cars being deposited at customers’ homes in Amazon style boxes complete with perforated tear strips.

Customers using the service can choose a car, arrange a trade-in, sort out finance, and pay online. The process is claimed to take just five minutes to complete with the handover taking place at home or from a local dealership.

Click and Buy is a natural progression for Hyundai following the opening of its digital outlets with Rockar at London’s Bluewater and Westfield Stratford. Furthermore, it got off to a flying start with the first car sold within 48 hours and 23 over the course of January, with most buyers opting to collect from their local dealer.

“We’ve spent many years listening to customers and Click To Buy is the result: it’s a site that makes the process of buying a new car easier, simpler and clearer than ever, doing away with haggling through fixed pricing and offering the ability to buy a car online in just five minutes flat,” said Tony Whitehorn, president and CEO of Hyundai UK.

Smart’s service also offers doorstep or dealer delivery and claims to be able to fulfil a customer order within 12 days of credit acceptance.

So does this OEM activity pose a threat for the specialist sites which actively market cars for dealers?

“It was inevitable that OEMs would enter the market and we expect to see more to follow.  What’s clear is the approach they’re taking has a commercial objective at the heart not the needs of the consumer,” said Karen Hilton, carwow’s head of sales operations.

“A recent customer study revealed that for 70% of people the primary reason they’d come to carwow was for confidence in the price they were paying, not to find the cheapest price. Therefore OEMs launching online sales platforms does not overcome the fact that for many buying a car is a daunting and uncertain process,” she said.

“We also suspect that OEMs won’t allow a customer to compare and contrast their products with the competitors, therefore consumers need to shop around four to five websites when carwow allows them to do it all in one place.”

Auto Trader also does not believe the OEM activity will be a threat, maintaining that customers expect choice when shopping online.

“Many manufacturers are heading towards operating their own online sales channels, but we don’t see this as a threat at all. In fact it’s an opportunity. Consumers want ease, transparency and convenience when buying online, and buying a car shouldn’t be an exception,” said Nick King, Insight director at Auto Trader (pictured in head office)

The argument is that some customers will find OEM sites too limited.

“Our research tells us that a third of consumers aren’t sure whether they want to buy new or used so we are focused on ensuring that we offer a great mix of both. The recent launch of virtual new car stock on Auto Trader has helped us to strengthen our new car offering, adding around 10,000 vehicles for consumers to choose from. So we feel that the new OEM sales’ channels will further enhance our new car journey, and in time will likely become a natural extension of the new car path to purchase journey.”

The view is echoed by Motors whose director of marketing and business intelligence, Dermot Kelleher (bottom photo), believes it is all part of the process of offering car buyers what they want.

“We recognise that consumers will use a wide range of websites and resources in their car buying journey.

“Research we carried out last autumn revealed that 72% of consumers use three or more car search websites alone when finding their next car,” he said.

“Consumers have come to expect choice in the market and various touch points across the industry can only help them make the right choice to suit their lifestyle,” he said.

With so much change characterising the start of the year, how will the online customer’s buying experience change over the next 18 months or so?

“I don’t feel the process will change fundamentally, but with economic uncertainty around Brexit and changes to road tax meaning for many a new car will cost more,” said carwow’s Hilton.

“Even people that change their car like clockwork every 36 months will be doing more research and fully considering their options before diving in,” she said.

With Auto Trader research suggesting the average customer only makes two showroom visits before purchasing, compared with seven visits 10 years ago, online marketing will continue to empower buyers and provide dealers with their best possible opportunity to engage with them.

Author: Curtis Hutchinson