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Car Dealer Via LOC
Credit:e Lyda Hill Texas Collection of Photographs in Carol M. Highsmith's America Project, Library of Congress, Prints and Photographs Division.


US Car Dealers Embrace Online Sales As Coronavirus Shuts Down Showrooms

Car dealerships in many states are shut down due to the coronavirus contagion, leading to a surge in online auto sales techniques.

The coronavirus is forcing people to rethink what normal is. Who needs large schools that are expensive to build and require heat, air conditioning, and lots of maintenance? The same can be said about retail stores and sports arenas that are expensive to build and maintain. So much of what we do now can be done online. The pandemic is making it clear the internet can provide a substitute for many of the things we used to think of as normal — like going to a dealership to shop for a car.

Car Dealer Via LOC

Image credit: Lyda Hill Texas Collection of Photographs in Carol M. Highsmith’s America Project, Library of Congress, Prints and Photographs Division.

Why do we do that, anyway? Largely for historical reasons. For millenia, people have brought their goods to central marketplaces where they could be displayed, touched, squeezed, evaluated and — hopefully — sold. There were few alternatives for merchants to get their wares in front of the public. Roads, canals, and railroads all came into existence primarily to make commerce possible.

For most people, the era of shopping from home began in America with the Sears catalog. For the first time, people didn’t have to go to the store, the store came to them. It was the beginning of a transformation that has been accelerated by the advent of the internet. Browse, click, done. No leaving home to fight traffic. You can do it from the comfort of your living room.

Car dealers were once subservient to manufacturers, but no more. Now it is almost the other way around. The hometown dealer has given way to corporate conglomerates that own dozens — or hundreds — of dealerships. They have tremendous wealth and have accumulated massive political power. In many states, it is illegal for a car company to sell its products directly to consumers. The coronavirus is changing that, possibly forever.

Suddenly, going to a showroom to rub shoulders with dozens of other customers, sales people, and staff doesn’t seem like such a good idea. J.D. Power reports 24 states allow for dealership sales operations to remain open. In the other 26 states, showroom sales are prohibited. What to do? Hmmm……let’s try that online sales process we have been adamantly opposing for so long.

Some dealers have been making it easy for customers to make appointments to come to showrooms. Angelo Salvadore owns Chevrolet and Fiat Chrysler stores in Massachusetts. “We’re doing very well with the appointment side of it,” he tells CNBC. “People are more looking to see what we have online and then are giving us a call. It is working.”

Sonic Automotive is the nation’s fourth largest automotive retailer with more than 100 stores that sell 24 brands in more than a dozen states. “We’re still pushing through. We’re dealing with the market we have,” Sonic CEO David Smith tells CNBC. “We’re able to do online virtual sales and a no-contact touchless delivery both in service and our sales customers.”

Manufacturers are getting in on internet sales, too, as the virus has crushed their business. Fiat Chrysler launched an online sales program this month that allows customers to purchase a vehicle and have it delivered to their home without ever setting foot in a dealership. “While you’re staying at home, there’s absolutely no reason you can’t be online shopping like you do, whether its Amazon or other online retailers,” says Mark Stewart, head of the company’s North American operations. “We want to have a process so our customers can do so as well.”

Stuart, who previously worked for Amazon, said the company expects to have about 50% of its roughly 2,650 US dealers using the tool by this week, accounting for a “significant number of sales” in the coming weeks and months.

He said his company was planning to launch the program in a few weeks, but moved it forward due to the coronavirus pandemic. “We really made it happen to have it to where we could release it several weeks earlier than we had initially anticipated,” he said. “It’s really gaining a lot of momentum for us.”

Porsche, General Motors, and Ford are also introducing online shopping programs which include online credit applications, used car appraisals, and so-called “touchless” delivery options. Carvana, which specializes in bringing cars to customers rather than the other way around, has an employee unload the car in a driveway, sanitize the steering wheel and keys, then leave the paperwork on the passenger seat for the customer to review and sign. The employee then calls the customer from the car hauler in case they have questions. Once the paperwork is completed, the customer can leave it in a mailbox or another place to be picked up.

“The health of our community at large is the highest priority during this time of uncertainty,” Ryan Keeton, Carvana co-founder and chief brand officer, wrote in an email to CNBC. “One of our company values is, ‘We’re all in this together,’ and our collective efforts are bringing that value to life.”

Cox Automotive’s Autotrader, owned by Cox Automotive,  has launched a new program called “Dealer Home Services” that provides virtual tours, test drives at home, and touchless vehicle delivery. The company reports more than 7,000 dealers have signed up for the program.

Sonic’s Smith says despite all the online options coming available, people still want to visit a showroom to touch, see, feel, and drive a car in person. “It’s still such a large purchase for most people. It’s not like going to the grocery store. It’s a big deal. It’s a big purchase. People like to see it and browse.”

Maybe, but then again that could be a cultural thing and could vary by age group. Older shoppers may still prefer the full showroom experience they are used to, but younger people who grew up with the internet may be less concerned about shopping online. Most dealers today offer what is known as the “3o-day test drive.” Buy it. Drive it for 30 days. If you don’t like it, return it for a full refund.

It’s risky, but experienced sales people call it “the puppy dog close.” As they say in the car business, “The feel of the wheel seals the deal.” Any new car is likely to feel better than the old family bus with a zillion miles on the odometer. On a percentage basis, very few will want their old car back after experiencing the joy of driving a new one, just as most people bond with a new puppy. The small percentage of malcontents and crackpots who will bring the car back on the 29th day is small enough that the risk is worth the reward.

The coronavirus will alter life in many ways we can’t even predict at the moment. Our grandkids may think it strange to go out in public without wearing a face mask. Night clubs may go out of business and be replaced by virtual lounges where people socialize on Zoom. And the traditional car dealer may succumb not to pressure from Tesla but cultural changes wrought by a disease no one had ever heard of until just a few months ago.

The virtual world will make everything different, and those who adapt quickest will benefit the most. Whether the new normal will be better than the old normal remains to be seen.

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