Technology

Dealers want post-pandemic investment in IT, not showrooms

What the post-pandemic dealership looks like is anyone’s guess, but Canada’s auto retailers know it will be different: Likely smaller and with fewer features as customers lean more heavily on their electronic devices to interact with businesses.

And that’s precisely where many dealers want to invest their time and money, as opposed to building oversized, overstuffed showrooms that now seem less relevant with each day the pandemic persists.

The gradual pre-COVID-19 evolution to digital transactions “got turbocharged” when the pandemic hit, said Tim Reuss, CEO of the Canadian Automobile Dealers Association (CADA). With new-vehicle sales and volumes down and customers active online, it’s no time for automakers to push for pricey showroom upgrades, he told Automotive News Canada.

“The pandemic has shown very clearly that where investment is required is in the processes and the systems, the IT, the online transaction world, the digital transaction, etc.,” Reuss said in the March 5 edition of the Canada Conversations podcast.

“That’s where the investment needs to be and where it can really add value to the customer, not necessarily whether the tile on the floor is two shades darker or lighter on the Pantone scale of colours.”

Dealer Trevor Boquist is wrestling with a large capital investment at his River City Ford dealership in Winnipeg. Ford of Canada wants him to spend “several million dollars” to update the dealership, he said. Yet Boquist questions its relevance now.

“Do we need to be as large and have as many customer-facing tools?” said Boquist, who is 2020-21 chairman of the CADA. “Customers aren’t hanging out in our showrooms anymore.”

WHAT’S IN STORE FOR RETAIL?

Across the country, dealers and automakers are trying to get a bead on just how much the pandemic will change the way cars are sold and serviced in the future.

Kevin Zimic has committed $5 million, plus the purchase of land, for a new building that will replace his 78-year-old Ridgehill Ford store in Cambridge, Ont. An old building on the new site has been razed and construction is about to begin on the dealership, which will be renamed Cambridge Ford.

“Right now, I’m staring at my navel, wondering what I’m doing,” Zimic said. “It’s a lot of money.”

Ford declined a request for an interview but said in a statement that it expects retail to remain a combination of virtual and in-person experiences.

“Many consumers will research their vehicle online, with the majority utilizing the dealership to see, touch and test-drive a vehicle,” the statement said.

Ford said it will “continue to monitor consumer preferences and refine our strategies to deliver the best possible experience, whether virtual or in-person, for our customers.”

Boquist — whose Driving Change Automotive Group also owns Ford dealerships in Carman, Man., and Regina and Moose Jaw, Sask. — said he has seen few buyers willing to complete the full transaction online. Instead, “What we’re seeing are a lot more virtual conversations and virtual walk-throughs,” he said. “People are buying at their own cadences.”

Ford has been flexible with timelines on the upgrade and is “not pushing me to overbuild,” Boquist said. Instead of having a 10-car showroom, he will likely build a six-car, no frills showroom, he said.

“We’re not putting money into water features,” Boquist said.

ONLINE WINS CONVERTS

A recent survey by Cox Research in the United States found that 58 per cent of those who purchased online said the experience was much or somewhat better than the traditional buying process. Only six per cent said it was worse.

This means less retail space is needed, highlighting that showrooms are expensive, overbuilt white elephants, said Robert Karwel, senior manager of the Power Information Network for J.D. Power in Toronto.

“How much dealership do you really need? Do you really need a 30,000-square-foot (2,800-square-metre) dealership? This is certainly going to give dealerships pause.”

Buyers of lower-priced cars, in particular, are less interested in the dealership experience than buyers of highend luxury vehicles, Karwel said. Customers who plan to buy a luxury car as a reward for years of business success will still want to visit a brickand-mortar store, he said.

“Who doesn’t get a buzz from buying a new car?” Karwel said. “If it’s a ‘reward car,’ don’t you want some of that brand experience?”

The real value in the rapid evolution of online tools for customers is that it has given them an alternative approach for purchasing a vehicle, he said.

Customers who prefer not to haggle can choose to do the entire transaction online up to but not including signing on the bottom line, but those who enjoy the negotiation can still choose to deal with a sales associate face-to-face. Customers can spend less time waiting at dealerships, and many appreciate the convenience of contacting a dealership outside of regular business hours.

Ontario dealer Greg Carrasco, an outspoken advocate of online sales, said dealerships should prepare to shrink their showrooms. Virtually every step — the test drive, trade-in appraisal, financing and even taking delivery — can all be arranged remotely, said Carrasco, general manager of Oakville Nissan and Oakville Infiniti.

“It’s never been less necessary to have these big mausoleums.”

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