A new study conducted by Roadster examines the many opportunities that are emerging as a result of dealerships implementing digital retailing, and how these implementation levels are impacting their return on investment.
The company’s latest Dealer Impact study was released in May 2021 and covers the third wave of the COVID-19 pandemic. It found that digital retailing does impact a dealership’s ROI, but to understand the “how” of it all involves considering earlier studies that covered the first and second waves, with reports released in May and September 2020 respectively.
The first two waves
In an interview with Canadian auto dealer, Roadster CMO Michelle Denogean said the first version considered if digital retailing is more profitable for dealerships that use it, and found that those retailers do experience higher increases in profit with the tool versus without it.
“What we found is that the dealers that had digital retailing were more likely to be seeing an increase in profit, both on the front end (52% vs. 27%) and back end (60% vs. 35%) than those that didn’t,” said Denogean.
The second study looked at efficiency as a potential benchmark for success; it revealed that 44% of consumers were doing some of the buying process online, and that one-third of the transactions took less than a hour.
Furthermore, dealerships observed productivity gains as salespeople were able to sell an average of 16 units per person when used with every customer. This, compared to 12 units on average for dealerships without digital retailing, 13 for website only, and 14 for remote sales.
“Most dealers have digital retailing, but they’re not all using it to proactively engage with customers. And so we broke it down to how they use it,” said Denogean. “What’s interesting is, when you actually look at how dealers use it against the percentage of sales that were influenced by digital retail — when they use it with every customer, they’re pretty much influencing every sale.”
The third wave
That information was covered in the third wave study, which looks at the result of everything 12 months from the period the first study was done. It is also worth noting that all studies were conducted in partnership with the National Automobile Dealers Association (NADA), but the third one also included Upwave, a third party consumer survey company.
This report considers the recent experiences of 304 dealerships and 1,008 consumers in the United States with digital retailing. It found that car buyers are doing more online than ever before, with 86% doing some of the transaction online — up more than 42 basis points since September 2020.
It also found that most customers have some kind of remote interaction during the process; lower funnel buying activity was evident and continues to grow, with big gains seen in credit apps (44%), F&I (33%), and contracting (27%). These are prime areas for dealership ROI increases.
Also of interest is that 82% of car buyers now learn about service and protection plans online: 94% of them when buying 100% online, and 42% of consumers even if they have not done a single step online. Consumers are also more likely to add F&I products if they buy online.
“We looked at the two slices of the pie — those that bought a 100% online, which in our consumer study was 10%. And those who bought only in the showroom, meaning they didn’t do any online activity, which was about 14% of the audience,” said Denogean. “What we found is that those that bought 100% online were 50% more likely to add F&I than those that didn’t.”
To break it down, 90% of car buyers who bought 100% online did add F&I products, versus the 61% of consumers who bought F&I products in the showroom.
The study also found 89% of online car buyers interact with someone at the dealership remotely, and more than 80% who bought online had help configuring their deal or were guided by someone at the dealership. Furthermore, 87% of consumers said they are satisfied with their remote interacts.
The study breaks that down to show that 54% of car buyers said all of their questions were answered, and 44% said they received help configuring their deal prior to visiting the dealership. Another 37% said they received guidance through the entire online experience, and 32% said they received answers to some of their questions.
On the lower end, 19% said they felt the salesperson was just trying to get them into the showroom and 8% said the salesperson did not answer any of their questions. It is also worth noting that 25% of in-store visits are driven only by the dealership’s request.
“I think there’s a little bit of a friction point happening where as an ecosystem, we are still trying to get them in the showroom as quickly as possible, but we really want to promote our online capabilities, and there’s friction in the buying process,” said Denogean.
As for how consumers are interacting with the online system, phone and email appear to dominate remote interactions — but text and chat are gaining traction. The report shows that 67% of consumers prefer phone calls and 60% are using email, but text is at 39% — no small percentage, and chat is at 35%. And the interaction preference for those who buy 100% online is 45% chat versus 39% text.
“I think it’s been interesting because, as you know, chat is a hot topic,” said Denogean, adding that “there’s all sorts of conversational commerce.” (On that note, Roadster recently launched its own managed chat service called Express Store Live. More on that here.)
“If you buy a100% online, if you do this all digitally, it makes sense that chat would become one of your top interaction preferences, because you’re already on the website,” said Denogean. “I think this speaks pretty well to the fact that chat is making inroads, and it works really well with digital retailing to help guide people through the process when they’re in it.”
Faster transaction times
It is also interesting that digital retailing appears to speed up transaction times and makes the overall experience more satisfying. Eighty-four per cent of consumers said their purchase was more efficient, compared to 63% in September 2020.
Transaction time length has declined from 2.5 hours in 2019 to 1.43 hours in 2021 — which means a whole hour was shaved off the transaction. Thirty-nine per cent of respondents said the transaction time was less than an hour (up from 33%) and nearly 70% said it was less than two hours (up from 64%). So the process is getting faster.
And importantly, online buyer satisfaction increased to 77%, compared to 28% for the in-store experience only.
So how are digital retail implementation levels impacting dealer ROI? Most dealerships have digital retailing (or a level of it), but their usage varies greatly — and less than 50% use it proactively with their customers (23% use it with every customer and 35% use it to remotely guide customers, for example). But dealerships are seeing growth in online sales — and that growth significantly increases when they guide customers through the process.
Seventy-three per cent of dealerships also make the same amount of F&I profits when using digital retailing, and that number jumps to 82% when used with every customer — just as their growth in Customer Satisfaction Index increases as well.
“They’ve seen an increase in their CSI scores and you can see that when they use it with every customer, 78% of dealers are seeing that increase in CSI with digital retailing versus before,” said Denogean.
The takeaway? What is good for the consumer is also good for the dealership. Roadster’s study shows that digital retailing when used with every customer can help boost ROI, because it expands to reach a wide range of areas that customers focus on, and it meets their needs for a faster, more convenient, and easier car-buying experience.