Cost Efficiencies Could Be Made by UK Auto Retailing Industry Every Year by Adoption of E-commerce

• Embracing ecommerce has potential to save UK automotive retail industry up to £9.5 billion per year. Even 30% phased transition could save up to £4.7 billion
• Moving more of the customer journey online can deliver a 50% Pure Transaction Time Saving (PTTS) and a 23% Cost of Sale Saving (CSS) for the retailer
• Adoption of an ‘omnichannel’ business model suits the needs of both those customers who wish to buy a car purely in the digital world, and those who still wish to visit a retailer for certain phases of the transaction
• Migrating staff and time intensive processes to online provides optimum retailer profitability efficiency

By leveraging online sales, UK auto retailers could reduce the transaction time taken to sell a vehicle by 75% and cut the costs incurred in the process by 45%, according to new research released by industry-leading automotive ecommerce solution provider GForces. The data indicates that, as per 2020, based on an annual used car market of 6.75 million sales, the industry could save £9.5 billion each year. Even a more conservative approach, based on a phased 30% transition to greater online selling, the sector could save £4.7 billion.

Given the surge in ecommerce across the auto retailing sector, GForces conducted in-depth research to identify the potential commercial cost savings which retailers could reap through greater ecommerce platform adoption. Their approach looked at the current costs of traditional car retailing, as well as the projected costs of going fully online, and a ‘hybrid online model’, based on 30% of sales being transacted on laptops and smartphones.

It is widely acknowledged that the auto industry has been slow to adapt to online purchasing, compared to other industries. One key factor is that buying a car often involves significant financial outlay. As a result, many consumers are still keen to retain a human element in their purchasing journey, often including the ability to see a potential car and discuss finance and part-exchange details in person. Providing the ability to blend a physical showroom with an online sales platform, termed an ‘omnichannel’ approach is becoming the new normal.

By adapting their current commercial processes, from both a front and back office perspective, there are significant cost savings to be made by UK retailers. Just by moving to a 30% online sales strategy, a 50% Pure Transaction Time Saving (PTTS) can be achieved, alongside a 23% Cost of Sale Saving (CSS), down from £314 to £243 per unit, according to the GForces data.

Reverting from the traditional automotive sales model, where only a small portion of the customer experience occurs online, to an omnichannel approach facilitates customers’ ability to carry out all initial research and find suitable finance options online. Much of the customer-retailer interaction also moves online, with elements such as video and live chat. Some leading retailers already operating a successful omnichannel ensure that when a customer does visit a showroom to take the purchase process to the next stage, they can seamlessly engage with digital technology to enhance the experience. Examples of this include customers being able to use a QR code to view the car they specified at home, precise in every detail of trim, colour and options, on a large video wall.

“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 1228% during 2020,” explains Tim Smith, Chief Commercial Officer at GForces. “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.”

“Compared with sectors such as consumer goods and travel, which have been reaping the benefits of online shopping for decades, the automotive retail industry has been a slow starter, proving reluctant to move from traditional retail methods to ecommerce. However, franchised dealers and used car retailers who took a pioneering approach and already had systems in place before the pandemic fared better than those who did not, and with online car buying here to stay, are poised to prosper further in the future,” asserts Smith.

The GForces research data has been compiled by Paul Stokes, who joined the company as Head of Ecommerce in 2018. Stokes has 29 years of experience in the UK automotive industry. His former roles include Business Development Manager at Vauxhall Motors, Managing Director of the multi-franchise dealer Nidd Vale Group and MD of the omnichannel automotive retail start-up, Rockar.

“The automotive retail industry is undergoing a paradigm shift with customers showing very clearly that they are no longer comfortable within the traditional retail environment. This does not spell the end of the retailer as a physical entity, which will be here for the long-term. However, 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,” states Stokes. “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.”

“Some customers wish to engage in a fully end-to-end online car buying solution. This incorporates home delivery and completely negates the need to set foot in a showroom at all, as seen with the proliferation of sites offering this during COVID-19 and lockdown,” continues Stokes. “However, other customers still desire to try before they buy, conduct test drives, and speak to retailer staff for guidance on the car they are considering. For such customers, it is important to deal with issues such as configuration, stock, offers and part-exchange negotiations face-to-face”.

“Creating a successful omnichannel enables retailers to satisfy the needs of both types of customer. And the enhanced level of online engagement an omnichannel approach delivers significantly optimises efficiency. It increases productivity for the business, with many traditional time and staff intensive processes migrating to online and back-office systems.

Key to being successful as the UK auto retailing industry continues to evolve is not just improving the customer experience from an ecommerce perspective, but also using it to increase retailer efficiency and profitability,” concludes Stokes.