The Pandemic Is Accelerating Auto Dealers' Digital Transformation

You can add “buying a car” to the long list of activities that have changed in 2020 — and many consumers are happy to embrace the change. A Cox Automotive report released in May 2020 shows how the pandemic is changing the car business, and found that two in three people surveyed are now more likely to purchase a vehicle completely online. How does that affect the auto dealership business? Plenty.

I recently spoke with Rich Zellner, president of Automotive Resource Group, Inc., about how the pandemic is accelerating the digital transformation of today’s auto dealership. Rich — whose company helps small-to-medium dealer groups gain access to auto finance programs and pricing previously available only to large public dealer groups — offered plenty of insight on:

• How dealers can win customers’ loyalty by delivering a streamlined at-home buying experience, including financing their new car and having it delivered to their doorstep.
• How consumers are taking their online research of vehicles and financing to the next level, to close the transaction.
• The long-term impact that digital sales will have on the dealer business model.    

Here are a few highlights of my conversation.

Q: How has COVID changed the way that dealers sell cars?

Rich Zellner: Customers have long researched new purchases online, but when coronavirus-related lockdowns started keeping people at home and out of showrooms, auto manufacturers and dealers quickly accelerated their digital transformation. Looking at the 10-year time horizon at which digital car sales were projected to be the norm, pre-COVID, I believe we are going to reduce that timeframe by up to 60%.

Q: How will digital buying transform car dealerships?

RZ: Just as there is a broad spectrum of dealership sizes, digital transformation is happening in many different ways. Small and midsize dealers have built out their websites to let customers tour their showrooms virtually and complete more steps of the car-buying process online, including test drive drop-offs at the customer’s home. They are reaching out via social media to expand the store’s footprint. During the pandemic auto makers are stepping up their promotion of digital offerings that help dealers close sales.

Q: Will the dealer showroom as we know it disappear?

RZ: The short answer is no. Alongside brick-and-mortar showrooms with car lots, a second sales channel that is rapidly emerging is completely digital. It will coexist alongside the traditional dealership, serving the customer who is happy to transact online. This customer knows what car they want, which features they’re looking for, and is comfortable negotiating a price online.

All of the gross profits from digital car sales go directly to dealers which, along with customer demand, is a big factor driving their investments in digital capabilities.

Q: How are dealers re-deploying sales people?

RZ: At many dealerships, sales people are transitioning off the floor and into rapidly growing digital marketing departments. These new digital marketers are targeting specific audience through social media campaigns on Facebook, Instagram and even Snapchat.

Q: How is vehicle finance adapting to the digital channel?

RZ: Vehicle finance will be much more streamlined than it is now, whether fixed-price or negotiated online, with the price more easily agreed upon. Guided by their FICO® Auto Score, consumers can quickly zero in on the right offer, or next-best offer, to obtain the best deal and financing for the vehicle they want. Digital document signatures increasingly make it fast and easy for buyers to take the purchase to the finish line.

Q: Won’t digital signatures make it easier for fraudsters to “steal” a new car? 

RZ: Fake identities, represented by fake IDs, are used to make the vast majority of fraudulent auto purchases. In the near future, an all-digital purchase process will be faster and more fraud-proof as advanced capabilities for identity proofing and authentication are seamlessly integrated with digital signatures. Many lenders are looking to offer FICO® Falcon® Identity Proofing, which allows buyers to verify their identity at home with a selfie and any government-issued ID.

Q: If fewer customers will be coming into the showroom, how can dealers maintain customer relationships and build loyalty?

RZ: Customer satisfaction is a big part of dealers’ incentives, and that will remain. How dealers deliver positive experiences, though, will evolve. In the all-digital model, that person who drops off the car at the customer’s home, or greets the buyer for pickup at the dealership? They’re not a delivery person, they’re a concierge delivering personalized, high-touch customer service. This is a critical point in the customer’s relationship with the dealer, and it needs to be delivered with the utmost attention to customer service.

To read my full conversation with Rich, download the FICO Q&A, “How the pandemic is accelerating auto dealers’ digital transformation.” To learn more right now, see how FICO® solutions can help auto lenders and dealers optimize profitability and the customer experience across the entire lifecycle. Keep up with my thoughts on how FICO is helping to optimize the automotive industry by following me on LinkedIn.