As time moves on toward autonomous cars and smart roads, more manufacturers are throwing their hat in the ring to provide online car sales. Combining the convenience of digital retail and the ability to select new and pre-owned vehicles in stock on dealer lots, this appears to be the wave of the future.
No doubt, many are aware of Carvana and the website “We Buy Any Car,” just a couple of several online used car sales sites that combine the convenience of digital retail and the selecting of new and pre-owned in-stock vehicles. Carvana, out of Phoenix, AZ launched a few years back and has become more mainstream. We have a nice one here in Indianapolis (8130 Summit Hill Dr). The gleaming glass and steel eight-story tower that opened in 2019 resembles an oversized Match Box toy car container, right on row along with other conventional dealerships. But those used vehicles in each section in the “vending machine” are real cars and trucks in a new twist in the car-buying landscape that is beginning to embrace many metropolitan markets across the country. Carvana is joining other used-vehicle retailers that are bucking the traditional trend of car dealerships and eliminating the middleman and haggling on the car lot.
Many of those vehicles are ordered online over the internet now. Ryan Keeton, co-founder and chief brand officer for Carvana, said the company’s approach is pushing car sales further in the departure from traditional car sales. “Carvana does have brick-and-mortar, but that’s for [order] fulfillment only,” Keeton notes. “A customer goes to our website, where close to 7,000 cars that are company-owned can be viewed. In Carvana’s Jacksonville, Fl location, for instance, the car can be picked up the following day.”
That “vending machine” allows the customer to arrive there, locate their car, then “purchase” it. A series of elevators and platforms lowers the customer’s car to the ground. In reality, most of the purchasing work has already been done online. Beyond the fancy—and eye-catching machine — Carvana’s system is similar to other car sales operations that have shifted primarily to online sales, such as CarMax located in Jacksonville.
CarMax has no vending machine tower, but it has a large lot with a wide supply of vehicles that customers order online and, like Carvana, eliminates haggling. CarMax, was founded about two decades ago.
To date, CarMax has 180 stores across the nation, offering online customers about 45,000 mostly used vehicles and a few new vehicles to choose from. The customer heads to the lot and picks up the vehicle after settling the transaction online or over the phone. When asked if there are some pitfalls for traditional dealers, Jake Sydorowicz, VP and GM of World Imports in Jacksonville, pointed out that the traditional way to buy a used car was to locate it…and have it explained by the dealer, including accident history and any cosmetic changes. Most people shop by price,” he says, so the buyer may be confused with how it's done today.”
There are others in the business who don’t believe online sales are hurting traditional showroom dealerships. However, it’s clear buyers come in a lot more educated than in years past. There are no black book secrets anymore. It’s all out there, available to the consumer. According to Car Max, the more competition entering the market, the better. Competition makes dealers sharpen their skills and remain innovative.
Porsche has recently jumped into the fray of online sales in the U.S., launching online car sales that combine the convenience of digital retail with the selection of new and pre-owned vehicles that are in-stock at local dealers. Once an online order is submitted, customers can visit the dealership just once for final signatures and to collect their dream Porsche. At launch, 25 of the 191 independently owned and operated U.S. Porsche dealers were taking part. A wider national rollout is possible, depending on the results of the pilot.
According to Detlev von Platen, Member of the Executive Board forSales and Marketing at Porsche AG,"physical and digital retail experiences have to work hand in hand yet, stay typically Porsche. Offering our customers an enhanced digital option for acquiring a Porsche makes this experience even more accessible and more convenient." "Porsche is always looking for new ways to meet customer expectations," notes Klaus Zellmer, President and CEO of Porsche Cars North America, Inc. "For our dealerships, who are at the core of our strategic initiatives, we think this blend of digital and physical interaction with customers will only strengthen their business."
The service features new and pre-owned vehicles that are in a participating dealership's inventory. It covers all aspects of buying, financing or leasing a selected vehicle, including payment and trade-in calculators, credit approval, and financing and insurance options through Porsche Financial Services. All of this is from the comfort of wherever a customer chooses to shop.
Potential buyers (or sellers) can upload photos of their personal documents for ID verification and car pictures for trade-in valuation. With the information completed, the dealer can prepare the necessary paperwork for signing when the customer arrives. The new process is integrated into the websites of participating dealers, who are distributed from coast to coast. At the same time, Porsche in Germany is launching a similar program as the sports car brand looks to expand its overall digital business.
Additional nationwide dealerships like Carvana and CarMax include:
•AutoMatch USA is a used car business driven largely by the internet. It's only location is Jacksonville, FL.
•CarsDirect specializes in both used and new cars and, through the internet, connects shoppers with existing car dealerships for major auto makers. CarsDirect is basically the matchmaker between car shoppers and the traditional car dealers.
•TrueCar is another online service, but allows shoppers to compare and contrast cars for sale in their respective local market and encourages competitive shopping and dealing.
•NowCar an online service that uses the internet, but it uses analyses by a group of automotive and technical experts who provide evaluations. NowCar provides direct home delivery for vehicles purchased by customers.
•An online consumer watchdog site known as NerdWallet also advises and offers a ”car concierge” service mainly available online and offered by multiple companies. Car concierges are hired purchasers. They learn the preferences of the car buyer, then do the research and associated legwork of finding the right car for their customer. When it’s time to buy, the concierge guides the customer into the dealership for the final steps beginning with a test drive and the final financial details. Two concierge services include AuthorityAuto and CarBargains among others.
•Club car-buying programs have also emerged in recent years. These are networks that provide car-buying information and input online, but are run through mostly well-established companies and groups such as American Express, credit unions and even some retailers such as Costco and clubs such as AAA motor club.
Will innovative ideas like Carvana stick around? Hard to tell. Some believe it’s just another “gimmick” and in five years, they too will go the way of traditional sales. And, what happens when it comes to having warranty work done? Well, most will go to a favorite mechanic or most likely, a regular brand dealership.
Car-buying methods have been shifting for years and will continue to do so, notes Doug Johansen at Davis College of Business at Jacksonville University. For instance, Tesla, notes Johansen, put stores in shopping malls across the U.S. so customers could see and touch the vehicles in person. Some ordered a vehicle for delivery to their homes. Tesla also maintains a few service/receiving centers. Like most purchases, different people will choose a different way to make a purchase. Different things appeal to different people. Carvana believes what they offer comes in one package; a “proprietary, e-commerce platform, integrating financing and trade-ins.
Located in high-traffic areas, Carvana is building brand awareness. The vending machine approach holding just a few dozen cars, as opposed to hundreds on a dealer lot. The number of employees is fewer (8), all driving down traditional costs. Sales associates get a flat commission fee per vehicle as opposed to adjustable commissions on various vehicles. On the other hand, CarMax has some 24,000 sales associates across the U.S. That costs money to operate, which may mean better deals for Carvana buyers. Carvana also delivers the car to the customer, but most dealerships will do the same today. There is a lot more customer service across the industry. Customers have come to expect good service.
Car dealerships traditionally have a lot of power in the automotive industry; they remain a strong alliance. They aren’t about to disappear any time soon. There may remain advantages to dealing with a particular sales person at a dealership; for instance, a long time customer may qualify for loyalty pricing. And of course, most have repair and maintenance services that can accommodate with a loaner. Large amounts of revenue from the service centers translate to lowering the price of cars.
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