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With closed showrooms and limited staff, auto dealers had to adapt quickly in 2020. And adapt they did, giving shoppers safe ways to browse, test drive, and buy vehicles. Thanks to their innovative efforts, car dealerships realized a profit even though sales of cars, services, and parts fell.  

Although life is slowly returning to normal and sales teams are thrilled to be back in the showroom, shoppers aren't letting go of their demands for virtual shopping and buying. Instead, industry experts say the dealership experience has changed for good, and dealers who meet consumer expectations can improve loyalty and attract new buyers. 

Market Impacts of COVID-19

According to the National Automobile Dealers Association (NADA), in 2020, "total light-vehicle dealership sales topped $980 billion." Moreover, "Dealerships wrote more than 265 million repair orders, with service and parts sales totaling more than $111 billion." Imran Lakhani, Head of Operations at Cox2M, says,"Despite COVID-19, Cox2M doubled manufacturing capacity while reducing defect rate by over 50%."

Plus, the customer experience improved in 2020. The"Digitization of End-to-End Retailing" (DoEER) study by Cox Automotive finds, "those who were "highly satisfied" with the overall shopping experience reached 72%, up from 60% in 2019." As COVID mitigation efforts lessen, dealerships continue to see improvements. Wards Intelligence reports April retail sales "are estimated to be up 114% from 2020 and up 23% from April 2019." However, lasting impacts are rippling through the market.‍

1. Online Buying Is Here to Stay

In 2017, Cox Automotive data revealed that 25% of buyers wanted to finalize the vehicle price online. But that number skyrocketed to nearly 40% in 2020. Indeed, the Boston Consulting Group (BCG) predicts that "online transactions extending to billing and payment could account for about 5% to 7% of new-vehicle sales in the US by 2025 and for as much as 33% by 2035."

Although the pandemic drove online buying in 2020, the desire for convenience may fuel future purchases. The Cox Automotive "Car Buyer Journey" study notes that "negotiations and time spent completing paperwork" are top pain points for consumers. Allowing car buyers to complete the process from the comfort of their couches can enhance buyer experiences and increase customer loyalty. 

As used car platforms like Carvana and Vroom try to leverage the online buying boom, dealerships should go beyond the showroom to satisfy shoppers. By providing buying alternatives, dealers can stay competitive and capture a higher market share.

2. An Increased Investment in Logistics

To stay competitive, dealers provide shoppers with online tools to search inventory from multiple dealerships on one website. Doing so allows dealers to give consumers more options, even if those cars aren't physically on their lots. Yet, keeping up with real-time inventory and locating vehicles on-demand poses a logistical problem for dealers. 

Fortunately, the right technologies can support the needs of dealers and consumers. Automotive leaders realize this and are increasingly shifting towards an approach that simplifies vehicle inventory and maintenance processes. One step towards improvement is embracing the internet of things(IoT). 

Dealers place sensors on vehicles that are connected to a platform like Cox2M's LotVision. From there, they can instantly locate a vehicle and direct shoppers or sales teams to it. Not only is this a time-saving measure, but it also gives dealers access to valuable data about which models or brands are getting the most test drives. Plus, dealers can use automated alerts to stay on top of maintenance or know how long a car has been on the lot. 

3. A Focus on Low Touch Interactions and Self Service

According to the DoEER study, "69% of franchised dealers added at least one digital step due to COVID-19, and 74% indicated their customers had used digital retailing tools more since the onset of the global pandemic." While safety drove many shoppers online in 2020, going forward, the focus will be on personalized experiences. 

Online self-service tools let customers shop at their own pace, and dealers can offer recommendations tailored to them. Trade-invaluation and payment estimation calculators are essential. But dealers can go beyond the basics by providing 360-degree walkarounds, supporting online test-drive scheduling, and offering video chats. In 2021, few customers want to wait for your team to read and respond to a contact form. Consequently,"75% of dealers agree that digital retailing provides shoppers a more customized experience." 

Additionally, digital services can help dealers create efficient processes, save on labor costs, and allow sales teams to concentrate on customers. In fact, 61% of franchised dealers say that "digital retailing efforts are allowing them to spend less time on a sale." 

A customer-centric approach that lets shoppers choose how they want to shop can give dealers an advantage. By supporting customers and rethinking your processes to fit their preferences, dealers have a chance to delight existing customers and increase loyalty while attracting new generations of digital-first consumers.

4. New Ways to Approach Inventory Replenishment

With the ongoing microchip shortage, many experts believe dealerships will face inventory issues for the remainder of 2021. But, used cars are also in demand and tough to keep in stock. Although excess inventory adds to dealer costs, a limited selection can send potential customers elsewhere. To combat these problems, dealers can use technology to prioritize procurement efforts. 

Platforms like LotVision deliver insights about models and brands on your lots. Dealers can review data about test drives to find shopping trends relating to specific vehicles or years. When combined with website analytics, dealers can forecast future purchases and procure in-demand vehicles. These insights extend to used models as well, helping dealers create targeted campaigns to encourage car owners to trade in or sell their pre-owned autos. ‍

Post-Pandemic Disruption in the Auto Industry

The need for operational efficiency and the desire to meet consumer expectations may lead to significant developments in the auto industry. Chief Economist at NADA, Patrick Manzi, says, "Many of the changes to the dealership business model made during this crisis will stick around long-term." However, for dealers to realize the opportunities, they must overcome existing barriers and develop partnerships that further a digital-first approach.