How automakers can overcome e-commerce skepticism

Will COVID-19 finally cause automakers and dealership rethink how they move vehicles?

By | 4 minute read | September 9, 2021

We have watched retailers of all stripes undergo a top-to-bottom digital transformation over the last decade, but one sector, for many reasons, has clung to its 20th century ways. In 2021 you can still walk into a dealership, talk to an informed sales rep, take a test drive, fill out a bunch of paperwork, and drive away with a new vehicle. It’s a process that has remained largely unchanged in the last half-century.

Cars themselves have undergone massive innovations in the last decade, with the industry making great strides in electric and driverless vehicles, emissions controls and more. But the retail space lags.

Buying a car has historically been a high-touch experience. After all, it’s often not a casual purchase, one that buyers will often live with for many years. Consumers define themselves in part by the kind of car they drive. Buying a car can even be seen as a rite of passage. Dealers pride themselves in being able to make a direct connection with their customers to meet their emotional needs.

The technology to transform car-buying has existed for a while, but it makes sense that the industry has been reluctant to change its way of doing things, given that personalized, high-engagement customer experiences have historically been difficult to replicate online. There’s also some legal and regulatory barriers that allow for dealerships to persist and make direct or digital sales rare.

And then COVID-19 hit.

As has happened in many industries, the coronavirus pandemic was the catalyst for automakers to accelerate transformation. With limitations on face-to-face sales experiences, the industry had to quickly come up with digital alternatives. Pandemic or no, these new retail modes are here to stay.

“The automotive industry is already engaged in a strong transformation in many areas,” said Holger Horn, IBM iX leader for DACH and a senior partner at IBM Services. “We see that every day in the electrification of the powertrain, we will see that in autonomous driving, and what is becoming more and more important is the relevance of digital services and products as part of the overall experience.”

Horn and Andrea Gerber, the director for customer experience design at IBM iX, joined thousands at this year’s IAA conference to discuss how pandemic conditions have thrust industry innovation into a higher gear.

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Purchasing a car has historically been a high touch experience.

Today’s auto customers have been spoiled by other sectors, like consumer technology, where for example, Apple has tightly controlled the quality of its customer experience. This includes not just the marketing and sale of its hardware, but also the ecosystem of software that breathes life into their devices. Every time a customer touches the brand, they are experiencing a carefully devised, unified, consistent experience.

“It’s no longer about the vehicle alone,” said Gerber. When you buy a new car in 2021, you aren’t so much buying a product as buying into a relationship, just like when you buy an iPhone you become an Apple user. Apple mediates your relationship with a number of third party services. If your phone breaks, you go to an Apple store. With Apple, it’s more than just the phone. And with automotive, it’s more than just the car. The hardware becomes an entry point into the whole customer experience.

“Whether It’s marketing websites, apps, or the in-store experience at the dealership, and of course, also the car itself,” Gerber said, “we need to be able to work seamlessly across those touchpoints and make sure that we excel and over-deliver at each of these tasks with channels that offer an outstanding experience.”

According to Gerber, digital commerce is automotive’s biggest challenge, and not only because of COVID-19. Auto players must explore the new possibilities made available by digital technologies, like new subscription models; new pre-order mechanisms; and frictionless, end-to-end digital purchases. The latter is more challenging than one might think. Given the stakes of the purchase, vendors need to be able to verify identities, perform credit checks, and have customer assistance options available at all times.

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IBM X utilized services for organizing test drives and ordering spare parts during an app transformation for Audi UK.

Horn shared an example of how his team at IBM iX facilitated an app transformation at Audi UK through a “joint-garage” working group. They integrated new marketing software from Adobe and implimented a number of higher value services for organizing test drives and ordering spare parts. It’s been a successful relationship.

“Remember, in 2020, the overall automotive sales in the UK were plunging by approximately 30 percent,” said Horn. “Whereas at Audi during the same time, their lead rate generated by this new tool increased by about 60 percent. This whole approach was driven in an agile way. So we’re able to really shorten the development cycle in this joint world.”

With efforts like this, automakers like Audi are well on their way to overcoming the e-commerce skepticism that uniquely challenges this industry. Car buyers, especially among the younger generation, are ready to buy online. It’s up to the industry to provide a customer experience that integrates brick-and-mortar dealerships, online sellers and post-sale customer care platforms. With a strategy for scalable, continuous innovation and flexible growth, automakers will become not just product vendors, but true partners.