Online commerce is disrupting industries at every turn. While some shoppers will always prefer brick-and-mortar stores, a growing number of consumers are attracted to the simplicity of online shopping.
Will online car-buying services like Carvana and vehicle subscription programs bring the same woes to traditional dealerships?
Years ago, the thought of purchasing a vehicle online was ludicrous. Does one buy a house with a click as well? Yet today, online car shopping is showing no signs of slowing down. Already, the majority of customers who enter the dealership will have done their research online. More often than not, customers have already decided which vehicle they want, it’s simply a matter of confirming and negotiating a price.
To take it a step further, services like Carvana allow customers to research, shop, and purchase used cars online or pick them up at vehicle “vending machines.”
It’s common talk in the car industry that Carvana’s popularity hasn’t translated into profits for its shareholders. Last year, the company reported its third-quarter profit to be $57.3 million, compared to a net loss of $64.4 million.
At first glance, Carvana’s business model seems unsustainable. But the disruptive force of this company should not be underestimated. Carvana has reported triple-digit growth for 19 consecutive quarters. As the company learns to further reduce overhead and increase profitability, it is poised to become a major competitor in the used car market.
In many places across the country, the law requires that new cars be purchased in-person. But certain loopholes, such as those used by vehicle subscription programs, give buyers options outside of the dealership.
To stay competitive, dealerships can leverage the advantages they have over virtual shopping sites.
In sum, the introduction of new car-buying models shouldn’t be treated as an end-all threat to dealerships, but it also shouldn’t be ignored. This era of change is the perfect time to reevaluate what customers are seeking in the buying experience and improve your team to stay ahead of the curve.
John Paul Strong: As owner and CEO of Strong Automotive Merchandising, John Paul Strong brings more than two decades of advertising experience to the table. He is the author of Next Day Traffic and leader of 100+ employees servicing more than 230 clients across the country. In 2018, John Paul was listed in the Birmingham Business Journal's Top CEO Awards and 2013's Top 40 Under 40.