What to expect as forecourts reopen and why automotive retail has changed forever
Forecourts are expected to reopen with Scotland retailers welcoming buyers back from 5th April, and 12th April elsewhere. What automotive retail will look like once forecourts are open and beyond has been a hot topic of discussion of late with retailers falling into three main camps. There are those who want or expect things to return to pre-pandemic ways; those who have found huge benefits in new ways of working and may not return to their old business model at all whether, for profitability reasons or lifestyle; and then there are those in the middle who think it’ll be a blend of physical and digital. We firmly believe the latter will be true and retailers should carry forward some key learnings from lockdown. In this blog post we take a look at what the market indicators are, consumers might react and how retailers should respond.
Reasons for optimism – pent up demand as forecourts reopen
There are many reasons retailers should be optimistic about the trading outlook for the next few weeks and months. There are certainly strong indicators that forecourts will be busy in April. Sales volumes have been rising steadily from the start of the year from 60% of expected volumes, to around 90% on average in early March and that’s with physical forecourts still closed. We also believe that there are around 500,000 used car sales missing from the market taking a like-for-like view on top of reasons to believe the pandemic has created pockets of increased demand for car ownership.
Audience visits to Auto Trader have also never been stronger, March visits and time on site are both setting new records up 27.2% and 22% respectively over 2019 levels1. We’re also ramping up our consumer marketing efforts to support you as forecourts reopen.
On top of this increased demand, there are also very positive signs of consumer confidence with affordability at a peak and higher than pre-COVID levels. This appears to be driven by a series of macro-economic factors such as low interest rates, a reduction in unsecured debt and government support. This coupled with a lack of spending opportunities over the past 12 months has created huge cash reserves amongst many consumers with the promise of a surge in so called “revenge spending” as people look to treat themselves.
Are you doing all you can to build your pipeline and maximise efficiency when you open your doors? Have you reached out to recent enquiries who may not yet have purchased, made appointments for the hottest prospects? Whilst there is likely to be a flood of browsers, you want to make sure you take the pick of the buyers.
Out with the old, in with the new. Consumers want digital.
As with any major situational change, consumers will retain elements from the past 12 months they’ve enjoyed, such as more home working and shopping online, but will reject things they’ve not, such as home schooling. We look at what consumer behaviour may look like and what retailers should consider taking forward from the pandemic. On our recent webinar, Chris Penny warned that when we’ve washed through the pent-up demand in April and early May, the overall dynamics of car buying in the UK will likely look very different.
How has consumer behaviour changed?
We’ve all witnessed and been part of the behavioural change that’s been symptomatic of the pandemic, from a focus on local shopping with many choosing to support small business and shop local, through to an explosion in online shopping driven by the “Stay home” order. Our latest data, surveying over 1,000 car buyers on Auto Trader, shows that buyers are looking to the future of automotive retail with a very blended view, with a significant portion now taking online research further to the point where a purchase decision is made, a vehicle reserved and even delivered to them, meaning no visit the physical forecourt at all. As a retailer in 2021, if you aren’t catering to this emerging and growing buyer type, you’re eroding your addressable market of buyers – your potential share of the pie.
Car buyers are split over how they want to transact when showrooms reopen
Annotation: 50% of buyers are intending to return to the forecourt as they would have pre-pandemic to complete their car purchase. However as new behaviours become ingrained, retailers should also note that 50% will not and will want to consider reserving the vehicle online, purchasing remotely and simply collecting from the forecourt or having the car delivered with on forecourt visit at all.
What should retailers retain post-pandemic? Moving from ‘adapting for survival’ to ‘adapting for growth’. The Omnichannel approach.
We’ve seen many retailers very successfully evolve and adapt during the pandemic, some of whom we’ve spoken to on our webinars, who most likely will not want to go back to old ways. They’re making more money, more efficiently by reducing operational costs as well as growing sales. This was driven by a need to survive but retailers should now look at these ways of working as the catalyst to fuel growth by appealing to more buyer types, and to protect market share from new online only entrants.
Protect your share of audience and leads
With today’s research showing clear signs that there won’t be a “typical” buyer in future, retailers should look to cater for any buyer need to maximise their share. It’s no longer about simply “selling” to buyers but enabling buyers to buy. Serving the buyers research or purchase needs wherever they are and through whichever channel they choose. Providing the information they need to finalise a buying decision, feel confident buying from you whilst removing as much hassle from that process as you can.
Use a 14-day money back guarantee as a selling point
Many retailers were forced to offer a 14-day guarantee as part of distance selling regulations. However smarter retailers will consider how this can form a part of their every-day offering regardless of whether the sale is a distance sale or not. By offering a 14-day money back guarantee, retailers can match the offering from new entrants as well as leveraging their brand and reputation to reassure buyers. We’ve seen many retailers successfully use this as a tactic to combat test drives being unavailable, but even when they are back, offering this level of reassurance could help convert sales regardless of whether they’re a distance sale, or on your forecourt. Some retailers have built in safe guards like excess mileage charges to cover against excessive use during the 14-day period.
New ways to manage returns
Whilst returns should be low, Retailers can charge a restocking fee for any returns if they feel this is needed (relative to the mileage the customer has travelled and cost of re-valeting the car). Even if they do return, it will mostly be for valid reasons and the buyer will be left without a vehicle, so this is still an opportunity to flip them to a different vehicle. It’s very inconvenient for a buyer to return a vehicle unless there is a genuine reason for doing so and we’ve all seen the rise in online mattress retailers offering 100 day no quibble money back guarantees. Once you’ve gone to the effort to have a new mattress delivered, tried it for a while, probably got rid of your old mattress or at least put it in the shed. How many will realistically go to the trouble of returning it unless there is something seriously wrong.
Retain the V5 for a few weeks
When we spoke to Phil Weaver on one of our weekly webinars where we were asked a question about the impact of adding another driver to the vehicle if a car is registered to the new owner, then returned. Phil has a solution to this which he’s been using for years before the pandemic. He retains the V5 for a few weeks, telling the customer he’ll post it to their home address in a few weeks once the paperwork has been completed. This means the vehicle is only registered to the new owner once you’re confident a return isn’t going to happen.
Take more control of the buying process
We’ve also heard from many retailers that being forced into managing as much of the enquiry and deal phase of the transaction online or remotely has reaped many rewards in increased efficiency and time saving. Dealing this way and operating appointment only for any essential forecourt tasks like simply collecting the vehicle or signing paperwork or even implementing online reservations can weed out the serious buyers from tyre kickers and test purchasing intent.
Request online appraisals for part exchanges
Part-exchanges can be a challenging event at the best of times, with two-thirds of retailers telling us they’ve turned sales away because they didn’t want the part-exchange. Our all-new Guaranteed Part-Exchange product is a perfect example of that. With part-exchanging causing a headache for consumers and retailers alike, we’ve created the technology to reduce those issues. The technology allows you to ask potential buyers a few simple questions about the condition of their part-exchange – this can be done over the phone, in person (when safe) or anytime via your adverts. We’ll generate a guaranteed price for the part-exchange based on its condition, which is underwritten to reduce the risk to you. Think of it as an insurance policy for unwanted part-exchanges that’s available 24/7. Once the deal’s done, you get a happy customer and a part-exchange which you can retail on, or simply dispose of through the underwrite service to get your cash back quickly. We recently went into more detail which you can read on this blog post.
Sources
1 Auto Trader internal analysis of Google Analytics data, average number of unique advert views daily and time on site, 1st–30th March 2021 vs 1st–30th March 2019 (inclusive).