Friday, April 24, 2009

Automotive & Internet: towards online vehicle buying

Cap Gemini Cars Online 08/09 - 10th Annual Global Automotive Study
The importance of Internet for automotive industry is not to be demonstrated anymore (see previous post “Automotive & Internet: trends & challenges”). Automotive websites play a key role as they support customers during the purchase process, mainly during the awareness and consideration phases. Still the most important step - the purchase - happens offline but for how long?

According to Cap Gemini’s Car Online 08/09 report(1), online vehicle buying may become a reality as the one of the key changes consumers expect to see in the coming decade is that the whole purchase process will be done online.

Cap Gemini’s Car Online study – 10 years of global automotive study
The Car Online 08/09 is the last edition of Cap Gemini’s famous study on automotive industry. It was done in 2008 – during the gas price crisis but before the major financial crisis. So if you are after more information about how economical crisis is affecting customer online behaviour, you will have to wait for the next release.

For its 10th edition, the study not only looks back at the evolution over the last 10 years but also took the opportunity to expand the coverage of the research to new emerging markets: Russia, India and Brazil in addition to China. So if you are looking for information on automotive online trends for these markets, the Cap Gemini report is for you!

The emergence of social media and new online tools
With no surprise, the Internet continued to strengthen its position as primary source of information during buying process. In 1999, only 11% of respondents used the Web to research vehicles. In 2006, the number reached the 80% and climbed to 88% in 2008.

The Internet rise as a research tool
The report confirmed the increasing usage of new online tools & social media such as blogs, forums, customer reviews, RSS… especially in emerging markets like India. For example, in average 42% of respondents said to use automotive blogs. In India, they are 56%!

And online tools can have a significant impact on the buying decisions as the report explains that “almost three-quarters of consumers said they would be more likely to purchase a vehicle from a specific manufacturer if they found positive comments on blogs & forums”. So automotive manufacturers have to pay attention to these communication platforms.
The report also addresses other topics such as the importance of environmental aspects (the “green” effect) and customer satisfaction. However what I found particularly interesting is the “confirmation” of consumers’ interest in having the full buying process online – including the sale itself!

“Buy your car with a click of a mouse”
Buy a Toyota iQ online - just add it to your basket and check out!Many may found it is a silly idea but we are actually getting closer. Recently, in the context of buzz campaign, Toyota Finland launched the iQ Store where you can buy online a Toyota iQ (comes in two colors :-)), accessories and Finnish design objects. The site is actually built on an e-commerce platform so even if it is for marketing purpose, Toyota is technically the first manufacturer to sell cars online in Finland.

Peugeot, the French manufacturer already provides for a while the Peugeot Webstore in France where customers can search for a vehicle by dealership, budget, model, get prices & special offers, delivery time and arrange an appointment with a dealer. In a recent press release from Renault(2), the other French car maker announced that they will follow same path toward e-commerce with the launch of RenaultShops in France & Spain this year and later in Italy, Germany & UK.

In 2000, only 1% of consumers surveyed by the Car Online study showed interest in buying vehicle over the Internet. It was only 2% the next year therefore Cap Gemini stopped asking the question until reintroduced it in 2007. The number went up to 20% and it made a big jump in 2008. In total, 44% of respondents said they were very likely or likely to purchase vehicle online. There is a significant interest especially in the emerging markets like Brazil, India or China. Most skeptic consumers were from the U.S. where the number was less than 20% while it was around 25% in Europe.

Likehood to purchase vehicle over the internet

Common barriers to online buying
It is certainly too early to say that consumers’ desire for online purchasing will translate into their actual behaviour as barriers exist but most seems addressable. You could think that number one barrier would be the inability to negotiate pricing or having face-to-face contact with the retailer but these only come in 4th and 6th position respectively. Instead, inability to test drive the car or lack of full price and product information were the top 2 blockers. The second one can be easily addressed by improving the information that is available online. Regarding test drive, a solution would be to book test drive online and having the car brought to you, directly at your place. Wouldn’t it be cool?

Whatever happens, the vehicle buying behaviour will certainly evolve in that direction. It will lead to significant changes in the role of OEM’s and dealers. For example, retailers will focus more on services (test drives, financing, maintenance…) rather than sales.

Manufacturers need to get ready for it and be prepared for the future. They will need to overcome challenges and obstacles like regulatory roadblocks, technology hurdles, data integration (and I am not even talking about Web analytics)… Interesting times ahead!

Who will be first?
Does it sound like science-fiction? What happened in many other industries tend to make me believe it will happen. It will begin with the younger generation and early adopters. Once it will get started, it will probably grow fast even if it will take times before a majority of consumers buy their car online - many sales will still be made offline. The question is what manufacturer will be the first one to make the move? - Future will tell!

I will end with a quote from a Russian consumer taken from the Car Online 08/09 report: “Sitting at my computer, I will directly order a vehicle from the maker, making design changes. It will be put on the assembly line and I will have a unique vehicle. Funny maybe but we can buy furniture that way today so why not cars in 10 years?”

What do you think? Is buying a car online a silly idea? Do manufacturers play an important role for you when looking for a new car?

UPDATED 17-08-2009: Seems that selling cars online is not a silly idea. Not for General Motors. On the 10th of August, General Motors (GM) joined forces with eBay to test online car sales (http://gm.ebay.com). More than 200 dealers from California are selling models from GMC, Buick, Chevrolet and Pontiac. Customers can browse new 2008 & 2009 models, either buy it directly at the proposed price or make offers, ask questions to dealers and figure out financing. The test will be limited in time but one can imagine that if it is successful that it will be made available in other states and possibly for latest models. More info here.

(1) Capgemini Cars Online 08/09 “10th Annual Global Automotive Study: Tracking Consumer Buying Behavior in Both Mature and Emerging Markets”. Survey covers following markets: US, Western Europe, China, Russia, India & Brazil. It can be downloaded on Capgemini website(registration required).

2 comments:

  1. check it out.
    it was live in December 2008:
    http://www.fiat.co.uk/Showroom/#showroom/new_500/configurator/diesel

    ReplyDelete
  2. Thanks for sharing the link. Interesting to see that the functionality to order the car is offered in the Car Configurator.

    Wonder how many orders were placed? :-)

    But it is no surprising. The Fiat 500 is aiming at an audience such as "early adopters" that would be more open to order such a car online.

    Nice move from Fiat UK!

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