The rising demand for online retail has changed the way people shop, including for cars. For The Drum’s e-commerce dive, Alastair McLeod of TMW Unlimited investigates the shift towards e-commerce as it blurs the roles of car manufacturers and retailers (and how they advertise).
E-commerce is already changing the automotive industry – but smart brands won’t lose sight of where they came from / Obi via Unsplash
Given the price of a new car, the automotive market has been understandably slower to progress to an online, direct-to-consumer (DTC) model than some other markets. But attitudes have clearly shifted – particularly post-pandemic – and improved digital tools such as virtual showrooms, car configurators, real-time test drive bookings and buy/reserve online options have taken more of the buying journey online.
A shift in gear
Estimates vary as to how many people are willing to do the whole journey online. But it’s clear there’s a burgeoning group of car-buyers – particularly among the young – who are increasingly happy for more, if not all of it, to be done digitally.
This shift is under way with used cars. Take Cinch and Cazoo – as relatively new entrants to the industry with a focus purely on online sales, they’ve cornered a large portion of the market and won investment to spend big on advertising and sponsorship. They’ve also invested heavily in their websites. By presenting options across all manufacturers and models, they’re simplifying the process further for consumers.
But for many people, a test drive, or even just seeing and sitting in a car, will remain an essential part of their buying process. So will the opportunity to talk to product experts, provided they don’t feel sold to. That’s particularly true for customers who are considering a new brand or model for the first time (making them less familiar with what they’re buying).
Steering towards a new dynamic for national and local marketing
While that remains the case, manufacturers will continue to embrace a local presence in one form or another and need to work closely with their network partners to create streamlined and integrated customer journeys across both national and local touch points.
Analysis of our own automotive client shows that up to two-thirds of new car purchases are touched by local marketing activity (eg visiting a local retailer’s website, engaging with a retailer’s social or search ad, seeing a model at a local event or product placement , or responding to local customer CRM).
But the shift to buying online is creating an interesting new dynamic, with tension between manufacturers and their retailers when it comes to national and local marketing.
Historically, there has been a clear role for both parties. Without wishing to oversimplify, manufacturers would focus on national advertising to create demand at the top end of the funnel; retailers would service that demand and do their own local marketing to capture and convert additional leads at the bottom of the funnel.
The new shift to e-commerce is blurring those roles. By centralizing and digitizing the whole journey, manufacturers are now both creating and seeking to convert that demand. That’s why some manufacturers are opting for a more centralized agency model where the retailer acts on their behalf, but the customer buys the car directly from the manufacturer.
There’s a potential risk in moving towards a more centralized marketing model: manufacturers could lose the ability to understand and respond to the nuances of local catchment areas – or to build local relationships that influence lifetime customer value. This crucial ‘local’ element of the marketing mix could inadvertently be lost.
Local remains key to sales and loyalty
Whether consumers or manufacturers are aware of it or not, localized retailer marketing works to influence perceptions and create additional demand. As separate business franchises, automotive retailers will always want to retain some control of their sales funnel and not rely solely on manufacturers’ centralized marketing activity.
Local retailer relationships are key to ongoing brand loyalty for many customers – so the need to properly align national and local communication strategies to benefit both retailers and manufacturers remains key, even if the final click is to ‘buy online.’
For more on digital commerce in this industry and beyond, head over to our e-commerce deep dive hub.