Pandemic-induced changes to auto retail that are here to stay

What will the new vehicle dealership look like post-COVID?

To figure that out, DesRosiers Automotive Consultants (DAC), in working with the Canadian Automobile Dealers Association (CADA), surveyed all 3,328 new vehicle dealers across Canada.

The goal was to measure the opinions of dealer principals around the “stickiness” of pandemic-induced adaptation and changes to business processes—and more specifically, whether these adaptations were merely stop-gap measures, or permanent changes that will endure post-crisis.

“Undoubtedly—in the eyes of dealers—online new vehicle sales are here to stay, and their importance to the market is certainly expected to grow into the future,” said Andrew King, Managing Partner of DAC.

When it comes to new light vehicle sales pre-pandemic, the online portion represented only a small fraction of the overall sales picture; 2.4% of sales were done entirely online at that point. However, when COVID-19 hit in 2020 the pandemic accelerated the movement and dealers rushed to accommodate the online aspect.

“Online initial contact rose from an average 29.7% of cases in 2019 to 38.9% in 2020. The portion of sales which had occurred entirely online rose to 7.6%,” said DAC. “When asked about the future, dealers overwhelmingly forecasted a sharp increase in the number of online-only sales, rising to an expected average of 17.8% for 2025.”

As for used vehicle sales, dealer accounts of the situation followed the new vehicle sales pattern: while online-only sales accounted for just 2.6% of total used sales in 2019, that number increased to 6.7% in 2020. And when asked about the future outlook, dealers expect online-only used vehicle sales to make up 15.5% of the market in 2025.

Looking back from 2019 into 2020, DAC said the average number of salespeople per store among surveyed dealers declined from 10.2 to 9.1. That makes sense due to pandemic-related sales difficulties, but dealers do not expect their average number of salespeople to return to 2019 levels—even by 2025, increasing only to 9.7 salespeople per store on average.

“The expected growth in online-only sales could be a factor in this shift if online processes enable fewer salespeople to handle a greater number of clients,” said DAC.

On website upgrades, 19.9% of dealers upgraded their systems in 2020, which means 80.1% did not— although 58.5% expect to do so in 2021. “While forecasting further online sales in the future is one thing, dealers are clearly expending resources internally in order to facilitate this shift,” said DAC.

Finally, dealers were also asked what the pandemic-related changes would mean to image standards going forward, since OEM image standards have resulted in increased spending by dealers on their operation.

To answer that question, DAC said many dealers were divided: 36.4% expect no change, 25.8% expect image programs to become more important, and 37.9% expect image programs to become less important.

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