The unprecedented COVID-19 pandemic has completely disrupted the global economy. The economic effects of the pandemic can be felt in nearly every sector, including the automotive industry. In this industry, the global health crisis has led to supply chain interruptions, assembly plant closures, production delays, and ultimately, lower automotive sales.
But now that vaccines are being distributed, the automotive industry must focus on planning for a post-pandemic world. One automotive manufacturer that is already adapting to the changing times is Nissan.
It was recently reported that Nissan informed its board that the company was building a “complete, end-to-end digital journey” that would allow automotive consumers to purchase vehicles online. What will this shopping experience look like? How will consumers respond? Here’s what you need to know about Nissan’s bold shift in strategy:
The Evolution of the Automotive Consumer’s Buying Journey
The way in which the average automotive consumer shops for a vehicle has drastically changed over the years.
In the past, consumers who were interested in purchasing a new vehicle started their buying journey by visiting local dealerships. During these visits, consumers would learn about different vehicles, compare and contrast models, ask questions, take test drives, and discuss pricing and financing. They worked one-on-one with sales representatives at local dealerships and had the opportunity to explore vehicles in person.
They wouldn’t limit themselves to one dealership, either. The average automotive consumer used to visit five dealerships before making a purchase decision. Visiting multiple dealerships would help consumers gather as much information as possible before deciding which vehicle to purchase. The entire buying journey—from conducting research to completing the transaction—took place inside local dealerships.
But now, times have changed. Today’s automotive consumers typically start their buying journey online, where they conduct research, compare and contrast models, and look up information on local dealerships. In fact, Google estimates that twice as many automotive consumers start the car buying process online instead of in a dealership.
They complete the information gathering stage of the buying process online, so they don’t need to visit as many dealerships before making a purchase decision. Now, the average consumer only visits two dealerships before purchasing a vehicle.
Even when today’s consumers visit dealerships, they use their smartphones to connect to the internet for real-time advice and information. As they walk through the showroom, they may look up prices at other dealerships located nearby to make sure they are getting the best deal.
This means the buying journey for the average automotive consumer now occurs in two places: online and in dealerships.
How COVID-19 Affected the Automotive Consumer’s Buying Journey
The automotive consumer’s buying journey shifted further into the digital world as a result of the COVID-19 pandemic. This is primarily because many consumers are still hesitant to visit automotive dealerships in person due to the risk of contracting COVID-19. These concerns have led to a rise in demand for online vehicle sales.
McKinsey recently surveyed automotive consumers on their attitudes toward shopping for and buying a new vehicle. Forty-five percent of U.S. consumers surveyed said that they purchased their last vehicle in-person at a dealership. But only 35% of U.S. consumers surveyed say that they plan on purchasing their next vehicle in-person at a dealership.
The survey revealed that 38% of U.S. consumers plan on purchasing their next vehicle via an app or website. Another 27% of these consumers intend on completing their purchase over the phone or through email. Based on this data, it is clear that automotive consumers prefer shopping online for a vehicle over shopping for a vehicle at a dealership.
This preference for online vehicle sales was strongest among the youngest consumers surveyed. Less than one-third of these consumers want to buy a vehicle in-person at a dealership. Instead, this demographic would like to complete the entire process either online, over the phone, or via email.
This results of this survey also revealed that today’s consumers expect automotive companies to offer a digital buying experience that is equivalent to the in-person buying experience.
For example, the respondents showed a very strong interest in contactless services such as virtual test drives and home car deliveries. About half of the respondents even indicated that they were willing to pay more for these services in order to avoid making a trip to a dealership. The fact that these consumers are willing to pay more for a positive digital buying experience shows how strongly they feel about this issue.
How is Nissan Responding to the Shift in Consumer Behavior?
The message from consumers couldn’t be clearer: they want the option to buy a vehicle online. At least one automotive manufacturer is listening to these consumers.
During a board meeting last year, a board member asked Nissan’s Chief Operating Officer (COO) Ashwani Gupta what the company was planning on doing to address consumers’ hesitancy to visit showrooms in-person.
Gupta informed the board that the company was in the process of creating a “complete, end-to-end digital journey” for consumers who were interested in purchasing a vehicle online. He explained that this would allow consumers to conduct research, compare models, schedule at-home test drives in vehicles delivered directly from a local dealership, and complete their purchase all from the comfort of their home. In other words, it would eliminate the need to visit a Nissan dealership in person to purchase a vehicle.
Gupta acknowledged that the decision to create this digital buying experience was made with the post-pandemic world in mind. He explained that the shift in consumer behavior caused by the pandemic will not disappear once the global health crisis has been resolved. Instead, he believes that they will become permanent, meaning consumers will continue to prefer shopping online for vehicles even when it is safe to visit dealerships in person.
This doesn’t mean that consumers won’t be able to purchase a Nissan vehicle in-person at a dealership. The manufacturer will still offer in-person dealership sales, but now consumers will also have the option of purchasing a vehicle online if that’s what they prefer.
The Benefits of Creating A Digital Shopping Experience for Automotive Consumers
Nissan could benefit from creating a digital shopping experience for automotive consumers in a number of ways. The most obvious benefit is that this digital shopping experience will allow Nissan to target consumers who prefer shopping online as opposed to at a dealership. There are still a lot of automotive manufacturers who don’t offer online sales, so for now, Nissan has the opportunity to sell to these consumers without much competition.
The shift to online sales also benefits Nissan from a profitability angle, according to two sources who spoke to the media. These sources revealed that building this digital platform would drastically reduce Nissan’s operational and marketing expenses.
It would also give the automotive manufacturer the chance to gather more data on consumers who are shopping for vehicles online. This data could help Nissan gain a deeper understanding of their target audience so they can finetune their marketing strategies to better meet these consumers’ needs in the future.
Shifting to online sales also ensures that Nissan customers won’t be limited to purchasing the vehicles that are in-stock at their local dealership. The automotive manufacturer will allow online customers to search inventories from all Nissan stories in a specific area. Since online customers won’t be limited to searching through a single store’s inventory, they will have a better chance at finding the vehicle they want.
The Challenges of Creating A Digital Shopping Experience for Automotive Consumers
There are certainly benefits to launching a new digital shopping experience for automotive consumers. But Nissan will also face a number of challenges when implementing this new strategy.
Nissan will likely face some resistance from franchise dealers, who typically rely on the standard showroom strategy to sell to automotive consumers. Moving to the digital world—in addition to offering contactless services for digital consumers—is a big jump for these dealers.
Nissan must be willing to work closely with them to help them see the benefits in this strategy shift and successfully adjust to the changes. However, sales representatives typically work on commission, so they may view this shift to digital sales as a threat to their livelihoods since it may lead to fewer in-person sales.
Nissan must also be willing to invest in the technologies to build this digital platform for consumers. Certain technologies, such as virtual reality and augmented reality, can greatly enhance the online shopping experience for consumers.
For example, virtual reality technology can provide consumers with the opportunity to take virtual test drives. Augmented reality, on the other hand, can be used to help consumers explore the interior and exterior of a vehicle without ever leaving their home. Investing in these technologies could help Nissan stand out among other competitors who are also shifting to digital sales.
There’s no question that digital sales will play an important role in the future of the automotive industry. Even though shifting to digital sales presents certain challenges, it’s safe to say that many other automotive manufacturers will follow Nissan’s lead to create a unique digital buying experience for their consumers. This shift to the digital world doesn’t spell death for the automotive dealership. But dealers must work with manufacturers to understand their new role in the ever changing automotive industry.