What Corona and Carvana Have in Common
Steps to Help Mitigate the Disruption to Come
By Phil Villegas
With China in a state of Coronavirus and contamination concerns, new vehicle sales volume in China dropped over 80% in February 2020. As the virus is appearing to gain traction here in the U.S., genuine concerns begin to arise related to the potential disruption here at home and what this could mean for dealers.
Having faced some adversity early in my life, my personality type has always been to focus more on the potential opportunity of a given set of circumstances. Operating with a philosophy that “the calvary isn’t coming” to save me, has always provided me with greater clarity in confusing times.
Even before the rise of the Coronavirus, one of the largest risks facing conventional retail auto dealers has been their ability, or should I say inability, to successfully engage and transact with customers online. The general inaccessibility to fully transact virtually by most dealers has paved the way for providers like Carvana and Tesla in providing a refreshing alternative buying experience to consumers. We are living in a decade where we expect the greatest transformation and pressure to the dealer franchise network due to the mobility movement. Whether it’s start-up manufacturers like Tesla, online friendly alternatives like Carvana, vehicle subscription services, ride-sharing providers, or autonomous fleets of vehicles, dealer sales will get negatively impacted. In light of these pending changes, most dealers are continuing to sell vehicles in the traditional fashion with no actionable plans to change.
With the risk of the Coronavirus poised to disrupt US sales I see the silver-lining in this forcing the opportunity for dealers to improve their virtual/online presence. Knowing that a disruption is coming to the industry with the mobility movement in the coming years, dealers should be seizing the current opportunity the Coronavirus crisis is providing in improving their virtual/online presence. If U.S. dealers are impacted even half of what China experienced in February, we are looking at a 40-45% drop in new vehicle sales, with comparable drops in pre-owned and likely greater in parts in service. Some marginally capitalized dealers can possibly not survive more than a few weeks in these circumstances.
How well prepared is your dealership to transact online? This is not just about having a little chat pop-up window on your website that is handled by a third-party provider. Does your dealership have a process by which you appraise a customer’s car remotely? Do you have a process by which you will take a car for a test drive to a customer’s home? Can a customer complete the entire transaction without stepping into the dealership? The same goes for service, can customer’s car be picked-up or pre-diagnosed remotely without an exorbitant tow bill?
One early lesson coming out of China is dealers’ challenges with transacting remotely with customers. This is different from social engagement; this is the ability of getting cars over the curb or up on a lift without a customer having to set foot in the dealership. As a dealer, I wouldn’t be waiting for the manufacturer, DMS provider, dealer association or vendor to come with a silver bullet on how to help me through the Coronavirus or mobility disruption to come. Change comes from within and how you view and position your store to engage in changing environment will determine whether your dealership will survive the threats and disruptions to come.