Online Used Car Retailing in 2020 & the Need to Deliver
As competition intensifies in the online used car retailing sector, different players in the market are working out how they create a leading customer experience. Home delivery is a critical piece of the jigsaw. It’s not only the last stage in the journey, but it’s the only physical touchpoint that online retailers have.
What’s happening in used car retailing?
With more than 7 million used vehicles sold each year - worth a combined £45 billion in sales - the UK used car market has been identified by many as a target for disruption and digitisation in recent years. The Covid pandemic this year has sharply increased the shift online that was already happening.
The sheer size of the market and historic lack of innovation in the sector has driven a proliferation of online business models in recent years - both from new entrants (such as Cazoo and BCA-backed Cinch) and changing strategies from incumbents (Big Motoring World & Carzam).
The development of the market appears to be being driven by one concern: Customer Experience. If you control the customer experience, you control the customer. In this vein, there is a clear investment, for example, in ultra slick websites at the front-end, and high-standard refurbishment at the back end.
Why is this relevant to vehicle logistics?
Covid has only accelerated a trend that was already in motion - customers want the same convenience of home delivery as they get with all other online purchases.
This means that all players in this space - whatever angle they are coming from - are realising that offering home delivery to customers is now a critical piece of their proposition. There is a huge risk of losing the sale by not doing so - either by the customer heading elsewhere, or cutting out the middleman when they visit the dealer site.
Who’s doing what?
As we see it, there are four key segments in the market; below, we look at how each are responding to the need to deliver.
#1 Search Engines
These are websites that aggregate stock owned by other companies - usually dealers, but also auction houses, leasing companies and others. AutoTrader’s Vehicle Moves platform is an example of how even this segment (the least value-adding for the customer) has realised the importance of offering delivery as a means of increasing customer conversion and dealer stickiness.
#2 Traditional Dealer Model (Search online, purchase offline)
Even some of the largest dealer groups in the country are still not set up with a full e-Commerce solution. Whilst customers can browse online, they are still required to attend a physical dealership site to complete the purchase. The scope for delivery here is limited as the customer naturally “clicks and collects” at the point of completing their transaction. Most dealers fulfil delivery requests on an ad hoc basis using local logistics providers.
#3 e-Commerce & Finance Specialists
These are websites that are focused on selling and financing third party vehicles. Their specialism is their ability to drive traffic to their site via e-Commerce expertise and their range of stock. The most common revenue model is converting customers into finance agreements. Home delivery for these companies is critical to avoid dis-intermediation - they lose out when the customer visits the showroom in person, only to be offered a better finance deal by the dealer directly. Placing the vehicle on the customer’s drive is a small price to pay to avoid this risk.
#4 End to End Online Plays
The newest segment are those companies offering an Amazon-style purchasing experience for used cars - “Search - Drive - Smile” in the words of Cazoo, Unlike e-commerce and finance cos, these companies also control the stock they sell. They typically refurbish vehicles to a high standard to avoid 14-day return rights being exercised. Delivery is key, as (i) it is simply expected by those seeking convenience transacting in this channel, and (ii) stock is often held in “dark store” locations, such as remarketing centres that are not customer friendly.
What do used car retailers need from delivery?
Despite their differences in approach, the requirements in the delivery process are common to all retailers. In our experience, the key ingredients are:
Professionalism: A driver that represents the company’s brand at the point of handover, giving the customer a great end to the sales experience
Communication: Processes that keep the end-customer fully up to date, such as calls ahead and live tracking links; centralised access for the retailer to this info is key to managing end-customers
National coverage: An “anywhere to anywhere” delivery service is needed to maximise stock offered and customer conversion
Transparency & visibility: Full, live reporting on activity, cost and performance is key to controlling high volumes of activity across many different locations, particularly to keep operating models as asset-light and overhead-light as possible
If you are retailing (or leasing) used vehicles online and would like to find out more about how Engineius could support your home delivery operation, please do get in touch as sales@engineius.co.uk,