Report: Increase in ‘digital’ automotive retail due to pandemic paves way for ‘new normal’
TROY, Mich.–(BUSINESS WIRE)–Decreased showroom traffic caused by COVID-19 shutdowns fast-tracked dealer adoption of remote selling capabilities, according to the J.D. Power 2020 U.S. Sales Satisfaction Index (SSI) Study,SM released today.
“The pandemic provided dealers with a wide-open path to allow different approaches to sell vehicles outside of their traditional showroom sales process,” said Chris Sutton, vice president of automotive retail at J.D. Power. “It’s revealing, too, that 44% of online shoppers are now selecting the exact vehicle they want from inventory on a dealer’s website, which is an increase of 13 percentage points from January of this year.
“The more shoppers are exposed to remote communication and actual online buying options, the more they may prefer these methods in the future over traditional showroom visits to wade through inventory and negotiate. In fact, nearly one in four buyers say their purchase experience during the pandemic will make them less likely to shop in person in the future, indicating that digital retail processes are here to stay. These lasting effects make it imperative for dealers to step up their digital offerings to remain competitive.”
The study, now in its 35th year, has been redesigned for 2020 and places a much greater emphasis on digital retail and remote buying. Digital retail activities measured in the study include the ability to select vehicle from inventory; receive credit approval; review F&I products; agree on purchase price; and complete purchase paperwork. All saw a spike during the onset of the pandemic and, while many declined in the May-June timeframe, all are still up nearly 50% from January.
The study also finds that, as dealers implemented and refined digital procedures at the onset of the pandemic (March-April), buyer satisfaction among digital customers increased. Most notably, satisfaction among buyers who finalized a price online was nearly identical to those who didn’t finalize a price online before the pandemic began. By the May-June timeframe, satisfaction among buyers who agreed to a price online was 42 points higher (on a 1,000-point scale) than among those who hadn’t. This demonstrates how quickly dealers were able to implement and refine processes that resonated with buyers.
Following are some key findings of the 2020 study:
- Key pandemic-related buying activities improve satisfaction: Even though most buyers say COVID-19 affected their buying process in ways they didn’t expect, many were more satisfied as a result. In fact, satisfaction among buyers who say their process wasn’t affected at all is seven points lower than among those who were affected. Buyers who completed most of their paperwork online are the most satisfied, with satisfaction averaging 873, which is 35 points higher than among those who didn’t complete paperwork online. Similarly, satisfaction scores among those who had more virtual communication are 17 points higher than among those who didn’t. These activities illustrate why such trends are likely to continue.
- Online F&I review can enhance take rates: Reviewing F&I products online increased after the COVID-19 outbreak, but it’s still uncommon—only 7% of buyers say they reviewed products online during the March-June timeframe. However, the take rate among buyers who reviewed products online is higher compared with those who reviewed products in the showroom, especially for extended warranty (36% vs. 28%); prepaid maintenance (23% vs. 16%); and tire protection (18% vs. 12%).
- Brand and dealer advocacy aren’t aligned: On average, vehicle brands have a higher Net Promoter Score® (NPS)1 than their dealer base, with nearly a 20-point gap (on a 100-point scale) between the scores. However, there’s also a wide range of gaps between the two groups that vary by brand, the largest of which is 34 and the smallest of which is -2. Key performance indicators (KPIs) that have the highest effect on buyer satisfaction index scores include sales consultant completely understood needs (+94); vehicle delivered in perfect condition (+55); and finance staff not too pushy selling additional products (+52). These KPIs are met nearly 90% of the time. NPS measures customer advocacy for the model they own and can be a strong predictor of future business growth.
- Tesla profiled for first time: Tesla receives an SSI score of 804. The automaker is not officially ranked among other brands in the study because it doesn’t meet ranking criteria. Unlike other manufacturers, Tesla doesn’t grant J.D. Power permission to survey its owners in 15 states where it is required. However, Tesla’s score was calculated based on a sample of surveys from owners in the other 35 states.
Lincoln ranks highest in sales satisfaction among luxury brands, with a score of 827. Lexus (826) and Mercedes-Benz (826) rank second in a tie.
MINI ranks highest in sales satisfaction among mass market brands with a score of 824. GMC (804) ranks second and Buick (803) ranks third.
The U.S. Sales Satisfaction Index (SSI) Study measures satisfaction with the sales experience among new-vehicle buyers and rejecters (those who shop a dealership and purchase elsewhere). Buyer satisfaction is based on six factors (in order of importance): delivery process (28%); dealer personnel (21%); working out the deal (19%); paperwork completion (19%); dealership facility (10%); and dealership website (4%). Rejecter satisfaction is based on five factors: salesperson (28%); price (27%); negotiation (18%); dealership facility (14%); and variety of inventory (13%).
The study is based on responses from 35,816 buyers who purchased or leased their new vehicle from January through June 2020. The study is a comprehensive analysis of the new-vehicle purchase experience and measures customer satisfaction with the selling dealer (satisfaction among buyers). The study also measures satisfaction with brands and dealerships that were shopped but ultimately rejected in favor of the selling dealership (satisfaction among rejecters). The study was fielded from July through October 2020.
J.D. Power is a global leader in consumer insights, advisory services and data and analytics. A pioneer in the use of big data, artificial intelligence (AI) and algorithmic modeling capabilities to understand consumer behavior, J.D. Power has been delivering incisive industry intelligence on customer interactions with brands and products for more than 50 years. The world’s leading businesses across major industries rely on J.D. Power to guide their customer-facing strategies.
J.D. Power is headquartered in Troy, Mich., and has offices in North America, Europe and Asia Pacific. To learn more about the company’s business offerings, visit JDPower.com/business. The J.D. Power auto shopping tool can be found at JDPower.com.