Auto sales going mobile
Growing numbers of buyers are doing their shopping online.
DETROIT - Billy Franklin recently bought a 2007 Chevrolet Suburban for $14,900 through eBay on his Android phone while eating dinner at Red Lobster.
The seller was in Brooklyn. Franklin, 38, and his wife were so satisfied with the deal that they stayed a couple of nights in the Garment District, walked around Central Park, and visited a couple of decent restaurants. It was their first trip to the Big Apple.
No dealer. No test drive. No negotiating.
"That's the first time I've bought a vehicle sight unseen," Franklin said.
This is a pretty good time to be a car dealer. Americans bought 16.4 million new and 41 million used cars and trucks last year. Both numbers are expected to increase this year.
But a growing number of consumers are shopping and choosing their vehicles online, especially on mobile devices. McKinsey, the global consulting firm, released a study last year that found customers physically visit an average of 1.6 dealerships before buying, down from five a decade ago.
Four of every five prospective car buyers compare prices and cars from an average of 10 dealerships. They go to third-party sites such as TrueCar, AutoTrader.com, Edmunds.com, eBay Motors, and Dealer.com.
AutoTrader found that half of millennials - those born after 1980 - who bought cars last year used their phone or tablet.
Conversion of online lookers into buyers is essential for dealers if they are to succeed in the increasingly digital retail environment.
Franchise laws may protect dealers from such maverick entrepreneurs as Tesla Motors CEO Elon Musk, who wants to sell his luxury electric cars only from company-owned stores. But there is no protection from technology that is transforming auto retailing faster than ever.
Earlier this year, TrueCar unveiled an app that collects data that will allow automakers to target customers by profile, activity, and location. The app can also help predict who is going to buy a new car, what they may buy, where they will buy it, and when.
TrueCar officials say that about 4 percent of new-vehicle sales or leases in the United States begin on their website.
As a growing portion of the remaining 96 percent of sales flows through smartphones and tablets, competition to connect customers with dealers is growing. The challenge for TrueCar, Dealer.com, AutoTrader.com, and eBay Motors is to convince traditional dealers that online services are effective tools, not competitors out to take sales away from them.
"We are not a retailer. We are a channel," said Bryan Murphy, general manager of eBay Motors, which can connect dealers with 155 million eBay users worldwide. "What differentiates us is scale. We can bring customers to a dealership regardless of geography. We just sold a $1 million Bugatti here in the U.S. to a guy in Dubai."
Overlaying these new online opportunities is the explosion in personal data. Dealers and their online partners have access to a customer's credit history, income, insurance history, and an array of information that might not be relevant to the process of buying a car.
The mission of Jason Barrie, a senior director for market performance with Dealertrack Technologies, is to streamline the process at the end of buying a car, when the consumer sits down with a finance and insurance specialist and signs a small pile of documents.