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Pandemic changes to dealer business model likely to endure and expand

Posted by Meg Bernazzani on July 15, 2021

Last year, dealerships across Canada were forced to adapt as buyers were suddenly unable to visit their showrooms and service areas. A shift into digital sales and customer service took place overnight, turning a long-predicted future into instant reality. CarGurus quickly rolled out our contactless services feature, allowing dealers to promote their offerings and how they were adapting to new shopping preferences.

Now that public health measures are beginning to ease and there’s light at the end of the tunnel, analysts are beginning to assess whether these changes are likely to stick or if customers will revert to old habits.

The complete answer is complicated, as found in recent survey data compiled by Desrosiers Automotive Consultants and the Canadian Automobile Dealers Association (CADA).

According to the 3,328 new vehicle dealers across the country, 68% of transactions took place entirely at the dealership in 2019, while 29.7% started by making contact online but concluded at the store, and 2.4% of sales unfolded entirely online.

In 2020, unsurprisingly, the shift to online sales was dramatic: 53.5% of transactions took place entirely at the dealership, a year-over-year decrease of 21.3%. Sales that began online and ended at the dealership went up to a total of 38.9% in 2020, a 30.9% increase over 2019. And transactions that were completed entirely online were up more than 200%, for a total of 7.6%.

Looking ahead to 2025, Canada’s new vehicle dealers see this trend gaining even more traction. According to the survey, on-site dealership transactions are expected to fall to 40.3% of the mix, while sales that begin online are predicted to comprise 41.9% of all sales with 17.8% of all transactions being completed entirely online.

Used vehicle sales are expected to follow similar trends. Dealers say fully online sales accounted for only 2.6% of their total used car business in 2019 but grew to 6.7% in 2020 and is expected to make up 15.5% of transactions in 2025. Importantly, these figures capture the importance of this shift in the dealer experience amid an influx of independent sellers doing business entirely online such as Clutch and Canada Drives.

COVID-19 also affected the number of salespeople working in a typical dealership, with the average across Canada dropping from 10.2 in 2019 to 9.1 in 2020. The dealers surveyed predict this number will not fully recover post-pandemic: an average of 9.7 salespeople per dealership is expected by 2025 as online selling allows fewer salespeople to manage a larger number of clients.

What does this mean for the average dealership?

In the short term, website and digital infrastructure spending are on the near horizon. In 2020, 19.9% of CADA dealers made upgrades to these systems in anticipation of the added demands of online selling. This year, of the 80.1% that did not make upgrades in 2020, a full 58.5% expect to do so to prepare for this shift.

To prepare for the longer term, hiring staff with the skills to handle digital leads will also be key to success in this new era. Clients will expect fast response times, transparent answers to their questions, visual communication such as video vehicle walkarounds and text messaging with photography from the service bay, and digital service reminders and special offers. If your dealership doesn’t already have employees on staff with these skills, now is the time to seek them out as people from customer-facing industries like retail and hospitality are more open to making changes in their careers.

Topics: covid, digital retail, industry insights, industry trends, online sales