Articles

Are there any barriers to selling cars through online channels?

A lot of different digital applications are on the websites of various car manufacturers and dealers, which are aimed to help with the online purchasing process. Some of them appeared nearly ten years ago but became demanded and spread widely during the last three years of the pandemic.
As proof, multiple studies confirm that:

- the number of customers visiting the dealers' showrooms and conducting test-drive per one-sold car has been declining for the last years;

- more than 90% of car buyers visit websites of brands they are considering. The purpose of these visits is not only product familiarity but also implementation of some primary steps of the purchase as model choosing, looking for the best offer, and car booking;

- up to 80% of potential car buyers announced their readiness for buying a car totally online.

But in fact, the average share of real online purchases among the market (booking with the prepayment or full amount purchase) is not more than 10%. So why is the reality still so far from the expected results and what are the reasons?
Let's consider some of them:

1. Customer concerns

Despite the fact that the majority of customers claim their readiness to buy cars online, in reality we observe a different picture.

Firstly, only a few customers are prepared to leave a sufficient amount of money without seeing the honest pair of eyes of the sales manager in front of them.

Secondly, for 99% of the customers buying a car online is a brand-new experience that required some attention and patience to figure out how it works.
2. Maturity of Digital Solutions

In comparison with electronic devices, where online retail is mostly provided by marketplaces with a common interface, car online sales platforms are very fragmented and differ from each other since they are localized on the manufacturers' and dealers' websites.

This fact makes the customer's online journeys more complicated as far as requiring additional efforts for understanding different sales applications. But bearing in mind that not all of them are UX-friendly, we may assume that real online car purchases might be rather challenging.
3. Legislation and finance restrictions

Additionally, there are some legal and financial restrictions that block key steps of online purchases on different markets.

The main barriers are the following:

- the absence of qualified signatures from individuals for the signing of contracts of sale and loan agreements;

- insufficient transaction limits and huge acquiring fees for banking card payments.
It's absolutely clear that all of these issues will be solved in the next ±5 years and buying a car online will be common practice. Up to that moment, market players need to build up all necessary digital infrastructure and upgrade all the required business processes.

It means that the transformation of the commercial model to online retail has to be launched sooner rather than later.