Though online shopping has become ubiquitous in recent years, buying a new car remains a distinctly retro experience. However, a new initiative by General Motors may eventually make a visit to the local car dealership obsolete.
Throughout the year GM has been quietly piloting a new online service through which people can buy cars from local dealers via the Internet. The initiative, dubbed Shop-Click-Drive, is currently being tested with around 100 dealers around the country. Through the website, customers can browse new cars, obtain pricing quotes, select add-on features, apply for financing and confirm a purchase. The dealers will even deliver the new car to a customer’s driveway. The program, which has generated 900 car sales so far, will be available to all 4,300 GM dealers in the U.S. by the end of the year.
“There are some dealers out there who are Internet savvy and enable consumers to do a lot of the experience online,” says Ryndee Carney, manager of cross-brand communications for GM. “What’s different about Shop-Click-Drive is that consumers can virtually complete the whole transaction online all in one place.”
Ninety-four percent of consumers globally research cars online before they buy, and about a third would be willing to buy a car over the Internet, according to an annual survey by consulting firm Capgemini. GM says their online initiative is particularly aimed at attracting Millennials, who spend much of their time online and are driving less than their predecessors. Purchases of cars by young people took a particularly hard hit following the recession but recovered somewhat in 2012, when Millennials bought more than 1.2 million new cars, according to data from auto research firm Polk. A push to online sales could help encourage even more young people to become car owners.
“This sort of evolution of use of the web in the industry has been going on for quite a while,” says Tom Libby, a senior forecasting analyst at Polk. “It’s in a seller’s best interest to take advantage of this trend.”
Some dealerships may be wary of offering online sales, as it could hamper their ability to sell customers additional features in the store. It’s also more challenging to cultivate loyal clients if customers are interacting with a computer instead of a human being. On the other hand, online sales could lure in a group of buyers who are looking for a straightforward shopping experience instead of the drawn-out process of visiting a car dealership and haggling with a salesman.
“The dealer might actually make slightly less money per unit using this new process but because their volume’s gone up, their overall profit has gone up,” Libby says. “From that standpoint it might very well help them.”
GM is quick to point out that the online sales are not intended to circumvent the independent dealerships that carry their cars. State laws around the country protect dealerships’ exclusive right to sell new cars to consumers. Attempts to get around such laws have met resistance in the past from dealership coalitions that lobby heavily to influence state and national legislation. In 2000 Ford attempted to market its used cars online, but the effort met resistance when the Texas Department of Motor Vehicles said it violated state law. This year Tesla has been banned from opening its own dealerships in a variety of states (including Texas) on the grounds that car manufacturers cannot sell directly to customers.
“A manufacturer cannot just arbitrarily say, ‘This is the way it’s going to be,’” explains Libby. “It’s a two-way street. The dealers have some leverage and some power. Even though this process is done online, there’s still a lot of power in the hands of the dealer.”
GM isn’t sure whether dealers will flock to online sales en masse. Of the 900 cars sold through the website so far, only five have been sold to customers through an online-only process. Many drivers still want take a car for a test drive before making a big purchase, and dealers must inspect trade-in vehicles if they are part of the transaction.
But the option is now there to buy a brand new car from the comfort of your living room. Other car manufacturers are no doubt watching to see whether the habit takes off.
“If it works, we could see this spread throughout the industry,” Libby says, “but in the near term we just have to wait and see how it works.”