Why Human Interaction is Important for Automotive Industry?

Twice a year we produce the Auto Trader Market Report, our biannual review of the UK’s new and used car markets and how consumer buying and selling behaviours are changing, based on data from our marketplace of 55 million views a month. In the latest edition, we considered what’s in store for car retailing – in the UK and more broadly - and how we must adapt as an industry to capitalise on future opportunities and make the industry work better for all involved.

It’s an interesting time for the automotive industry right now, and some are feeling the pressure. Although slightly buoyed by the outcome of the recent UK General Election, Brexit-related uncertainty continues to hamper consumer confidence. Both new and used car transactions in the UK remain depressed according to the Society of Motor Manufacturers and Traders (SMMT), with used car transactions falling by -0.8 per cent during the period January to September 2019, and new car registrations are down too, by -2.7 per cent year-to-date. What’s more, emissions legislation has caused supply issues. Manufacturers are having to spend enormous amounts on R&D for electric vehicles (EVs). And retailers are experiencing margin pressure from rising labour, property and tax costs as well as facing challenges from manufacturers looking to evolve their network strategies. If that wasn’t enough there’s increased scrutiny from the Financial Conduct Authority (FCA) around automotive finance.

It doesn’t paint a particularly rosy picture. However, there remain pockets of growth. For example, SUVs have grown significantly in popularity, increasing sales by 279 per cent in 2018 compared with 2009 and accounting for a third of UK car sales today. And demand for EVs is growing rapidly too, with searches on our site increasing 73 per cent since November 2018. What’s more, this year the UK’s fastest selling used car was the Renault ZOE – the first time a pure electric vehicle has topped the annual list. We continue to believe these demand stimuli will drive long-term growth as the macroeconomic backdrop recovers. What’s more, the more forward-thinking approach that some retailers are taking has seen them bucking the trend and outperforming the market. For instance, the top 1,000 performing retailers on our marketplace of circa 13,300 dealers, advertise 43 per cent more live-stock than the rest of the market, with 20 per cent more of their stock categorised as well priced. This results in 8 per cent less overaged stock and a 61 per cent increase in profits compared to the rest of the market.

Car buyers want more from the industry

However, car buyers want more from the automotive industry. Our Car Buyers Report published during the summer revealed that 15 per cent of consumers are ‘dreading’ buying a car – and that goes up to 40 per cent when you narrow it down to women aged 45 and over. With more than half (60 per cent) of car buyers completing a purchase in a state of exhaustion and frustration, with a feeling of just having to 'get it done', it’s hardly surprising that 85 per cent don’t even think the car they purchased was their ‘perfect car’.

It’s important to remember that buying a car remains a big physical purchase – and often a very personal and emotional one for individuals

There are a whole host of different pain points that contribute to these findings, but at the centre of them lies a feeling of 'cognitive overload' – many consumers feel they are faced with complex choices, find it too difficult to compare, have too much jargon to contend with, and have a lack of clarity (or understanding) about the information that’s being presented to them. Added to this, they feel there is a lack of transparency when it comes to price – leading to a worry that they’re being 'ripped off'. Given all of this, we see a real opportunity for the industry as a whole to improve the process and make it work better for consumers and retailers alike.

The fundamental challenge here is a mismatch between where consumers are spending their time – c.70 per cent of which is online, vs. where retailers are spending their money – c.85 per cent of which is offline. What’s needed is a digital 'rewiring' at (almost) every step of the retailer process, to address this mismatch and take a much more digitally led, data-driven approach. If done well, this should be a win-win for all - yielding tangible economic benefits to retailers, as well as providing a substantially better experience for consumers. Consumers are ready for this digital transition too, according to our recent study. Almost half of people (45 per cent) said they would buy a new car online without seeing it in person if purchased on a finance deal. This rises to nearly two-thirds (64 per cent) for 18 to 34- year olds.

Retailers will remain fundamental

However, most people still value human interaction of some kind during the process as it’s a key part of building trust in the seller, and gaining confidence that they’ve made the right decision; three in four (74 per cent) said they wouldn’t buy a car without speaking to a retailer. Accordingly, retailers remain crucial in the car buying process - 34% who bought a new car and 26 per cent who bought used said that speaking to a helpful retailer was the biggest accelerator to purchase.

The people we surveyed think it’ll be nearly 20 years (19.5 years) before new cars are bought without any human interaction at all. This is nearly the same amount of time as they think it will be until you can get treatment for minor medical issues without human interaction (21 years). Crucially, the nature and length of those appointments will change thanks to the seamless online experience. So, each customer service advisor will be able to sell more cars and recognise greater revenue. The automotive model will change to the benefit of car buyers, retailers and manufacturers alike, but people still value human interaction.

It’s important to remember that buying a car remains a big physical purchase – and often a very personal and emotional one for individuals. There’s no getting away from the important offline elements of the journey. There needs to be a seamless, omni-channel experience for consumers so they can choose the journey that’s right for them – be it online or offline, or any combination of the two. A one-size-fits-all approach won’t work, so we need to create an experience that’s flexible enough and 'blended' enough between digital and physical to cater to everybody’s needs. It’s a big ask, but given the scale of the purchase, it’s one that we as an industry need to work towards delivering.