Winners and losers in online autos
The latest New Zealand retail survey from Nielsen last week confirmed the switch to online commerce is continuing apace. More than half of the Kiwi adult population (54 per cent) are now shopping online, 38 per cent up on five years ago.
Not only are more people buying stuff online, they are buying it more often with 446,000 people making 11 or more transactions online in 2012, up 44 per cent. In total, Kiwis spent close to $4 billion online over the last year.
Interestingly, this number does not include cars as they fall outside traditional retail definitions. Late last year US research house IPSOS found that 80 per cent of car buyers chose cars and dealerships off the back of online reviews and research.
Over the last year there were 782,000 changes of car registration according the NZTA (a fair yardstick for used car sales). The majority (58 per cent) were private-to-private sales, less than a quarter (24 per cent) were by car dealers to private buyers, and the remainder were trade-ins.
Turn the clock back 20 years and it was a different story with the majority of used car sales being trader-to-public, and trade-ins being big business. Back then, buying a car likely meant a Saturday working your way down Moorhouse Avenue, Cambridge Terrace or High Street then making your mind up based on what you saw and believing what car dealers told you.
But then the damned internet came along and cars started moving online. And as they moved online a giant database was formed that started empowering consumers like never before. Today the car buying journey starts on the couch with Google, review tools, Facebook and the big car classified websites.
An estimated 20 per cent of car buyers never actually visit a physical car before buying it, but rely on the web and the plethora of connected services that have sprung up like AA's mobile car inspection service and Motorweb's Vehicle Information Reports.
If a buyer does turn up to a yard, then the chances are good they know more about a car than the salesperson. And they'll know the bell curve of values for any car as there is now one national transparent market for cars, easily exportable into an Excel spreadsheet to empower those buyers.
Private sellers have adapted to this new world of digitally empowered car consumers much more rapidly than many dealers. Their online listings are often more comprehensive, with more photographs and they're more responsive. Best of all they don't waste buyers' time with empty listings and dumb messages like "photos coming soon".
Four years ago I carried out an experiment. I compared the response time of private sellers and dealers. I targeted the 10 largest car brands and sent them each an email enquiry for a car they were marketing on the web. At the same time I sent enquiries to 10 private sellers.
The average email response time for the private sellers was 98 minutes. The average response time for car dealers 227 minutes (although 40 per cent never responded at all).
Next week I'm doing some seminars on selling cars online so I tried the exercise again, but with a few tweaks. I asked a primary teacher friend with an easily findable online identity to pose as an online car buyer. The theory here was that any dealer worth their salt would not only respond promptly, but would also spend a couple of minutes profiling the enquirer to better target their needs.
This time I focused on 12 large dealers in Christchurch and had my friend email half of them through their own websites, and half through an online car marketplace. I hoped that car dealers had smartened up. My hope was forlorn.
Of the 12 "hot leads" sent out, only six generated replies after a week of waiting. Half of car dealers didn't reply at all.
The quickest response time was 11 minutes. The longest was 21.5 hours. The average was about 420 minutes. Three dealers stood out, head and shoulders above the rest: Jucy Car Sales, Corlett Motor Company and Orange Auto Company all responded within an hour when approached via their websites.
Orange Autos was in a league of its own. Their first response took 11 minutes, and it was evident they had profiled my buyer and did it seamlessly, offering multiple options for her growing family. They then texted her 20 minutes later, and followed up with photographs and videos of similar cars that fitted her profile. Impressive.
The web is a media of awesome destructive ability. Over the past 20 years it has put the car-buying consumer in control and savaged the old opaque marketplace. But it also provides stunningly effective ways to connect, understand, and meet the needs of car buyers.
There will be winners and losers. I reckon Christchurch's Orange Auto Company will be one of the winners.
*Mike "MOD" O'Donnell is a professional director and head of operations for Trade Me. His Twitter handle is @modsta and his wife says he doesn't need any more cars.