Audi opened its first virtual showroom in London last year (Photo: Audi)
More people will buy their cars online in coming years, providing a business opportunity for IT service providers, according to a new study. The study also says that many traditional dealerships will have to either change or die.
The report, prepared by analysts at Frost & Sullivan, projects that 4 pc of global automotive retail sales could be conducted online as early as 2020. That's equal to 4.5 million cars worldwide, up from roughly 5,000 in 2011.
The change, which is in line with trends in other consumer industries, will have major repercussions for the way cars are sold.
"Do not be surprised to see your local dealership closing in the near future," the Frost study says.
It draws parallels with the publishing and entertainment industries, where leading retailers already collect more than 50 pc of revenues online. As a result, many have had to close traditional bricks-and-mortar outlets.
The Frost study notes that the auto industry is addressing the changing retail patterns. "Most OEMs already are experimenting or planning to get into the online bandwagon," the study says.
The analysts lay out two approaches for the industry. One is the evolutionary track that will see sales conducted online but the actual handover of the car taking place at the dealership.
The other is what Frost calls the "omni channel approach." In this scenario, the entire new car buying process is carried out online with minimal need to keep a physical dealership in place.
The impending changes will provide opportunities for the IT industry. Dealerships will be smaller and will take a digital, interactive approach in dealing with customers. As a result, automakers will have to invest in an integrated channel strategy and an IT platform that can quickly become nationwide. "Internet buyers can be sitting and ordering anywhere in the country," Frost noted.
In addition, sales training will have to include augmented reality and techniques taken from the gaming industry.
By 2020, Frost says Europe and China will be key markets to promote automotive e-retailing. The US will be third in implementing new strategies.